Thinking Outside the Box is Not Everyone’s Cup of Tea

Not My Cup of Tea

This week and last I attended two aviation financing conferences by Airfinance Journal, one in Japan, one in Latin America. Then I read an article by National Geographic, demanding that travel should be considered an essential human activity. But that is something I find so very often. Thinking Outside the Box and understanding psychologically different mindsets is Not Everyone’s Cup of Tea.

Airfinance Journal Virtual Events

Airfinance Journal Virtual EventsI am sure you remember my recent blog about why I consider Virtual Conferences a Barrel Burst.

Whereas a conference for me is a place we do networking, for which I am immensely grateful for Airfinance Journal (AFJ) to allow me attending the event. I sure couldn’t have afforded travel to Japan and Latin America. And thanks to their added focus on networking, it turned out some very promising new contacts to discuss KOLIBRI.aero with.

Let us have a look at the Latin America event which ended yesterday.

The Great Pretender

The Great PretenderWhereas AFJ added a virtual networking lounge, there were the same, I’d say ten, people in there, only once the (too small) window showing the delegates forced me to scroll with more than four delegates in the networking lounge.

Saving the delegate list and not counting the dupes I came up with 720 delegates. An awesome conference. 42 of which “filled out” their profile. Only. The others failed to use a free way to promote who they are and what they, respectively their companies do.

I happen to believe from what I have seen that most of the delegates of the online conference were obviously pretenders, signing up, but not showing up. Not even taking the time to log in and fill out their profile. Do they know there are such?

Virtual Networking

Airfinance Journal 2020 Latin America Dedicated NetworkingThen there was a “dedicated networking”, where more than 50 registered for (I think the host said 64). We were seven (plus AFJ moderator, plus one totally unresponsive), so roughly 9 out of 10 having registered for it did not show up. For some reason, being in aviation so long, “no shows” is something I consider exceptionally rude. Not just careless, but outright rude. Because there are people, taking the effort to organize something good and then people simply don’t show? It is extremely frustrating for whoever works this out to provide you a service!

For the few being there, I believe it was better than if it would have been crowded. I just hope I didn’t talk too much!

Overall, it just confirms my assumption that less than 10% of the registered delegates showed up at all. Of which again, how many have been speakers? 21?

Not My Cup of Tea?

Not My Cup of TeaAgain, these two events showed that there are different mindsets at play and it should be worthwhile to understand the motivation behind it.

I’ve seen that before, 20-odd years ago, when I organized the Airline Industry Stammtisch in Frankfurt. Many sign up for the event, to show their bosses, never intending to go there and spend their “valuable” time off elsewhere. Others, like me at AFJ do see the opportunity and value in networking.

Empty CabinA very good and valuable event, especially in Corona times. But it seems, at least from the outside, that most of the “delegates” were pretenders and never showed up on the website, never “participated”. Those people missed out on supporting a good event and torpedoed a valuable effort. From my side, I can only thank AFJ. The next step to improve the events in my opinion will be to automatically add the delegates to the networking lounge to enable messaging. Let them “opt-out”… There’s no e-Mail or other personal information shared, beyond the attendee list that delegates have access to anyway.

And they might want to promote to the delegates to fill out their profile… That’s free marketing and free networking!

Learning Curve?

Airfinance Journal 2020 China virtual eventThe next event coming up in two weeks as Airfinance Journal China, then followed by Asia Pacific. Hopefully the “delegates” are motivated to not only register to show-off to their bosses, but to really attend? And use the networking opportunities AFJ provides?

Because else, such virtual conferences turn to be a barrel burst. And that would not value AFJ but do them a big disservice! Did I mention? Aside failing on your job (or why would you sign up?), it backfires; no-one really likes “Dateileichen” (file corpses).


Of Nestlings and Birds of Passage

National Geographic: Why travel should be considered an essential human activity
Source and Copyright: National Geographic

Then there was that article on National Geographic: Why Travel Should Be Considered an Essential Human Activity

Which is another example of people focusing on their own life style, ignorant to others’ needs, motivation, life style. As I commented right away on LinkedIn:

A dozen years ago, I spoke with a friend/student, trying to convince her to join the aviation industry. There’s three types of people.

  • Nestlings, staying all their life in one place, except for the one or other vacation. A flight of more than two hours takes them to the unknown they fear.
  • Precocials, leaving home to move elsewhere and get settled. They travel for vacation and VFR.
  • Birds of Passage. They go, where live takes them, are open to the new and for them travel is a reward and each destination an adventure they embrace.

If you talk to nestlings, they will oppose your notion that travel would be “essential”. At the same time, they tend to be nationalistic and protective about their local environment. And the first to shut-down borders and travel. It’s those, “thinking different” being “in power” we have to catch and convince. To do that, we must understand their different “gut feeling”.

That said, if you talk crisis these days, it showed (most of) us, what privilege it is to be able to travel. And how quickly such privileges can be taken from us by forces beyond our control. And the lousy standing of travel lobbyists and lobbies with the decision makers.

A Lesson for the Crisis

Crowded Aircraft Aisle during BoardingConvincing the People to Fly Again

In all the discussions, it seems to be common opinion that we must regain the travelers’ faith to fly again. Given the (painfully) slowly sinking-in fact that we never might have “the” super vaccine, we better adjust our communications. We must understand that there are us “birds of passage”, looking forward to new experiences and adventures, but also the ones that are afraid of the new, the conservatives, the nestlings. And some of them being politicos, in my humble experience a lot of them narrow-minded, cover-your-ass-types that do not make a move unless they have to. As seen at the beginning of the crisis. Then they overreact out of fear, understanding they made a mistake, trying to cover up hysterically to distract from the mistake. Or like Trump now was caught in the act, lying to the U.S. people to “not spread panic”. Whereas a healthy panic is good! It keeps us alert. And then we must adapt. It’s called evolution. But that’s something many people are mortally afraid of.

Think Outside the Box

Blame GameThere are a lot of posts and speakers emphasizing that we must adapt to the crisis, think outside the box, then in the next minute turning back on why them keeping the status quo and doing as they always did would be the right thing. As they obviously fail to understand the thinking of their customers, shutting down the crisis, falling back to “safe thinking”. Just as most investors do.

As painful as it was, in fact it was truly funny. A speaker at Airfinance Journal Japan, an aircraft lessor, emphasized the time being right for new airlines. When I approached him, he retreated to the fact that they never lease to start-ups and would never invest in a start-up airline. Oh yes: Cognitive Dissonance at it’s best, right? This is a quite common stance when we talk to “aviation investors”, failing to understand that “aircraft investor” is not “aviation”, but just one piece of the puzzle. We represent an opportunity to place 200 aircraft in 10 years. Which is big business. Once we get the launch funding secured.

Me too … Or doing things different?

A320 B737 Whats Your USPWhile many still focusing “blindly” on “Airbus/Boeing” aircraft investments, they lost and loose money. It’s been a shark pond before the crisis, now that bubble imploded. At Airfinance Journal Latin America event, the best speaker was Walter Valarezo of DAE (Dubai Aerospace Capital), outlining the “abnormal normal” in the market pre-crisis. Now most investors curl up into a ball falling back to “old habits”.

USP is about “unique”. You don’t have a USP if you only copy what the others did. And stick to your modus operandi.

Fortunately there are some – very few but some – who do understand the opportunity, the need to think outside the box. Those are the ones we talk with. Will they help us launch the Kolibris? I guess they will. Let’s see how quickly we can convince them and their PTBs that change is good and our business plans are safe and sound. And benefits a great deal from this crisis.

Food for Thought
Comments welcome!

Kolibri @ Prestel&Partner Zurich December 2020

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Regional Airports Threatened by Corona?

Juergen is one of the very few people, I really mean, VERY FEW, people that understand both airlines and airports.

BUND analysis 2020-08 Regional AirportsLast week it started with a analysis by the German Association for Environment and Nature (BUND), hitting the headline news claiming that seven of the 14 regional airports in Germany would be expendable. Which was a welcome story for the media. While I still hope that they come to senses, I am afraid that history shows their sole focus on populism (next election) and hypocrisy. Including their attempts to distract from their failures managing the ongoing Corona crisis.
More articles and posts surfaced this week that airports should be privatized.

Focus on votes reminds me too much on “shareholder value”, being accused to have a sole short-term profit-maximization interest and none for long-term success, sustainability or social responsibility. Same stupid.

Today the headline news is about the Thuringian president of their Court of Auditors recommending the closure of Erfurt-Weimar Airport, building on the above analysis.

Closing Erfurt-Weimar Airport? And others Regionals?

Erfurt-Weimar Airport, Passenger Statistics 2006-2015As you may recall, 2009/10, I’ve been managing Marketing, Press/P.R. and Corporate Communications at the Erfurt Airport, one of the seven now questioned. Which is my example of why German airports fail thanks to populistic airport bashing by the local politicos and most of the media. And an idiotic, short-sighted focus on “outgoing” holiday charter flights. I am adamant about my justified opinion that given a positive support and strategy, the airport would be worth a million passengers and an economic operation. If they’d cash in on incoming.

Back 10 years ago that was the reason I made the name change from Erfurt to Erfurt-Weimar possible from Marketing budget. Just before the shortsighted politicos – lead by then Minister for Traffic (“C.C.”) who saw it more important to invest into streets and highways – decided to “strategically” end all support for scheduled flights, which I had recommended to replace Munich-service with a sole Lufthansa- but without Star Alliance codesharing, with a KLM-service to Amsterdam to be connected to the world. With having compiled justification and statistical data supporting the case.

outside-inAs I wrote three years ago, airports must embrace their changing role – which many airport managers and owners fail upon. And that is simply another example where the Corona crisis highlights the shortcomings. These shortcomings have been there before. We have too many “good weather managers” that keep running a company (beyond just airline, airport) and have no vision for it, no strategy. They handle day-to-day work and live inside their microverse without understanding or concern about the bigger picture.

Should they now close Erfurt-Weimar (or either of the other questioned airports), it is a direct result of the local stakeholders failing to envision, demand and support a long-term sustainable strategy for the airport. And giving the public airport bashing by the stakeholders, I wouldn’t justify scheduled flights to Erfurt-Weimar either. It’s an example how short-sighted stakeholders run an economic driver into the ground. And just an example how politicos don’t think and guide, but brainlessly worship an implied public (voters) opinion and not act but only react to developments (incl. Corona).

CYA in action: Cover Your Ass. Don’t think, don’t move, don’t risk.

Strategic Indecision and Short Sight

USP
Having a USP means you do things different…

As I’ve written in the two Food for Thoughts in December, there is the Financial Impact of Air Travel for the regions and their economy. If you understand and focus on the need for “incoming”, passengers coming into the region, bringing money to the region. Instead of the sole “outgoing” focus we see with most airports in the “developed countries”. And without this, there is no valid argument to invest into the airport, is there? But with a strategy, it makes sense to invest. Not to subsidize!

The other post in December was about Why Airlines Keep Failing, which is mostly the same reason why airports keep failing to live up to their expectations. No strategy, no stakeholder management (politicos, industry, media, public opinion, etc.). Erfurt-based Thuringian state development agency funding travel for delegations from Berlin, instead supporting the subsidized flights from and to Erfurt. Politicos publicly promoting to travel to Erfurt and Thuringia flying from Frankfurt, Berlin or Leipzig, then taking the train. And even with a Biathlon World Cup taking place in Thuringian Oberhof, places like Weimar, Eisenach and the Thuringian Forrest recreation are, travel to Thuringia not coming through Erfurt in their empty heads.

Scheduled Incoming vs. Charter Outgoing

No Flights (Erfurt, 2011)Again ,there is no reasoning to invest into an airport that only looks at outgoing summer charter flights. The money leaves the region and benefits the destination. Why would I subsidize that?

Without a strategic vision to use an airport incoming as an asset to connect the world to the region and cash in on the incoming air travel, it is a logical consequence to shut down an airport and write it off. In turn, you write off an asset for your region. If I call anything short sighted, this is a very good use case.

I keep explaining “seasoned airport managers” that airports need three foci.

  1. Connection with the global hubs and connectivity there
    At Erfurt, it was a barrel burst to have a flight into Munich by Cirrus Airlines as “partner of Lufthansa”, but with only some Lufthansa code-share, but not even Star Alliance. It was why I very quickly promoted to replace that one with a KLM-Amsterdam-service. With very promising talks ongoing until the political stakeholders decided to shelve all support for scheduled flights. A good reason to end my work there. Aside me being told later that the discussions ceased as they called my number, reaching someone not able to communicate in English.
    So connectivity to global hubs with code-sharing and/or interlining must be prime on any regional airport’s agenda.
  2. Strategic Point-to-Point travel
    Depending on commercial and strategic regional relations, direct flights between economic partner regions can and should be established.
  3. Local Support
    With “airport bashing” being too common, it is vital to promote the airport as a partner for the region. As a vital infrastructure to improve commerce and industry, incl. but not limited to tourism!

And yes. Summer charter flights are nice to have, and may contribute to the revenue, but they are commercially and strategically not a priority.

The Kolibri Offer

KOLIBRI.aero is looking for funding of the development of first and further bases. With seven aircraft, maintenance, infrastructure and several hundred jobs a € 15 million funding is needed. No subsidies but a bold investment with minimized residual risk, to be paid back with interest. Investment into local infrastructure will reflect long-term commitment. Further development of profit centers being part of the plans. Should you know airports being interested in such a joint development having regional funds to provide the capital but also demand for the new routes, we are happy to discuss details.
Kolibri @ Prestel&Partner Zurich December 2020

Food for Thought
Comments welcome!

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The Force of Inertia and Wagging The Dog

Change Resistance (shutterstock_210479080 licensed)

Change Resistance (shutterstock_210479080 licensed)Today I had a conference call and a major topic was Spain and how our (German) governments banned travel again. And publicly justifies under gross neglect of their own rules. Those “development” showing persistence to deny change. And the “Wag the Dog” syndrome, pointing the fingers at others to distract from own mistakes.

The second topic was about the way, aviation “recovers”, the managements’ strategies.

Political Lock-Down on Travel

Spahn Travel Warning not a Ban
“A travel warning is not a travel ban – Health Minister Spahn not discouraging Spain holidays in Tagesthemen.”

This week, our (German) government issued an official “travel warning” for Spain. It is legal requirement that German travel industry must enable free unplanned returns from regions a travel warning is issued for, which in turn also results in tour operators shelving all offers for regions such warnings are issued for. In line with that legal impact, TUI instantly cancelled all flights and packages to Spain.
In clear ignorance of those facts, the German Health Minister Jens Spahn claims that it is still possible to do vacation in Spain, travelers just needing to be careful… Say what?

Wag the Dog (film)
Wag the Dog (1997 film)

Either this is cognitive dissonance, or – and I am afraid it’s that – Spahn and German government tries to distract from own mistakes by “pointing finger” at Spain. It’s the old “wag the dog”. Make up a crisis elsewhere.

Spain is said to be extreme in its adherence to the Corona rules. It is not “Spains” fault if German tourists party and ignore those rules intentionally. And then return with infections. So this is a cloud screen by Minister Spahn and his political cronies.

A German proverb: “Who sits in the glass house shouldn’t throw with stones.” Taken residence for the pandemicfor the pandemic with the family in Germany again, I can assure you, we have our own problems with Corona here and the politicos still fail to follow a clear strategy. Exceptions to their own rules being the rule, not the exception…

The Myth of Aviation Recovery

IATA Load Factors Europe 2020-05The past weeks, I had ongoing disagreements with my friends at OAG, ch-aviation, RDG, Routes, ANNA.aero, etc., etc. Disagreement on the media-focus on recovery of flight services as a sign of recovery of our industry. As I mentioned in my recent blog on Corona Cognitive Dissonance and Whitewashing Statistics, to bring all those aircraft back to the air while the load factors plummeted from ~85% to ~35% (April) in line with evaporating ticket prices, dropping by 20-30%, depending on the statistics source.

Now in May the load factors recovered to ~43%, though from a business travel management company I heard that those loads were “bought”, by lowering the ticket prices even further. And there was a slight decline in available seat kilometers in that month.

For years, I complain about the state of airline statistics availability. Nowhere “real time”, IATA statistics come three months after, the commercial sources report on flights and seats but have no clue about the load factors or ticket revenue. Real time? Really?

In today’s discussion, it was emphasized that airline managers try to survive using the “classic” approaches. First of all: Be cheap. Second: Push flights to the air. By doing that, they have obviously lost all track of their cost of operations. And the conference call group agreed that we will see quite some groundings in Europe ongoing for the next year. As the airlines keep piling up Corona Debt. Even Lufthansa is said to have already started on demanding further bail-out in spring, when they burned up the € 9 billion they recently got.

Time for New Thinking

airline money burnIs it really “new thinking”? Last December, pre-Corona, I outlined Why Airlines Keep Failing. The reasons are still the same, just multiplied by Corona.

Any little startup understands the need for USPs, unique selling propositions. What makes them different? In the eyes of the customers, in the eyes of the investors. They understand the need for profitability. They know their cost. If you have a big war chest (or get it funded by a government bailout), you can temporarily “invest” in competitive routes. Often enough the likes of Lufthansa pre-crisis abused their market power forcing competitors, even so-called “partners” into insolvency. My own experience includes the first German Wings (the remainders then acquired by Lufthansa), Cirrus Airlines, Contact Air (Lufthansa regional partners) or more recently Air Berlin.

And when I wrote about Air Berlin three years ago, I asked “Lessons Learned?” … Hmm. Obviously not. And when I wrote about Why Airlines Keep Failing, it wasn’t any “new rules” either.

And while Jens Spahn emphasized the solidarity inside the company and that Lufthanseaten (what Lufthansa employees call themselves) stand together in crises… What a cognitive dissonance. His “shareholder value” focus is legendary – I don’t believe he ever learned what “loyalty” meant. Given “short work” in Germany, there would not be real need to fire employees. But he and his manager-cronies, the moment they got the € 9 billion warned of 22,000 layoffs being “necessary”. Hypocrite!

Doing Things Right…

If you need some help to map out a strategy to survive this crisis, I could need some paid consulting. The unpaid kind keeps me busy but not the family paid. Which is the same for so many others “made redundant”.

And if you are or know an investor interesting to do things right, we are seeking funding for an Airline 2.0 – focused on USPs and profits. But also on real aviation sustainability (not the typical whitewashing we see in aviation to date). And on real corporate social responsibility. Which starts with your own. Either contact me or come 8-9 December to the Prestel & Partner Family Offices Forum in Zürich at The Dolder Grand.

Kolibri @ Prestel&Partner Zurich December 2020

 

Food for Thought
Comments welcome!

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Corona Cognitive Dissonance

Cognitive Dissonance ResolutionRecent developments and posts really bug me. Don’t the writers of those posts recognize the cognitive dissonance? Yes, we must think positive. But there is a clear distinction between thinking positive and whitewashing or daydreaming. We have a crisis at hand and the “positive signals” aren’t as “positive” as those posts try to make them look like. They look at the marketing messages on the surface but fail to look the slightest bit deeper.

We need positive thinking, but we must also stay realistic!

Whitewashing Statistics

IATA loadfactor 2020Yes, the latest statistics are not there (yet), but we have enough experience to understand that the classic statistics, that I questioned as incomplete and intentionally misleading before the crisis, now in the crisis not only proof insufficient, but even dangerous for all of us, trying to grasp the repercussions to our industry!

Many of our media friends take up the old focus on unrealistic data packages. Yeah, hurray, the airlines add flights, bring the aircraft back in the air. Are. You. Kidding me???

The reason behind is mostly that the aircraft can only be parked for up to three months without the recovery into operational readiness getting substantially more expensive: >100 manhours, replacement and thorough components checks, etc., etc.
So the “losses” from flying empty might well be a cost-saving long-term. Depending on how long the aircraft must be stowed, when the passengers “come back”. But this adds to the “Corona Debt”, that must be funded and some day payed back.

ForwardKeys Average Return FaresThe current IATA Regional Briefing, Europe, June 2020 reports on the beginning of the crisis. Available seats for April plummeted by 95%, the load factors of the remaining flights to 32%! At the same time Gridpoint Consulting analysed the London-Heathrow figures with similar devastating results, an average load factor (2Q20) of 35.5%! And ForwardKeys published some nice figures on air fares, plummeting 20-30% in average.
Now the airlines are reported to bring flights back to the air aggressively. Whereas the German Airport Association (ADV) published in their latest (June) traffic statistics: “Privater Reiseverkehr findet nicht statt”: Private travel does not take place. So those added flights mostly cannibalize the existing, low passenger numbers. Which we will likely see reflected in the next statistics. But keeping the aircraft grounded comes with it’s own bill. Adding to the “Corona Debt”.

So aviation media, please do not simply publish those statistics on how many seats are added to the market, but also check the demand = load factors and the revenue = average ticket prices. It would be worthwhile to look behind those numbers and check the reasoning for those flights. Looking only at the first statistics (increase of available seats) is negative, if the revenue and loads drops further. We need the full statistical picture I was demanding for many years: ASK (available seat kilometers), load factor (how many seats sold) and the average revenue (ticket price). In combination with the CASK, the cost per available seat kilometer) it would allow to understand the real development. And commercial viability, success … or failure! And I do look forward to real “success stories”, a.k.a. “profitable routes”. Routes not piling up more “Corona Debt”.

The Fairy Tale of the Corona Super Vaccine

Yes, as you can see in the archive of my Corona Papers, I also believed what those lying politicos and virologists told us. Though having brought up in a medical household, I looked early behind that cloud-screen. My (published) assumptions were based on a recovery following the common availability of the vaccine – and the treatment. We’ve learned a lot on the treatment meanwhile. And now, like with the face masks they initially called “unnecessary” for pure hidden motives to cover their unavailability, they slowly let the fact surface that:

We must not expect a “super vaccine”!

Corona will turn out more to be like the flu. Okay, not so much like the Measles I referred to earlier. The first infected people in Germany have ceased to have antibodies in their blood a mere three months after their infection. Now they, along with the WHO start slowly telling us the “new truth” (like with the masks), that we will have a long journey ahead, getting used to Corona. And as I kept emphasizing for months already, the time to stop the virus is long over, all we can do – and must do – is to #flattenthecurve. Keep the infections at rates our medical systems can manage. Until the first vaccines are there – to further limit the spread of the disease. Just like we get (or according to statistics mostly don’t) get our yearly flu-vaccination. By which time we will also hopefully by able to “manage” the severe cases with standardized treatment.

But hold it, ain’t that telling, all that lock-down was for nothing???

No! The lock-downs were a vital necessity and still can be! Because the reasons to flatten the curve are still undeniably valid! As I just wrote in the previous paragraph. But we must return to a life that embraces the Corona-virus (and it’s future variants) as what they are. A new “flu”. Maybe more hostile, sure different. But here to stay. And once we will have learned to manage the recurring “waves”, just like the annual flu, we will live on. Without masks if you ask me. Without “social distancing”. And without lock-down. And with air travel and real-world conferences.

Bailing-Out the Dinosaurs

Burning EurosI know, being a German and having taken residence with the family in Germany for the pandemic, I am somewhat biased on what happens here and especially Lufthansa. And that makes me puke. No, I can’t say that nicely.

Lufthansa, with a pre-crisis value of four billion (Source: Fortune) and burning five billion in the first three months of the crisis receives a bailout from the German government of € 9 billion. For a 25% silent stake, not allowing them to influence Lufthansa, i.e. relating to job securities (prime CSR), sustainable developments or a less hostile behavior towards smaller airlines they kept and keep walking over, their latest “victim” Air Berlin. No, lesson not learned. The next they announce is to make 22,000 (twenty-two thousand!) jobs redundant. Quite recently, they had to admit that 25% of the refunds for unflown tickets due to Corona have still not been paid back, the media claiming a 1-billion backlog!

airline money burnI was kind of shocked this week, when German Tagesthemen, one of the main news channel mentioned already that this may not be the end, but just the beginning of an expensive further bail-out series for the airline and it’s many subsidiaries. But if they burned 5 billion in three months, how long can they sustain the drought before they burned up the added nine billion?

Don’t get me wrong! I belief that aviation will recover, but that will go slow and take time. What I see now is activism and lots of wishful thinking, piling up more debt and risking the airlines’ long-term survival.

But I keep my emphasis, that bailing out the dinosaurs is not good for anyone, except the dinosaurs. At KOLIBRI.aero, we have a concept in the drawer to invest € 1.6 billion into an airline with 200 aircraft. Okay, establishing the airline in Germany would be a bit more expensive. But no more than € 2.5 billion. Give another € 3-4 billion as a reasonable amount to add a global network, we could develop a “Lufthansa 2.0” based on sustainable aviation (not the Lufthansa greenwashing), true corporate social responsibility (way beyond Lufthansa whitewashing), looking after our own, but also after the regions we serve and the overall responsibility of a major player. There are others like us out there. I’m sure, given € 9 billion, given only € 5 billion, they could make a change. No Corona debt, but a clear profitable business, paying back the debt within 10 years with (above-market) interest. € 9 billion without any strings attached? € 11 billion for Air France/KLM? And meanwhile Austrian – a 100% Lufthansa-owned subsidiary also received a bailout by Austrian government, though “only” € 600 million and with environmental demands attached. But with another € 150 million to go into equity in Austrian parent Lufthansa (Source: CAPA). Swiss received a 1.25 billion loan guarantee for its poor mother Lufthansa (Source: Reuters).

"We are Listening. And We're Not Blind. This is Your Life. This is Your Time!" [Snow Patrol - Calling in the Dark]

And at the same time, one airline after the other is being grounded, Level’ed. No bailouts for Air Berlin pre-, flyBE early into the crisis. None for Level (IAG), Germanwings (LH Group), Laudamotion (Ryanair). And expecting no real “recovery” of the passenger numbers this year, I foresee a large number of the small airlines with one, two, maybe even five or ten airplanes to fail this year. And I get a lot of feedback that this is the time for KOLIBRI.aero. But we struggle not for billions, to launch we struggle to get funding of a mere € 30 million.

But given feedback from “experts” out there, to start it small as a virtual airline, or “aviation investors” not seeing beyond aircraft leasing? I now have hopes that our invitation to attend Prestel & Partner later this year at their real-world conference in Zurich will open the doors of more visionary family office owners, understanding the opportunity such a crisis provides to a business concept like KOLIBRI.aero. As those bailouts must be paid back one day. If the airlines don’t go bankrupt, once KOLIBRI.aero is kicking their butts.

Kolibri @ Prestel&Partner Zurich December 2020

Food for Thought
Comments welcome!

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Corona – the New Measles

Measles

MeaslesA few days ago someone on the media compared Corona to the “new measles. Ever since I use the analogy and sure gave it some thoughts how that will impact our industry.

Like the Measles, Corona is a virus that is in the wild. About 5 March, WHO admitted Corona containment to have failed, taking another six days to declare Corona officially a pandemic. While in hindsight it shows the failure of the world health system and China to contain the virus quickly and efficiently, pointing fingers is futile and does not help.

Ever since, political and health care PTBs (powers-that-be) started a spiral that now pushed the world on the brink of commercial collapse. Sweden and other countries going less wild where accused to spread the virus but again in hindsight seem to have done everything right.

Crisis Communication – Scaremongering

Flatten the CurveTo date, the PTBs communicate in the sense to stop the virus. That is crap and they should know it. The time of containment has been missed, see above. So it is not about stopping it, but to flatten the curve. To make sure our health care systems, our hospitals can manage the infected cases with severe, life-threatening symptoms. Until we have a standard treatment and can avoid infections with a commonly available vaccine.

While there will be reasons why aviation will recover slowly, it will likely be mostly economic reasons. People recovering from the economic impact to their lives are more likely to “safe the money”. But in Europe, U.S. and other “developed regions”, there have been crises and travel recovered relatively quickly.

P.S. 24. May 2020

I have been asked to add the referral I usually use here: We came to live with the Measles, with the Flu, SARS (since 2003), HIV (no treatment or vaccine yet), Polio, Malaria, Ebola and many other threatening viruses.

A brief lock-down was possibly called for to make people aware of the need of social distancing, but like in Sweden, it is time governments lift the bans and return their countries to life. And trust their citizens to be careful – and if they aren’t, live with the consequences.

And our (aviation) lobbies to make a case that airplanes are safer than hospital operation rooms, that travel is at own risk and that use of disinfection at airports and in the aircraft cabin and there also the use of face-masks is useful. But we must hold the horses and come back to the new normal. A normal that takes into account another lesson learned but won’t require acrylic seat shields, empty middle seats or other such placebos.

Else I keep with my Corona Assumptions.

Food for Thought
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Evolution … or why should we save the Dinosaurs?

Burning Euros

Discussing with a friend and intellectual sparring partner, why we focus to establish a new airline and not simply buy a failing airline, the reasoning was easy.

If you acquire an airline, you acquire it’s heritage.

Change resistanceTo which he replied: “I couldn’t agree more. I have seen the same firsthand when it came to [product] engineering. Initially we were going to work with an established manufacturer and have them make modifications for us. That was quite the trip down the rabbit hole, and more trouble than it’s worth. Now we’ll get [products] that were custom engineered for us, from the ground up.”

Most of the times I was asked for support in project management, the project itself was fine. What caused the trouble was the missing change management.

Air Berlin Example

Backstabber Assassin shutterstock22635031In direct conversation, one of the later board members of Air Berlin told me, the airline would not kick the bucket because the new CEOs wouldn’t have good ideas, but because they failed on the heritage. The existing “networks”, afraid of the change, afraid to loose their job, torpedizing the management.

When Stephan Pichler took the helm, he i.e. identified the “different fleets” as a concern. With little to no interaction on scheduled flights or tour operator charters. Still, when he left, there were still the different departments interacting little to none. There was a lot more to Air Berlin’s unnecessary demise, as there was to FlyBEs. Usually it is attributed to the management, but “internal resistance” can be a first-class back-stabber.

Save the Dinosaur or Fresh Start?

Disruptive Events - Meteor kills DinosaursAs addressed in To Save or not Save in the Corona Papers, The question in my opinion is mainly, how much funds you are willing to pump into the existing airlines and for how long. And if you now start to shove money down their greedy throat, will that ever end? The U.S. carriers complained instantly when they learned that they get only 30% of the bailout “for free”, but would get the other money as a credit.

To turn this around. We developed a business concept to invest € 1.6 billion into a new airline covering Europe. With a business concept based on USPs, profits, low residual risk, attractive profits, but also socially responsible and sustainable. i.e. A positive overall impact on greenhouse gases.

Triple that amount to invest into three new players instead of just one and you cover what we have today. Now airlines asking +$50 billion in the U.S., € 20 million for Germany, IATA calls for +$ 200 billion. Emirates will take up long haul, maybe challenged by a U.S. carrier and a Chinese one – connecting the long-haul world.

Dinosaurs …

The existing airlines will need to survive. Realistically downscale. At first and until a vaccine becomes available in sufficient quantity, we talk about “leave the middle seat free”. That cuts one third off the seat capacity of 189 seat A320 or B737. 126 seats. Given an inital slow start of traveler confidence to use flights agin, we realistically talk about max. 50% average load. Down from above 90%. That means that the ticket prices will likely be double. But the “administrative overhead” must be split to less aircraft, so we will have a totally different cost level.

Ryanair’s O’Leary clings to keep his “known model” and predicts even more aggressive discounting post-Corona. But in the end, someone must pay the bill. Does anyone really believe O’Leary to not plan for the stupid to pay his bills? Including airports, regions and naive passengers… I wonder how long even a Ryanair could keep  that illusion up?

… meet Evolution

evolution dino vs manDoing a staged setup and focusing to stake our own claims, select strategic bases aggressively outselves, we can establish the company for a mere €30 million. € 15 million per additional base with seven aircraft and hundreds of (secure) jobs. A fraction of the food the dinosaurs demand to survive. Condor now half a billion? What evolutionary wonders we could achieve with that money.

We’re the mammals. We’re effective, profit focused, sustainability and social responsibility driven. Evolution. Don’t pump millions and millions into the dinosaurs until the crisis is over. Invest into the future.

Food for Thought
Investors welcome!

Kolibri @ Prestel&Partner Zurich December 2020

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