AIRLINES & ALLIANCES

GLO Interview at WAF Lisbon: Mauro Oretti, Chief Operating Officer, SkyTeam – Part 1 (Full Episode)

0:00 - Introduction 0:29 - on key trends post-COVID 6:04- on opportunities in the next 18 to 24 months  7:23 - on budgets 09:32 - on sustainability initiatives and the Sustainable Flight Challenge 12:52 - on regional differences in sustainability efforts

SkyTeam

0:00 – Introduction

0:29 – on key trends post-COVID

6:04- on opportunities in the next 18 to 24 months 

7:23 – on budgets

09:32 – on sustainability initiatives and the Sustainable Flight Challenge

12:52 – on regional differences in sustainability efforts

Read the full transcript below.

00:00
GLO: Mauro, it’s a pleasure to meet you here at the World Aviation Festival in Lisbon. And thank you very much for the interview. And we’re looking forward to the insights you can share with our members. 

Mauro Oretti, Chief Operating Officer, SkyTeam: A pleasure to be here. Thank you for having SkyTeam and me in this interview.

0:29
GLO: Let’s start by looking at the trends post-COVID. What were the main trends and themes you and your members were focusing on? 

Mauro Oretti, Chief Operating Officer, SkyTeam: The two are closely related because we tend to focus on things that matter to our members. And the first focus has been on recovering traffic. The pandemic has been something unprecedented. The industry has never before faced something so dire as have all our members. We have been focused on supporting our members and accompanying the recovery for the last 18 months. Luckily, the recovery is going well. It’s been very healthy. We recently had calls with each of the 19 airlines at SkyTeam and we asked several questions. When we asked about the traffic, everyone was smiling, everyone was happy. So that was the first trend. The second trend for us has been continuing the journey towards a more seamless customer journey – seamless travel. We have invested significantly in technology, digital technology in particular. So, we didn’t stop during the pandemic. However, the actual budget was significantly lowered, of course, not to not to weigh on our members’ balance sheets, but we kept on focusing on technology during the pandemic. We kept the lights on in a way and this is continuing, and I will say accelerating. When I say digital, I mean digital technology to fundamentally improve customer experience in the areas of check-in, for example, ancillary services, notifications and bags, etc. The third area we have been focusing on is sustainability. We did a very important initiative called the “Sustainable Flight Challenge” (acronym TSFC) whereby in the month of May all our member airlines have flown one or more flights (existing flights) in their network, trying to make it as sustainable as possible. This year we have 22 airlines, 72 flights competing in 26 categories. It has been an incredible journey we supported that CEO level with a very eminent jury made of members at world quality level. To summarise, I will say recovery, seamlessness and sustainability. 

3:33
GLO: As you said, travel has had a strong rebound post-COVID. Our members have been talking about revenge travel. And now business travel is coming back as well. But the increase in demand for travel also came with its challenges. Airlines had to ramp up their capacity fast and they were facing some operational challenges. What challenges were you facing and how did you overcome those?

Mauro Oretti, Chief Operating Officer, SkyTeam: The Alliance is a very specific observation point. We’re not an airline, we don’t operate the aircraft. Our role is really to support the members. And the issue there is that each member has specific challenges. And each geography has specific challenges. In Europe, for example, and we are based in Amsterdam, Schiphol was an airport that has faced and is facing challenges. Last year was about not having enough people to cater for the demand. This year is about the ask that the Dutch government has made to lower the noise and as a consequence to lower the number of flights in Schiphol. And this is very much something that is happening across Europe: the focus on sustainability, inter-modality, replacing flights with trains, this is something that is very specific to Europe. In the US the landscape is different. The landscape is such that the US has a very healthy industry together for carriers cover 85% of the market. And so for them, the challenge was to reorganise the companies that have lost employees they’ve lost also competence over the years to really bring back that competence, that knowledge and that staff in order again to meet the demand. In Asia situation is much different. I was in China last week. And China showed us some numbers, you know, and the traffic in domestic China has now reached the level of 2019 or even exceeding that level. But if you look at international travel, we’re still at 30% -35%. Each geography has its own challenges. 

6:04
GLO: Looking at the opportunities, what do you see for the next 18 to 24 months? What are, in your view, the biggest opportunities for the industry and for your alliance?

Mauro Oretti, Chief Operating Officer, SkyTeam: The biggest opportunity is to continue the work that we were doing before the pandemic in the era of seamless travel. We operate at the intersection of customer experience, the design of certain products and services for the collective benefit of the Alliance intersecting with technology. We have, I will say, a leading edge position in that space: on the road towards retailing, on the road towards offer and order… we are doing things for example in check-in, in the areas of ancillary, in the areas of flight information (notifications) and also in the area of loyalty as well, because we have some projects that we want to carry out there. 

 7:23
GLO: So you’re talking about the seamless experience and also you mentioned earlier that even throughout COVID You have not stopped investing in technology. However, you’ve reduced the budget. What is the budget for next year? Do you think budgets have come back and they’re going to increase? 

Mauro Oretti, Chief Operating Officer, SkyTeam: Not really. We are discussing the budgets as we speak and there is a lot of caution in the industry. On one side, the outlook on traffic in summer has been great. And I think winter as well will look good. At the same time, there is a very cautious and, even concerned approach by a lot of our members because of what is happening in the world: the war in Ukraine, the climate challenge and increasing fuel prices. And everyone is asking the question “How long will this last?” And is there a risk that this may last for a long time? So the budgets are cautious.

8:45
GLO: And is this the budget overall for the airline industry? What about the loyalty budgets and focusing on a customer-centric approach?

Mauro Oretti, Chief Operating Officer, SkyTeam: This is a painful question for me because the loyalty budget was basically stopped for four years. And now this year I think there will be a better budget for loyalty, but I will no longer be in charge. This is painful because I’ve been trying to promote this kind of investment but I will not enjoy the satisfaction of seeing the result. But I’m glad for the colleague who is replacing me. I think there will be more money spent on loyalty.

9:32
GLO: You mentioned sustainability as your third topic of focus. How do you overcome the challenges and expectations to move into a more sustainable industry? 

Mauro Oretti, Chief Operating Officer, SkyTeam: The initiative that I mentioned before has been really the initiative that has induced traction in the space. Frankly, we have been trying to do things on sustainability for many years without much success. And then four years ago, magically, the focus changed. So now the sustainability efforts are supported at the CEO level. The Sustainable Flight Challenge is really becoming a very relevant initiative. Why is that? Because, through the Sustainable Flight Challenge we gathered a number of relevant innovations, about 200 last year, and about 300 this year, which we have captured on our website sustainableflightchallenge.com. We have divided them into some 14/15/16 streams: from eco piloting to waste management, and from cargo to SAF.  We are creating micro-communities of people who share the same interests. People are collaborating within the airlines and within the alliance to improve those areas is a very interesting exercise. This is one element. The second element is that this initiative is leading to us developing standards in sustainability that can be adopted by all the members of the alliance. This is a two-pronged approach; on one side the Sustainable Flight Challenge, and on the other, sustainability standards.

The sustainability challenge came from KLM. KLM has a group of people called Bold Moves (about 150 of them). They have been tasked with the challenge of finding projects and initiatives that can raise the bar in sustainability. And these projects need to be bold, they need to be ambitious, and they need to be painful because if it doesn’t hurt maybe the progress is not enough. So this group has selected 250 initiatives, shortlisted 60 and selected 10 which went to the board. And then one of them was the Sustainable Flight Challenge. And KLM said “Why don’t we hand over this to SkyTeam because this is best done collectively with the other 19 members.” So they handed it over to us and we implemented it.

12:52
GLO: This has really put you in the forefront of sustainability. If we look at your partner airlines, would you say that their approach to sustainability and their demands have changed as well?

Mauro Oretti, Chief Operating Officer, SkyTeam: Again, the geography is very important. The demand profile has changed significantly in Europe, where the awareness of sustainability is very high, in the US is not so high yet. It is there, it’s important, and it is relevant but is less felt compared to Europe. In Asia, even less so. I was recently in Korea and discussing with Korean Air, their sustainability ambition. They are absolutely focused on that and they do a lot of things in terms of fleet engine etc. But the sentiment in the country is not as pronounced as in other areas of the world. Simply because they consider themselves an island even though it’s not an island technically. But because they have North Korea, in the north, where they cannot travel, they need to fly everywhere. Hence the importance of having the freedom to fly prevails for now over the concerns about the environment.

14:21
GLO: That’s what we’re hearing from our members as well. There’s such a big difference in the geography in terms of how the customers have evolved and what to expect.Mauro Oretti, Chief

Operating Officer, SkyTeam: Two examples that are nice to mention for the Sustainability Flight Challenge: in Africa, Kenya Airways has been (thanks to the challenge) the first airline to actually have SAF deliver and put onboard the aircraft physically in Nairobi for the first time – huge tech for the African continent, and for Kenya Airways. The second example is KLM Cityhopper. Both last year and this year, they flew one route with the slowest-ever speed to save fuel and to be sustainable. Even though they flew with the slowest possible speed they got there earlier than the scheduled time. So how is it possible that you fly slower and you arrive early? This was possible because they interacted ad hoc with the air traffic authorities of the various countries involved, and said “Can we just for this flight, fly straight without diversions?” So my comment here is imagine how much we could achieve if we had the single European sky that we’ve been talking about for 20 years.