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Quest Means Business
IATA: This Year Is Unusually Challenging; Mexico Peso Falls After Sheinbaum's Landslide Victory; Israel-Hamas War; Qantas CEO: First Projects Sunrise Aircraft Due In Early 2026; Emirates President: Boeing Is Capable Of Fixing Its Issues; IATA D.G: Sustainable Aviation Fuel Is Key For Net Zero Goal. Aired 4-5p ET
Aired June 03, 2024 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:06]
RICHARD QUEST, CNN INTERNATIONAL HOST: There is the bell ringing on Wall Street. Dow up 116 at the start of the week. But it's not too bad a day,
all things considered. It was a sea of red. Yes, sir. Hit the gavel. Whoa. A bit of a wimpy gavel, but the end of trading. Those are the markets, the
events that you and I will be talking about over the next hour.
The crisis at Boeing is one at the top concerns for the airline executives here at IATA's annual general meeting in Dubai. The president of Emirates
suggests confidence in the company's leadership is running very low.
(BEGIN VIDEO CLIP)
TIM CLARK, PRESIDENT, EMIRATES: The notion that Boeing wouldn't be able to fix this going forward is unthinkable.
They just need the right people to do it.
QUEST: The right people to do it suggests that the wrong people are doing it now.
CLARK: Your words, not mine.
(END VIDEO CLIP)
QUEST: The chief executive of Qantas tells me she is putting the airline back on track after the string of scandals in her first interview with this
program since taking charge. You'll hear Vanessa Hudson.
And Mexico has a new president. Investors aren't exactly cheering. The peso is down sharply against the US dollar.
What a busy program, a busy hour that you and I have together. We are live tonight from Dubai on Monday, June 3rd, I am Richard Quest, and of course,
yes, in the UAE, I mean, business.
And a very good evening to you, a glorious evening. It is somewhat warm. Yes, it is a bit kibbitzing here in Dubai tonight, but we are at IATA's
Annual General Meeting and what a day it has been so far.
The world's largest airlines are all here. They are no longer concerned about COVID or indeed travel restrictions, they're actually making money;
in some cases, good money. But all of that could be at risk.
What a magnificent view that is we have from here.
The challenges in front of them, the political stability. Hundreds of millions of people are going to the polls, making key decisions, oil prices
amid geopolitical tensions and in terms of aircraft and manufacturers, safety as Boeing has faced quality concerns.
Tonight, as you would expect on QUEST MEANS BUSINESS, we will cover it from CEO's across its the world.
In Europe, we will hear from the CEO of SAS which is about to become part, or at least a small part of Air France-KLM. Emirates in the Middle East,
the giant behemoth Gulf carrier; Qantas in Australia, which of course is undergoing its own reforms.
But we will start in the United States with United Airlines.
Scott Kirby, the CEO is telling me, he is confident that Boeing will return to producing quality aircraft if it can change its culture. United has had
to deal with Boeing quality control problems after finding loose bolts on its 777 Max aircraft.
Scott told me what needs to change at the manufacturer.
(BEGIN VIDEOTAPE)
SCOTT KIRBY, CEO, UNITED AIRLINES: It is cultural. It is a hundred percent cultural, you know, they have 140,000 of the greatest engineers,
maintenance mechanics people in the world and they need to be allowed to build great products, design great products, focus on the quality, not be
focused on the short-term financial results, focus on quality and the finances will take care of itself.
QUEST: So your answer has just put you into the camp of those who, of where things may have gone astray.
KIRBY: Yes.
QUEST: You believe they were -- they focused on the balance sheet or the profit and loss rather than on the product.
KIRBY: Yes, I think all of us think that that they are too focused on the short-term financials, and this goes back really decades; too focused on --
I think it goes back to McDonnell Douglas merger, too focused on the short- term financials instead of focusing on building the best products in the world and building them with high-quality and then the financials take care
of themselves.
QUEST: And could you see that developing, I mean, both when you went to America and -- could you see this happening?
KIRBY: Absolutely. And it is a gradual -- it is the kind of thing that happens -- culture changes usually gradual -- and it is gradual. And you
could also see it, but it is also the reason that I am confident they can turn it around because they have great people who remember that, who want
that -- who take pride.
You talk to people at Boeing, they talk about building the B-29 to win World War II and there are people -- you know, they have the legacy and the
history of doing that. So, it is there in their DNA, in their bones, so I know can do it. They've just got to do it.
[16:05:08]
QUEST: On a wider note, I mean, I am asking the US CEOs particularly, how concerned are you about what you see as the divisiveness at the moment in
the United States?
KIRBY: Political?
QUEST: And it is not -- yes, political. It is not a political question per se, but we are going into a period, unprecedented.
KIRBY: Yes. You know, I will say this less -- not as a CEO of United Airlines, but as a US citizen, as somebody that believes the United States
is the greatest country in the history of the planet, and I am ready for us to get back to positive.
The United States, Americans are best when we are positive, when we are moving forward, we are making the world a better place, when we are making
our country a better place and I am ready to get back to positive.
QUEST: How do you do that?
KIRBY: You know, there are a lot of people that are -- this election doesn't feel like it is going to be very positive, but there are a lot of
people that are, and I think at some point it is the American spirit to be positive.
You know, we are not people that are down and upset. We are about, even when there are challenges, overcoming them, and it is core to who we are
culturally and it is going to come back.
QUEST: And you see it, of course, when you take IATA, we are here this year. We're in India next year. These are all the fastest-growing parts of
the world that the US has to play a part in.
KIRBY: Yes, and when I talk to people and I get to talk to people from around the globe being the CEO of the biggest airline in the world, and the
other thing is like, people will tell you, there may be things about the United States that they don't like or don't appreciate, but they aspire to
the values that the United States stand for, they really do.
And the people around the world want the US in a leadership position, out front, you know, something to aspire to and I am proud to be an American
and proud to represent the US when I am traveling abroad and end even though, we -- you know, it is fractious and it is frustrating at times, we
get to the right answer at the end of the day and we have a great system.
We are really lucky to be born Americans.
(END VIDEOTAPE)
QUEST: Scott Kirby, the chief executive of United Airlines.
Now to the sense, the Boeing issue was the main talking point, but of course, it has been a year of highs and lows for the airline industry
overall.
Most important of all, travelers finally fully rebounded from the catastrophe of COVID, and with that rebound, an entire new set of
challenges has arisen.
(BEGIN VIDEOTAPE)
QUEST (voice over): If there were problems last year, filling planes didn't seem to be one of them. Passengers were back international traffic was up,
China's traffic rebounded.
Last year, the aviation industry made good money and this year, it is projected to be even better.
PEDRO HEILBRON, CEO, COPA AIRLINES: One of the biggest surprises from the pandemic was how strong air traffic came back.
LUIS GALLEGO, CEO, INTERNATIONAL AIRLINES GROUP: We are investing a lot for the summer.
TIM CLARK, PRESIDENT, EMIRATES: Dubai, in this particular case has exploded in its growth in every aspect. So, it has added a real impetus to our
model.
ED BASTIAN, CEO, DELTA AIR LINES: We are also seeing that continued strength of the demand set. We don't have any -- I think this revenge
travel that people talked about is going to go on for quite some time.
QUEST (voice over): When it comes to safety, 2023 was a record year for IATA members.
The New Year, however, brought a fresh set of worries.
The successful emergency evacuation of a JAL A350 in Tokyo showed the importance of training preparation, and when the door plug blew off the
Alaska Airlines 737 MAX 9, Boeing found itself in deep trouble again.
CARSTEN SPOHR, CEO, LUFTHANSA: This particular incident will also now allow, not just Boeing, but other planes around the world to be more safer.
QUEST (voice over): United Airlines had to explain a series of incidents. The CEO, Scott Kirby, said they were all unrelated, but certainly gotten
the attention of management.
And there were the sharp reminders the flying will always be at the mercy of the elements. Singapore and Qatar's recent turbulence events showed the
power of moving air.
Today, the number one issue for commercial airlines is planes, planes, planes, and more planes, and how quickly the airlines can get their hands
on the planes they've ordered given the delays from plane makers on both sides.
AHMET BOLAT, CHAIRMAN, TURKISH AIRLINES: The issue is, how to utilize the available aircraft in most profitable way. That's really the issue.
[16:10:01]
QUEST (voice over): The march to sustainability continues with sustainable aviation fuel in short supply and high demand.
BEN SMITH, CEO, AIR FRANCE-KLM: So exactly having issue right now with availability and price.
QUEST (voice over): The hundred and fifty CEOs at this annual general meeting know only too well: You prepare for the best, plan for the worst,
and then get ready for something completely different.
(END VIDEOTAPE)
QUEST (on camera): One of the big talking points has been the consolidation, what everybody says is necessary in the airline industry and
considerable steps are being taken towards this over the last year.
So you do have Alaska and Hawaiian. You've got Lufthansa inching ever closer to ITA. You have Air France-KLM who are buying a sizable stake in
SAS.
Anko van der Werff is the president and chief executive of SAS, he joins me.
Good to see you, sir.
ANKO VAN DER WERFF, PRESIDENT AND CHIEF EXECUTIVE, SAS: Richard, how are you?
QUEST: So, when do you become a little part of the French and the Dutch?
VAN DER WERFF: The Dutch.
QUEST: Yes.
VAN DER WERFF: All right, well, we expect to complete this transaction by this summer. So that's when we expect to emerge from our restructuring
process, probably somewhere this summer, July-August, and that's when Air France-KLM would indeed, as part of a bigger consortium, take 19.49 percent
stake in SAS.
QUEST: What was it? I sort of asked you before, but never quite got to it. What was it about that deal rather than stand-alone that you liked? Because
you took the company into bankruptcy -- protected bankruptcy. Why did you choose them?
VAN DER WERFF: Well, I think really for us, this was the best deal on the table because that European consolidation indeed needs to happen. I think
as a whole, Europe has never been that profitable entity that for instance, the United States is, and when you look at the United States airlines, they
do invest a lot in consumer and customer. They do invest in that infrastructure overall.
And I think, Europe as a whole has been lagging.
QUEST: It's been lagging, but you've lost your independence. Was it inevitable that you were going to have to go with a group, whether it be
IAG or Lufthansa --
VAN DER WERFF: I think for many in Europe, of those mid-size airlines, let's call it, right, even look at KLM 20 years ago, right, good airline,
well-run, still part of something bigger and you can really make the case that it has been good for KLM.
I think that these size airlines, SAS, 130 aircrafts, at deep -- call it fringes of Europe, there is a lot to be said for being part of something
bigger.
QUEST: Okay, when do you expect to be fully taken over by Ben Smith?
VAN DER WERFF: That's a question really for Ben. There is a co-option, Ben and Air France-KLM have been very public about that. That is all known in
the deal, in a number of years, Air France-KLM could call. That's a question really for Air France-KLM.
We are focused on SAS because in that debt 19.9 scenario, we are still competitors.
QUEST: Okay, you're still competitors, but you expect to stay on?
VAN DER WERFF: Personally?
QUEST: Yes.
VAN DER WERFF: I do expect stay on.
QUEST: Right. And the other shareholders and the other -- I mean, the other interests the former government interest, the whole range of options, what
happens to them?
VAN DER WERFF: Denmark as a state will stay on. So Norway and Sweden are out or will step outs of SAS. Denmark will stay on. Private equity will
come in and private equity will actually be the largest shareholder in the new SAS.
QUEST: But isn't this a bit clunky, if you'll pardon it. You've got a government private equity and another large carrier group.
VAN DER WERFF: I think there is lots of alignment of interest here. For Denmark, of course, with a big hub, they are also a part owner of the
airport of Copenhagen. For them, the connectivity of the country, the job creation of those two job centers is very important.
For Air France-KLM, you would think, right, given the co-option that European consolidation is also in their minds.
QUEST: So how much more consolidation do you expect elsewhere and who? Go on. Be naughty.
VAN DER WERFF: Be naughty.
QUEST: We are in the Gulf, be naughty.
VAN DER WERFF: Yes. No, no, I do think that another round has to happen. I do think that for the greater good of the industry, it does need to happen.
Look, I remember my brother sending me an article in 1999, I was its about to start a month late in the 1st of January 2000 by European CEOs saying
consolidation is coming.
That's almost 25 years ago, Richard.
And yes, a few things have happened, but look at the size and look at the overall state of European airline business. I still think that another
round has to happen.
QUEST: And regulators, the commission are just going to have to learn to live with something. I mean, look at the difficulties of Lufthansa or ITA,
for example, of the transatlantic, and you've got IAG and Europa, and we haven't even got to TAP, which is on the blocks as well.
It is not going to be easy.
[16:15:00]
VAN DER WERFF: That's up to, in the end, also European Commission to have a good look at. I am looking at it from a pure European mobility perspective.
When I look at airlines for instance, the size of SAS -- that's the -- call it outskirts of Europe. I think we are really very well-off in a bigger
group.
QUEST: Well, now once you go to all the ownership and all of that sorted out, what do you want SAS to be? Because isn't it a time -- because that is
the moment when you turn your attention to --
VAN DER WERFF: Running the business.
QUEST: Well, being an airline.
VAN DER WERFF: Yes.
QUEST: Which you are doing anyway, I get all of that. But that's when you can focus on the product, on what you want it to be, what do you want to
do?
VAN DER WERFF: Yes, brilliant. So thank you.
So look, eight million yearly bound as passengers, right, or customers that we have. We have that loyalty in a very beautiful part of the world that is
also known to sustainability, right? We are really core to our suitability region, right in the world, and I think that is something that SAS is known
for.
So we will drive that, we will drive again that very clear customer focus agenda, the digitalization, the north of Europe, Scandinavia as a whole, is
known for those things.
We want to be a very strong part of something bigger. We wants to be our own airline that runs and connects really Scandinavia with the world, and I
think we can do that first still, of course, as part of a consortium and then as part of potentially as Air France-KLM, something bigger.
QUEST: Good to see you. Very kind of you for coming out --
VAN DER WERFF: Pleasure. Thank you.
QUEST: -- this late at night.
VAN DER WERFF: Pleasure.
QUEST: And it sure does feel warm and toasty out here.
VAN DER WERFF: It's quite nice, isn't it?
QUEST: A bit warmer than where your core markets are.
VAN DER WERFF: We have had a fantastic month, 25 degrees. You should come and visit in the summer.
QUEST: Thank you very much.
VAN DER WERFF: Thank you.
QUEST: Still to come, the Mexico peso is down sharply, one day after the country's historic election. For the first time Mexico is set to have a
female president and a political agenda has some investors fearing the worst. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: The Mexican peso is sharply lower following the country's election of Claudia Sheinbaum on Sunday. The peso is off more than four percent on
fears that a Sheinbaum Mexico's first female president-elect will seek major constitutional reforms.
She is climate scientist and former mayor of Mexico City and promised to expand the country's social welfare program, as well as tackling criminal
violence and fighting climate change.
[16:20:06]
Gustavo Valdes is with me from Mexico City. That is an extremely wide ranging, a large, if you will agenda that puts her in direct opposition to
many political and other forces in Mexico City.
But she has won, so that's clearly what the populace wants.
GUSTAVO VALDES, CNN CORRESPONDENT: And that's right and that is precisely what is perhaps like worrying the investors because they knew that she was
going to win. What is surprising is by how much. Almost 60 percent of the voters decided that she is going to be the next president, and it is not
only el peso that is falling level, the Mexicana de Valor is the Mexican stock exchange, it has dropped as much as five percent today, and that is
because with these much mandate from the public and the number of people that she is going to have from her party in Congress, she is going to have
in more power than Andres Manuel Lopez Obrador to continue these policies.
And even Lopez Obrador today, he said that he is not going to tell her what to do, but between now and October when he leaves office, they are going to
talk about what changes they can do, including constitutional changes that worry investors.
QUEST: The reality now of course is how this plays into US, both for President Biden, but by the time she takes office, there will be election
and there could be another President Trump. So what would you expect on that relationship?
VALDES: So first we need to see what changes they make and in what shape they leave the economy. They have got a deficit that is larger than in the
decades that could be a problem by the time she takes office. We can see perhaps something what we saw in '86 when Carlos Salinas de Gortari who was
thought of as a statesman around the world for the changes he implemented Mexico, but when he left, he left the country bankrupt.
We don't know what is happening. I am not saying that's the case, but that is one of the scenarios that has played out in Mexico in the past.
So that is the one thing on the financial side and the next one is what kind of cooperation she is going to have with the United States, not only
on trade, on drugs, but immigration, which is a big issue and is a big concern for Joe Biden, which is one of their weak issues.
So if all of a sudden, there is more migration into the United States, it is going to have an effect north of the border.
QUEST: It is a fascinating mood tonight, and Gustavo, we are grateful you're there and you will continue to keep us fully informed. I am grateful
to you, sir. Thank you.
And so to Israel now where the country has determined that four more hostages being held by Hamas have died. They were pronounced dead based on
Israeli intelligence. The families of those have been informed and the circumstances of the deaths are being determined.
Jeremy Diamond is in Jerusalem.
Well, the sad, the tragic news that is being given comes at a moment where the government is -- I mean, how to proceed on the basis of a ceasefire and
the possibilities put forward by the Israeli government, and there doesn't frankly seem anyway forward at the moment.
JEREMY DIAMOND, CNN CORRESPONDENT: Yes, I mean, there is no question that this is coming at a critical juncture at a time when we have seen more and
more Israelis taking to the streets, demanding that the Israeli government stand by this latest proposal that they have crafted and put on the table
in which President Biden and many other western countries are now fully backing and calling on Hamas to accept and on the Israeli government to
stick with it.
But there is no doubt that the deaths of these four men confirmed today by the Israeli military is the worst news that the families of these four
hostages could have expected.
For nearly eight months, they have waited and hoped and prayed that their loved ones would eventually emerge from Hamas captivity, returned to Israel
alive, and instead learning today that they are dead and that their bodies are still being held hostage by Hamas.
The four men confirmed dead today by the Israeli military are 79-year-old, Haim Peri; 80-year-old, Yoram Metzger; 84-year-old, Amiram Cooper; and 51-
year-old Nadav Popplewell.
The Israeli military actually acknowledged that they were likely killed during Israeli military operations against Hamas. They didn't explicitly
say that Israeli fire was responsible, but we should note that last month Hamas actually said that Nadav Popplewell, that 51-year-old British-Israeli
citizen they said that he had been severely wounded in an Israeli airstrike and subsequently died of his wounds due to lack of intensive medical care.
[16:25:03]
The Israeli military spokesman, acknowledging that there are "difficult questions" that will arise as a result of this news and the Israeli
military is still looking into the situation -- Richard.
QUEST: All right, the way -- I mean, it is almost impossible to ask you what happens next? But that is the core question that people want so know.
Who takes the lead now?
DIAMOND: Well, there is a clear acknowledgment that despite all of the debates within Israeli society and politics about whether or not Netanyahu
will stick by this deal, the ball is very much in Hamas' court at the moment.
We are still waiting to hear Hamas' official response to this latest Israeli proposal, which the president, President Biden laid out on Friday.
They did say initially that they responded "positively" to the president's speech, but we don't yet have their official response.
And that will very much determine whether or not Netanyahu has to confront this key choice, which is whether or not to stick by this deal, which his
own government crafted or whether to prioritize instead the survival of his government because several far-right members of his current governing
coalition effectively threatening to collapse this government entirely if Netanyahu falls through with this deal.
QUEST: Jeremy Diamond, who is in Jerusalem for us, I am grateful to you, sir. Thank you.
QUEST MEANS BUSINESS tonight, coming from the IATA Annual General Meeting. The airlines of the world.
I sat down with the new chief executive of Qantas for an exclusive interview. Vanessa Hudson says she is moving the airline past its recent
scandals.
(BEGIN VIDEO CLIP)
VANESSA HUDSON, CHIEF EXECUTIVE, QANTAS AIRLINES: Not just me, 25,000 people that work for Qantas felt it as well, because not only did we let
our customers down, we let our people doubt.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
[16:30:38]
QUEST: Welcome back to IATA. The airline aviation conference. Now in an exclusive interview with us on QUEST MEANS BUSINESS, the new chief
executive of Qantas tells me she's putting the airline back on track. Vanessa Hudson was previously the chief financial officer and a variety of
other roles over several decades at Qantas. And then she became chief executive in September.
Her predecessor, Alan Joyce stepped down early after several scandals. According to the allegations, Qantas allegedly canceled flights for its own
game, then sold tickets for canceled flights. It hoarded slots at Sydney Airport, and it annoy passengers left, right and center with its frequent
flyer program, which apparently was almost impossible to get a ticket. Well, now, Vanessa Hudson, she's in the top job. And she says she feels the
pain and anger of her customers and employees.
(BEGIN VIDEO CLIP)
VANESSA HUDSON, CHIEF EXECUTIVE OFFICER, QANTAS AIRWAYS: Coming out of COVID was really difficult. It's difficult for a lot of airlines. But
particularly, we had a lot of difficulty. We disrupted a lot of customers. The recovery took too long. That was poor on time performance, high
cancellations, lost bags, long call wait times. And customers have a very high expectation of Qantas. Higher than our competitors.
And when we let them down, they remember it. And that happened for too long. And so now looking forward, what we need to do is to listen to
customers understand the pain points and fix them.
QUEST: Do you think it helps that you were there during that period? In a sense, you saw what happened. So, you now know have a very good idea of
what needs to be put right. You felt the pain of the anger?
HUDSON: Well, everyone felt the pain of the anger. It's not just me. 25,000 people that work for Qantas filtered as well. Because not only did we let
our customers down, we let our people down. And I think given that, stepping into the role as CEO, I spent a lot of time listening, and
actually less time talking, listening to customers, in focus groups, in focus groups with customers who are detractors, listening to our people,
our pilots, cabin crew engineers.
And I think that that's actually a really important part to make sure that we focus on the things that matter. And our people, and our customers know
what matters. And if you listen, that's the most important part.
QUEST: Right. So you've listened. You've heard if you want -- what they want you to do. Can you do it?
HUDSON: Absolutely. And we started. We're investing hundreds of millions. $230 million this year. And that's really focused on four pain points. One,
fixing on time performance. And I can say that we've done -- we've done that. We've lifting both Jetstar and Qantas. This month actually saw Qantas
airlines deliver over 80 percent on time performance. And we know for Jetstar and also Qantas, that directly relates to customer satisfaction.
So, we've seen our customer satisfaction rebound. We are investing in the in-flight experience, Wi-Fi, food and beverage, and also the surface
experience. When things don't go right, because things won't always go right, we know that. We will never put our schedule ahead of safety. And
so, when things don't go right, we're also focused on communicating better and recovering better than we have in the past.
That's through our digital channels. That's about empowering our people on the front line. And then the fourth one, which is very important. We've
recently relaunched our loyalty program, because loyalty is absolutely a core part of what our customers give us.
QUEST: Now I have a personal interest in Project Sunrise. Are you still committed to it?
HUDSON: We are. And the first aircraft is due early 2026. We're incredibly excited about Project Sunrise. What an amazing --
QUEST: You're still going to do it.
HUDSON: We are still going to do it. It is absolutely in the plan. I spoke to Airbus this week. The first aircraft is coming out. It's been being
manufactured now. So, it's incredibly exciting.
[16:35:02]
And this is going to connect Australia, to New York and also London direct from the East Coast. So, Sydney or Melbourne, we haven't yet determined
that. But we know our geographic distance in the world. We're not afraid and have never been afraid to fly long haul to take what are leaps in terms
of driving, you know, using technology to the fullest advantage and Project Sunrise will be a key part of that.
QUEST: Do I still have a seat on board?
HUDSON: You come and talk to me, Richard, and I'll make sure that you get a seat.
(END VIDEO CLIP)
QUEST: That was Vanessa Hudson. Whether a question, I have a seat on Project Sunrise. Good to see you.
BRIAN SUMERS, EDITOR, THE AIRLINE OBSERVER: Nice to see you.
(CROSSTALK)
QUEST: -- see you. What -- how is -- how is she performing there?
SUMERS: Well, it's pretty early, Richard. We'd like to give everybody the benefit of the doubt in the beginning. But I think the consensus was maybe
Alan Joyce, the previous CEO overstayed his welcome. It's good to get some fresh blood at Qantas. It's going to be very neat to see what they do
internationally with Sunrise.
QUEST: It's so hot. I mean, the airline or the management went from hero to zero, overnight, that was extraordinary.
SUMERS: It was. It happens all the time, though in airlines. Somebody who's a genius, and then they expand too much or they become too full of
themselves. Alan Joyce was an interesting character. Maybe we could leave it at that.
QUEST: Now, of course, because you've got Vanessa Hudson who's moving things forward, quite deliberatively.
SUMERS: And more conservatively.
QUEST: Yes, absolutely. You know, I heard an interesting quote today from one person who said, actually, the delivery of plane crisis that they've
got is actually saving the industry from its own foolishness of overcapacity because, you know, it goes from boom to bust. The good times
come, they get the planes, overcapacity the bus follows.
SUMERS: Oh, well, that's the biggest secret of this event. All these CEOs, they whine about Boeing and Airbus and then sometimes on the record and
sometimes off, they say, this is the greatest thing to happen to the industry. Because, you know, how do we set the prices for airline tickets?
Its supply and demand. Seat supplies artificially constrained right now. Airlines get to raise prices and they can get away with it.
The worst thing for the industry would be if Boeing and Airbus could deliver every airplane that they had.
QUEST: Because then we will be back to the battle days.
SUMERS: Yes. And we would see, you know, it would be good for consumers. But we'd see new entrants, you'd see billionaires decided, well, I want to
start a new airline. They can't even get airplanes right now. Nobody can start a new airline.
QUEST: It isn't that incompetent that they can't get the planes? I mean, you know, the other side of that coin is you can't make -- the bone for
safety reasons or otherwise, Airbus simply because of supply issues. They can't get the planes.
SUMERS: Yes. I've been coming to this conference for about 10 years now. I have never seen airline executives as angry as they are right now.
QUEST: But there's nothing they can do about --
SUMERS: There's absolutely nothing they can do about it except complain to you and me, which they've been doing ad nauseam.
QUEST: And yet, they're quite happy on another point, which is fascinating. They're making money, admittedly not a lot.
SUMERS: Three percent net margin.
QUEST: Six dollars, the price of a cup of coffee in this hotel, I'm told as to -- as to when (INAUDIBLE) they are making money though.
SUMERS: They are making money. And when you consider where this industry came from four years ago, people forget or they like to forget. This was
the worst aviation -- the worst economic crisis in aviation history. Nobody knew that these airlines were going to come back and now four years later,
this idea that they could make a margin, even if it's only three percent. It's a very big deal.
QUEST: And that three percent by the way distorts slightly because the only CEOs I've been talking to today were eight, nine, 11, 12 percent.
SUMERS: Yes. And some of them, of course are negative as well.
QUEST: Exactly. Exactly. What would you say is the mood here? Because you've been coming in a few years. What's the mood?
SUMERS: I think the mood is actually jovial. You know, you had this period of 2020 and 2021, where nobody knew what the future was going to be. And
then if you remember, you know, 2022 was not great because demand was back. There was revenge travel, but airlines couldn't fulfill that demand.
Passengers were so unhappy. Now we've kind of reached this equilibrium. Airlines are running pretty well. Airlines are making money. It's not what
it was. But at least people are optimistic for the future.
QUEST: Will you be on Project Sunrise?
SUMERS: I will be there with you. Can't wait.
QUEST: (INAUDIBLE) Vanessa decides to keep us posted on that plane.
SUMERS: I look forward to it.
QUEST: Good to see you. Thank you, sir.
SUMERS: Thank you, Richard.
QUEST: It's vexing out here tonight. But it's good to be with you.
SUMERS: My pleasure.
QUEST: Thank you very much indeed. As we continue tonight, the president of Emirates tells me Boeing can right the ship. However, Tim Clark didn't
exactly give it a ringing endorsement. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:42:31]
QUEST: Welcome back to Dubai. The IATA. And the general meeting. I sat down with the Emirates President Sir Tim Clark. The elder statesman, if you
will, in the industry. I'm sure wouldn't mind me calling him that Emirates is hosting this year's event. And so, Tim was the right person to comment
on Boeing. He has a vast fleet of 777 and hundreds on order, dozen certainly.
So Tim told me he thinks Boeing can turn a corner. But it may take time and different people.
(BEGIN VIDEO CLIP)
TIM CLARK, PRESIDENT, AIRLINE EMIRATES: Boeing is going through a tough period. We know that Boeing has been one of the stalwarts of the business
afterwards global duopoly we're in now. Can they do the things that they need to do? Well, yes, they can. History tells us. The notion that Boeing
wouldn't be able to fix this going forward is unthinkable. They just need the right people to do it.
QUEST: The right people to do it suggest that the wrong people are doing it now.
CLARK: Your words, not mine.
QUEST: You haven't challenged them?
CLARK: No, I expect like any business is only as good as the people that work for it. A business will always be an operating model, will always be
driven. A successful operating model will be driven by the people at the top. And you need strong leadership, you need strong execution of the
model, you need laser focus on what you're doing.
QUEST: But it means that that it's still going to be extremely difficult in terms of delays, in terms of deliveries from Boeing and indeed from Amazon
for other reasons.
CLARK: Yes. I'm beginning to believe that we will have a five-year hiatus from today. So, will Boeing be able to recover its ramp up rates and
everything else get the supply chain in order, meet the demand from the existing customers plus the new ones coming after, we've got over 300
aircraft or including the Airbus aircraft. Will that all come into place at the time that everybody wants? I'm not optimistic.
QUEST: How much of the delivery question is now seriously impacting the growth plan or the growth trajectory that you've got?
CLARK: Well -- we, as far as Emirates is concerned, we have taken that decision I've just said about two years ago to retain and refresh our
existing fleet. Now, don't forget, those are 777 300ERs and three aces. We don't have a multi fleet operation. So, it's quite easy, not at the pace
that we would have liked but we'll live with it.
[16:45:02]
QUEST: And I was interested to see your boss shake out with saying he views Flydubai and Emirates is one airline essentially that will operate more
seamlessly in the future. That's where it's going to be, isn't it?
CLARK: I would think. So, yes, there's no point in having two companies owned by the share -- the same shareholders tripping value from each other.
The aggregate share wealth creation are the two carriers working together, particularly in this kind of region -- in this region, with the kind of
fleet that we have. The tools from the 737 max up to the 380 make a formidable proposition for the shareholders.
QUEST: You might be the only airlines in the world that are about to replicate successfully, Qantas Jetstar.
CLARK: Well, that is an example of how it can work and don't work.
QUEST: Yes. But nobody else is managed to do it.
CLARK: It's all about who runs the show. Remember, I said earlier, you're only as good as your man or woman to run the business. If you get that
right it can work for you.
QUEST: You have been extremely adventurous and indeed in arrangements. You're not part of an alliance but you have lots and lots of bilateral cost
being Qantas. And now you've got united, which is an interesting one. Does that grow further?
CLARK: I hope so. I think if you ask the united people, Scott Kirby is here, if you ask a Canada, Michael Russo is here, these are the co-chair
arrangements that we put together as a initial stage to see how that was working. Now, it's clear that they are working very well. And I would think
that this is just the beginning. Our metal is now in Dubai. And they're almost formed from what I can gather.
So, does it work with us? Yes, of course, it does. Something we always said. All those years ago, when we had the difficulties with the big three.
In the USA, I used to say, join us, don't fight us. If you join us, we'll bring value to them. Now, of course, they realized they crossed the
Rubicon, then that's actually not such a bad thing after all.
QUEST: Your own future. I don't know how many times I've asked you how long.
CLARK: In the end, I kind of -- I say listen, guys, that's not really part of the narrative. It's really about --
QUEST: It is.
(CROSSTALK)
QUEST: Because you have been such an important part of this airline. So, remove Tim from the equation. And everybody asks what's next.
CLARK: Yes. But -- so Tim is not going to be around forever, it's physically impossible to do that. We are trying to create a group of guys,
these people have been working with me for over 20 years, Richard. Even they are getting a bit long in the tooth. All I've said is follow the
model. Do not deviate from the model, scale the model, follow what the shareholder wants, which is what's happening in Dubai and you'll be in good
shape. Never take your eye off the ball, laser focus, laser focus, and then you don't need me.
(END VIDEO CLIP)
QUEST: Interestingly, you talk -- he talks about follow the model and look at what's being built. And if you look at what's been built here, well,
they have the Burj Khalifa over in the distance. It's just after midnight - - well, half past midnight, here at the moment. It's still buzzing in one shape or form. The size and scale of everything is here proving that the
Gulf whether it be here (INAUDIBLE) or Riyadh Air still to come will be with the growers.
Now when we return, Willie Walsh, IATA director general tells me the airline industry is treated unfairly when it comes to regulation.
(BEGIN VIDEO CLIP)
WILLIAM WALSH, DIRECTOR GENERAL, INTERNATIONAL AIR TRANSPORT ASSOCIATION: I know you're going to say every industry faces regulation. I don't believe
they face regulation to the same degree that we did.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
[16:51:13]
QUEST: IATA expects five billion passengers to fly this year. You and me add us all up and eventually we'll be up to five billion. It's a roaring
recovery after COVID. But with that comes a new set of challenges. The number of people who are voting in elections around the world. Key
elections, the sticky inflation, that prices just won't come down. The slim margins 3.1 under supply chain issues.
I spoke to IATA Director General Willie Walsh who told me where the industry stands now is difficult.
(BEGIN VIDEO CLIP)
WALSH: It's great to see all parts of the industry at a global level back in profitability. But it's still a very small level of profit. Now $30
billion U.S. is a huge figure. But when you express it in margin terms, a margin of 3.1 percent, it's still a very small margin.
QUEST: So, what work needs to be done? Is it on individual airlines in terms of making them more profitable? Is it in terms of consolidation?
WALSH: I've always believed that consolidation is part of the solution. It's not the answer, you know, but it is part of the solution, particularly
in highly fragmented markets like Europe. So, I think we will see some consolidation going forward. But our industry has always been very much
focused on our core space, you know, what can we control? And you'll see that, you know, we've been facing significant inflation in jet fuel costs
way beyond what consumers would have experienced in terms of, you know, petrol prices at the pump.
So, the challenge is there but these challenges I described this business- as-usual challenges.
QUEST: So, what's the unusual? What's the bit that you can't -- I mean, you know, your 30 percent --
WALSH: Regulation, regulation, regulation. You know, I think, regulators, politicians look at our industry and think this is a highly profitable
industry. And they look to us to generate new tax revenues. And I think people forget to look at the bottom line. And I know you're going to say
every industry faces regulation. I don't believe their face regulation to the same degree that we do. And, you know, that that's a job that the
industry has to do to push back against some of these measures that I believe are unfair.
QUEST: But you've got this problem in the -- in aviation. The supply chain issues, essentially, then magnified by Boeing's own safety issues.
WALSH: Yes, the supply chain has been a big challenge since the start of the recovery. The best I can say about that is it doesn't appear to be
getting any worse. But there's little evidence of it getting better. It's more an issue of frustration, to be honest with you, because it's not new
to see delays to deliveries with new aircraft. What is new is the complete uncertainty around when you're going to get the aircraft.
And it's not just Boeing. You know, Boeing clearly has greater problems and Airbus but, you know, Airbus has had problems delivering aircraft as well.
QUEST: The sustainability question is so mind bogglingly complicated. And the core problem really is there's not enough sustainable aviation fuel
around and it's too expensive and nobody seems to have an answer as to how to get more.
WALSH: You're absolutely right. I look at this, as you know, the most critical thing we can do is to ensure that we have a credible pathway to
net zero in 2050. Now, it's not going to be smooth. I've said this before, it's going to be expensive. It's going to be complex. But I do believe we
can get there. Sustainable aviation fuel is the single biggest contributor to the, you know, the path to net zero.
QUEST: You have the European system, which is much more designed to penalize. You prefer the U.S. system.
WALSH: Absolutely.
QUEST: Which is to incentivize the production rather than to penalize the lack of.
WALSH: Absolutely. You know, what we need is we need production. You're not going to get greater production of sustainable fuel in Europe by
introducing these penalties. What you will get is zero environmental progress and higher costs to the consumer.
[16:55:08]
QUEST: But how does an industry let this get through? How do you not have enough force to at least alter the argument?
WALSH: You asked me what would I do if I ran the world? You know, I would do it differently to this. There is a big disconnect between what Europe
does and what the rest of the world is doing. And I've said this openly, I think Europe, we're arrogant about this, because we assume that the rest of
the world can do away in Europe too. You know, and this idea that people should use the train instead of the plane.
QUEST: If you're a doctor.
WALSH: Amputate.
QUEST: If you were a doctor and the industry is your patient, how would you say its health was?
WALSH: I'd say it's a healthy patient that requires more exercise and, you know, needs to -- it needs to stop doing some of the bad things, you know,
change some of the habits. But it's survived an incredible scare. And it's recovering and recovering well.
(END VIDEO CLIP)
QUEST: Dr. Willie Walsh. Now there's a thought for you. It'll have so many industry terrified. We will take a profitable moment after this break.
QUEST MEANS BUSINESS live tonight from Dubai.
(COMMERCIAL BREAK)
QUEST: Tonight's a profitable moment from IATA in Dubai. The industry is estimated to make $30 billion this year. Now that sounds like a lot of
money until you realize it's on the best part of a trillion dollars of revenue. And then you realize that the margins are wafer thin for many of
the airlines, sure, some are making good 10, 11, 12, 15 percent margins but most are not. The reality is this industry has never made a great deal of
money.
And it's always gone from boom to bust. And probably the only thing that's stopping it from falling over its own shoelaces at the moment is the
reality that there are just can't get the planes, because if they weren't getting the planes that they were intending to fly, then we will be heading
very rapidly back to over capacity. Fares might fall, but that would also increase that would also destroy the yields and then we'll be back to the
bad old days.
The mood among CEOs here has been very interesting to watch. On the one hand, they are jovial as Brian said earlier, but they're also very worried
about the issue of sustainability, the new requirements, how it's all going to work and geopolitical tensions. Do not forget that what's happening when
we vote, what's happening in these wars, what's happening around the world is having a very real effect on the airline. So, we're here today.
[17:00:08]
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in Dubai. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see
you in Dubai again tomorrow.
END
