Why launch a new airline now?
We began this project before the pandemic; we have been working on this for two and a half years. We believe that we can bring new initiative and change way the airlines do businesses.
We see the big carriers stuck on their legacy models, the low-costs soaring high on short-haul, and a couple of initiatives to implement low-cost long-haul.
That, in our opinion, will be much different than short-haul where Southwest established a benchmark that has been copied and pasted around the world.
There will be no single benchmark, it will depend on where you are, what you want to do, your public, your proposed network, who you want to serve. So you are going to find many different models, either in Europe, Asia, South America, United States, Canada.
We have developed what we believe is one of them, and with the pandemic we have adapted this model. We see an industry devastated by the crisis and there is opportunity now to think about creating something using leading-edge technology with a very lean company, lower costs and high quality of service.
We are calling it the airline for the future.
It is basically a model of decentralized aviation, being away from the big hubs, serving nonstop direct secondary catchment areas with narrowbody, last-generation airplanes in a way that can decrease trip times and costs for people and offer a seamless personalized experience.
We also want to be very innovative and use technology for everything in the company, so we are using a hybrid democratic funding model using blockchain-distributed ledger technology.
This way we believe that we can bring to the market a very robust and stable company, financially speaking, and also operationally.
And we aim to grow fast.
What makes you confident to succeed where others have failed on low-cost long-haul?
We've seen their models and they are different than ours. We have learned from their experiences.
Our model is narrowbody airplanes serving point-to-point secondary markets in Europe to destinations in the US, Canada, the Caribbean, South America, Africa, the Middle East, even India.
If you put the airport you want to operate in Europe in the center, and you draw an arc of the new A321XLR range, then we have a menu of markets to be served.
So we aim to serve secondary to primary, secondary to secondary, and have a nice balance between business destinations and leisure destinations.
And we believe that this could be one of the benchmarks for low-cost long-haul in many parts of the world.
There may be opportunities for widebodies in Asia but here in Europe we don't have the secondary markets for widebody aircraft of 300 seats without connectivity; you would need to build new hubs and we don't believe in this.
We need to right-size the airplane that can fill in secondary markets with minor connectivity, because connectivity is something that will always exist.
And if we have agreements with short-haul low-cost airlines they can contribute to this connectivity like easyJet is doing—or was doing before the pandemic. They started in London Gatwick with a very successful model with Norwegian. This is something that will be interesting.
If you can shorten the trip of a customer by three to four hours to reach the other side of the ocean and directly to their destination, or at least taking them very close to where they are going, this will be, in our opinion, a successful model.
So you will be hoping for lots of demand stimulation with your offering?
This is very important and was a lesson that I learned when I participated in the start-up of Azul in Brazil. To give you an example, we were flying to the third airport in the Sao Paulo area, and the airport was dedicated mainly to cargo flights.
We started serving that airport and demand stimulation was very important, so we looked at bus services to the airport and we plugged in destinations that are not really reachable for the people of that area.
Once you start a flight you're always going to have a person that wants to visit a relative, or take a holiday in a new and interesting destination.
So we will choose some destinations for a season, then next year assess this and maybe offer something a bit different. Even during the current year you might have some destinations that are not reachable and we can stimulate demand with price or frequencies.
Frequency for some destinations is what will drive the demand. For the business traveler, to have a daily flight from A to B you know that you can count on that daily flight anytime you need.
Business travel will be the last sector to recover, but it will. There is no healthy economy without air services.
Long-haul requires more investment than short-haul. How will your network planning team identify destinations that will stimulate demand and minimize risk?
Nobody knows what's coming next, so we need to consider what happened already. And we should assume that once the recovery comes, something similar will happen but we should be open to change.
We have looked at lots of data and worked with our partners to develop the business model. But there are some natural markets, so if you want to fly to New York there will be demand, after the pandemic of course.
But secondary points in the US and Canada for example, these should be studied and you should have reasonable assurance that the market will work before they are tested. And if the tests do not show positive results then you change your mind.
There is a balance with leisure destinations, because there are destinations that everybody wants to fly to and you need to serve that month. But we also need to be creative and offer something different. I'm from Brazil, so I have some ideas there, that with the A321XLR we will be the only ones able to serve.
You are starting in Switzerland, but I assume you will be looking at other European bases for long-haul?
We will be a Swiss company, but with a pan-European vision. We want to be in different secondary points in Europe, serving European markets nonstop without passing through Switzerland.
You mentioned a modern fleet such as the A321XLR, and the desire to grow quickly. With the current aviation and financing environment, how quickly can you grow?
We know that long-haul will take a bit longer to recover. And with the decentralization mindset, we are aiming to take an opportunity here in Lugano where I live. The municipality here is in the middle of the tender process to hand the airport to a private initiative.
We aim to be one of the companies considered because we are in partnership with another company specializing in running airports, so we want to provide the airline piece to this partnership.
And here in Lugano, we have studied the market in much detail. There is a very rich market in the Ticino region flowing through either Milan or Zurich; there is no other option for them since Swiss stopped flying to and from Lugano about two years ago.
So the airport was threatened with closure and this initiative will bring the airport back to life. We aim to prove a small operation here, this is a niche market. The airport is small with a short runway and restricted ramp space.
But we aim to create a very interesting operation here to European destinations which will also create feed for our long-haul market in the future. We will look at a fleet of turboprops flying low-cost to about 19 destinations in Europe
We aim to do this and consolidate until 2023 and then start the long-haul from 23. This is also when the A321XLR will be deployed into the market.
So are you open to partnerships with other carriers as soon as this starts?
For sure. We need to offer some sort of long-haul connectivity in the meantime while we don't have ours.
Do you have any orders placed for these aircraft at present?
We don't have any orders but we have contact with the manufacturers and with lessors. Airplanes are highly available now due to the pandemic so the deals could be very interesting. We don't see this as an obstacle or as a bottleneck for our entry into the market.
You mentioned blockchain funding. How will this work for you and when can you get into the air?
We have developed a strategy to run a security token offering (STO), which is a new way of fund your business or startup, which in simple terms is a advanced IPO. So normally the IPO is done in a mature phase of your business. The STO is in advance of the startup; it is a democratic crowdfunding model.
We are already running the first stages of it. Unfortunately I cannot give you any more details because of restrictions from the financial authority, but we aim to get this done in 2021, receive the first airplanes by late 2021, early 2022, and be ready to fly in winter 2022.
Ok so with this timeline your launch might coincide with the market rebound and the pent-up demand that exists. Is this the hope?
This is not only a hope but what we expect to see; there are already signs in the market. We will be a brand-new, high-tech, debt-free company entering the market at a time when people will be still a little afraid of spending hours connecting; we believe that that's really a good opportunity for us to enter the market.
And do you anticipate less competition because of failures, consolidation and retrenchment in Europe?
Exactly. We expect a highly consolidated market mainly here in Europe which will cause a decrease in capacity. So people will have fewer options to fly and fewer destinations, at least nonstop.
Also price is something that is still a question mark; how legacy airlines will deal with their price when their cost structure is still there.
We expect that having a good service with affordable prices in the market at this point will be very advantageous for us, mainly because we will be a debt-free company. Also, regarding competition, we expect a less aggressive reaction from competitors because they will be taking care of their own recovery and rebuild.
And we believe being in this niche market we will not battle any competitors face-to-face. We believe that we can succeed.
You talk about low-cost, good service. What does this mean to you and how do you make that profitable?
We will adopt most of the concepts of LCCs, such as high utilization of airplanes, less time on the ground, and a focus on costs. But there are some new and innovative ways that we'll be working.
For example, we cannot disregard the needs and the preferences of a business traveler, so we should have a product for them. We don't call it business class, we don't call it first, but there will be a product for them.
We want to sell a seamless personalized experience using new technology. The logistics, which is the difficult part, technology will take care of.
I’ll give an example for long-haul: if you want to sit in front with more leg room, but you want to have a cheeseburger for your dinner we can give you that. On the other hand, if you're traveling with your family and want to fly in the back, but you demand a three-course meal, you can have that too. Technology will support the logistics.
Our business model will have a cost advantage of 30% over the legacy models and this will be transferred to passengers.
We believe that customers will drive our decisions and our products, but always using the low-cost concepts. Again, we have the advantage of being a startup so we don't need to change or to migrate from one system to the other, we can use the current, more advanced technologies and this will have an implication on costs.
Photo credit: Moov
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