In November, Lufthansa Group announced that Brussels Airlines CEO Dieter Vranckx would move to Zurich to become CEO of its Swiss International Air Lines subsidiary on Jan. 1, 2021.
Vranckx spoke with ATW’s Kurt Hofmann about his time in Brussels, continuity during leadership changes, restructuring during the pandemic, its hub strategy and more. He will be succeeded at Brussels Airlines by Peter Gerber, who will move from his role as CEO of Lufthansa Cargo.
Rush transcript:
Kurt Hofmann:
My name is Kurt Hofmann. I'm a correspondent for ATW. And today I have the great pleasure to talk to the CEO of Brussels Airlines, Dieter Vranckx. Good morning Dieter in Brussels. Nice talking to you.
Dieter Vranckx:
Good morning Kurt. Nice talking to you. How are you?
Kurt Hofmann:
Thanks. All good, busy times. And first I'd like to congratulate to your move to Swiss early next year. You will become the new CEO there. I think it's quite an honor to run such an very [...] interesting carrier, even in a difficult time.
Dieter Vranckx:
Yes, that's true. I am honored. And at the same time, I'm looking forward to go to Switzerland and to bring Swiss back to its older success story.
Kurt Hofmann:
Yeah, we wish you all the best with that. But today we talk about Brussels Airlines. And first I'd like to talk about leadership. One of your CEO's, Bernard Gustin, left the company February 2018. Then came Christina Foerster as CEO, and she moved to Frankfurt to Lufthansa. And now you came in early 2020. And now Peter Gerber, which was also a guest for our interviews recently. Currently CEO of Lufthansa Cargo will become the next CEO of Brussels Airlines. So there's quite several CEO changes within Brussels airlines. What that means for sustainable leadership. How you explain this kind of changes your employees?
Dieter Vranckx:
That's a good question. Of course, if you take a longer period, probably the last 11 years, there were three CEOs. So you look at it from an extremely short perspective, but you're right. There was quite some change in the last couple of years, but there is much more about continuity than just the CEO. I think it's really important that the continuity, will continue with Peter Gerber. We have also a very solid restructuring plan. Our restructuring plan is called Reboot Plus it's the evolution of the Reboot Restructuring Plan. And it will have been implemented for 90% by the end of December. We will have a restructured fleet, both on the short haul and the long haul. We will have reduced the company in size by more than 20% and we will have restructured the network. So a lot of changes are already done.
Dieter Vranckx:
And of course, Peter is fully committed to continue the Reboot Plus Plan. And so a change of CEO should not mean that there is a change of direction or uncertainty for the teams in Brussels. The direction of Brussels Airlines, Brussels Airlines is one of the four hubs of the Lufthansa group. And now after our experience with the Eurowings, we are one of the four hubs. And I think this is really important element. And in that context, Brussels Airlines direction and the strategic plan for the next years have also been confirmed by the Lufthansa Group executive boards. So a lot of constant elements in a changing world, but you're right. It is important that we have continuity for the company.
Kurt Hofmann:
Sounds good. Before I like to talk a bit more about the restructuring. You just mentioned the Eurowings topic. So you're Brussels Airlines was operating, I guess through Eastern surface for Eurowings long haul. Now all these plans are changed now. So can we say now, and Brussels Airlines is since 2017, 100% owned in Lufthansa is looking for... Inside Lufthansa. Can we say now Brussels Airlines will become a real hub carrier like we say Austrian Airlines or Swiss? So this Eurowings long haul is history for you. You will be more a real hub carrier?
Dieter Vranckx:
We should say they're actually slightly different. We will not become, we are a real hub carrier. Even during the project of bringing Eurowings and Brussels Airlines closer together. We continued to operate the hub in Brussels. So we continue to focus on Africa and a small part of the US together with Europe. And we have never stopped to operate a hub. I think there was a lot of uncertainty and a lot of talking about the merger with Eurowings. But in the meantime, the reality was that we continued the hub in Brussels. I think the operations which we had for the long-haul, the two long-haul aircrafts for Eurowings. For the moment, we are still operating aircraft's on long-haul leisure destinations out of Dusseldorf for the Lufthansa Group.
Kurt Hofmann:
But this will have-
Dieter Vranckx:
But the hub... This will move into the Ocean Platform. Which will be created on the Lufthansa Group site. But the hub is created and built in Brussels around... The core activities of our hub are Europe and Africa. And we are really the Africa specialist within the Lufthansa group.
Kurt Hofmann:
Yeah, I know there's a big tradition for former Savannah now Brussels Airlines in Africa. You have the strongest network there. So that means you will also remain in the future hub carrier for Africa, between Europe or maybe the US to Africa. When you said that the fleet will be reduced, how many long-haul aircrafts you will have after the restructuring?
Dieter Vranckx:
Yeah. Just to give you a total picture. From the previous fleet which we were operating in 2019, including the wet lease, which we had at that time. We will have reduced 30%, three-zero percent of our fleet. So we were not the most profitable company before the crisis. And you can imagine that after the Corona crisis, it needs a real adaptation of capacity. And that's why such a drastic measure on reduction of the fleet. We will, in our new setup, we will have 30 Airbus 320 family aircrafts for the European network. And we will have eight 333 hundreds fully harmonized long-haul aircrafts operating into Africa. And possibly then at a certain point to US again.
Kurt Hofmann:
Do we need a kind of minimum long-haul fleet to operate on a hub very well? You know what I mean? Maybe if it takes long-haul aircrafts, maybe then it makes no sense to do long-haul.
Dieter Vranckx:
Yeah, that's a very good question. We had quite a number of discussions because we had the 10 aircrafts before. And it is true that you need a certain minimum size because you use the winter operations to get some of the aircraft in long-term maintenance. So you really need a certain size. For us the minimum size was seven aircraft. But in order to make sure that we then also have flexibility, we have a certain percentage of reserve aircrafts. We actually ended up with eight. But more importantly than the minimum size we need for the hub on the long-haul was the harmonization of our long-haul fleet. You know in the past we had a combination of 333 hundreds and 332 hundreds and it really was extremely complex and you know complexity leads to cost. So we took out the older aircraft with the more complex and all the engines and we fully harmonized into eight, 333 hundred aircrafts. So this will give us a lot of simplicity in our operations. And also on the maintenance side.
Kurt Hofmann:
And I know these aircraft are younger, they are secondhand, but they are much younger in age. I think...
Dieter Vranckx:
Exactly, exactly.
Kurt Hofmann:
How much... How big is the Brussels Airlines right now? How much of your capacity is currently flying? I know my home carrier Austrian Airlines just operates 10% during this tough period now, how able you are, which kind of capacity you can operate now?
Dieter Vranckx:
Yeah. For the moment at this time, as we speak, we have around 10 to 12% capacity in Europe.
Kurt Hofmann:
Yeah.
Dieter Vranckx:
However, on the long-haul we have around 30% capacity. And we will increase the long-haul capacity during the Christmas time. So we have seen that there is still a demand, especially for VFR traffic into... In and out of Africa during the Christmas times. So we will actually operate a seventh long-haul aircraft during the Christmas time.
Kurt Hofmann:
So in this will go mostly to Africa. I can imagine.
Dieter Vranckx:
All of it.
Kurt Hofmann:
Did you had to axe some routes to Africa or maybe some destinations which will never come back, or you can keep all the destinations in Africa and how many you have actually?
Dieter Vranckx:
We are constantly evaluating our capacity into Africa. We had unfortunately to stop at Ouagadougou. But network is a constant moving target. In my view, it should be continuously evaluated, continuously checked and made sure that we have the right capacity into the right destination. But also that we have the right destinations. This is why we are also, as we speak discussing on how and when would be the right time to go back to the US, because I think from that perspective, at this moment, the US is extremely challenging and we only want to go back to the US if we are able to generate cash with our operations. This was one of the key elements since we started operations again, on the 15th of June. We have been operating every week cash positive. Which is quite an achievement in these current times, but we also manage capacity very strictly. And we have three times a week capacity discussions with our commercial and operational teams.
Kurt Hofmann:
Interesting. So I think you also have a lot of transfer traffic from the US to Africa.
Dieter Vranckx:
Well, there is quite some connecting traffic you're right from the US up to Africa, but you know that we are part of the A-Plus Plus Alliance and thanks and due to the A-Plus Plus Alliance, we are able also to get the connecting traffic on the United Airlines aircrafts, which are flying into Brussels and then connecting onto our Africa long- haul.
Kurt Hofmann:
Yeah. In times like this an alliance is helpful. And I was thinking a time like this to have an owner like Lufthansa is also quite helpful. I can imagine.
Dieter Vranckx:
Yes, we are very happy and also very proud to be part of such a strong group. You mentioned in the beginning that even Lufthansa and Swiss and very successful carriers are, are losing a lot of money. And you know this crisis is not normal. We never seen such a crisis before. It... I always say that the combination of September 11th, the financial crisis and everything else we had before, if you put it all together, it's still not enough to compare with Corona. The only one which might be very happy is Peter Gerber because cargo business is booming.
Kurt Hofmann:
Yeah. He was very relaxed in our interview...
Dieter Vranckx:
I can imagine that.
Kurt Hofmann:
...As the only one expanding currently in the Lufthansa Group. Brussels Airlines I think lost 182 million euros in the first half year. This business year if I'm correct. Well all Airlines losing. I also learned that Brussels is a very competitive airport. You have actually every kind of low cost carrier in Brussels. So that always means Brussels Airlines what had always fight against this kind of low cost carriers. How is your cost structure and to compete against this?
Dieter Vranckx:
Well, one of the major focus topics we had during the restructuring was the cost position. You know, our cost position didn't evolve in a very good direction in the last 5 to 10 years. In general, we can say that we have been growing a lot. Almost doubling our size, but unfortunately the costs were growing faster than our size. And this is the moment where basically your scale effects, which normally should take place when you grow don't happen anymore. And from that perspective, we clearly had one major topic was reducing costs and especially the CASK in our exercise. So after Reboot Plus will be implemented, I think we will continue because we have a continuous improvement approach so that we will always continue to look at improving things. Our cost position should be somewhere in the neighborhood of an EasyJet and the advantage is that we will continue to decrease our costs also in the future. And I'm very happy that Peter Gerber one of the top professionals and top managers of the Lufthansa Group will come here to Brussels to continue that exercise.
Kurt Hofmann:
So, but the name Brussels Airlines have can exist also in the future? The brand. Brussels airlines.
Dieter Vranckx:
The name. Sorry, I didn't understand the name Brussels Airlines?
Kurt Hofmann:
Yes. Can also exist in the future?
Dieter Vranckx:
Yes, of course the name Brussels Airlines will continue to exist. It's a very strong brand name actually in a... Not only in Belgium, but also in Africa. And it's very much connected of course, to our history in Africa. And I strongly believe that the task of Brussels Airlines is to position the Lufthansa Group strongly in Africa. And to use that position for the benefit of the Lufthansa group. And therefore, I also think that that name can definitely show its value in the years to come.
Kurt Hofmann:
Ah, we just talked shortly about the cargo. Do you have a lot of cargo actually to Africa to operate?
Dieter Vranckx:
Yes, we have. Yes, we have. Cargo is like on most of the long-haul routes a very important element for us as an airline. Yes. It contributes to the revenue 10 to 15% to the revenue of the long-haul flying. And we are very much and very closely working with Lufthansa Cargo. So we have used the synergies of the Lufthansa group there to make sure that the knowledge and the professionalism also of Lufthansa cargo combines with our experience in Africa and in Europe has been used to create synergies for Brussels Airlines, but also for the Lufthansa group.
Kurt Hofmann:
Just briefly about hubs. Is there a competition between the hubs in the Lufthansa group? Now we have Vienna, Zurich, Munich, Frankfurt, and Brussels. Do you see a kind of competition? Are you are now benefiting because you are the Africa specialist? This maybe gives you a detailed hub future.
Dieter Vranckx:
Well, we are very much focused on Africa and especially Sub-Saharan Africa. So from a Brussels Airlines perspective, for sure there is no competition in, on the hub site. That's very clear. Actually, we are very happy to be part of the whole commercial system of the Lufthansa Group. You know that commercially together with Harry Hohmeister, we have been integrating the group very much. And also Brussels Airlines now is getting integrated in the core commercial functions, such as network sales, pricing, revenue management to dot com. We are also getting integrated in those core commercial functions. And that's very important because commercially the hubs and the group should not work against each other.
Kurt Hofmann:
So you belong in now even more to the group, because I remember, not always, mostly we talked about Swiss, Austrian and Lufthansa. And now also Brussels Airlines we can say is more in the core of the group now.
Dieter Vranckx:
Yes, we... You will see more and more acute. You will see more and more in the communication that you will have Lufthansa, Swiss, Austrian and Brussels Airlines as a fourth up carrier. So the reason that in some communications we are not yet in is because we have already changed certain things. I'll give you an example. The just released news last week about the food and beverage. For example, that it would be food and beverage against the fee. That's we already have since years. So we didn't need to be part of that communication. And in some communications, we are not in because we are not yet fully integrated. But give it another six months and we will be in 99% of the communications as the fourth carrier in the room.
Kurt Hofmann:
Oh, sounds good. Final question. I know there are many challenges for Airlines in these days. What could be the biggest challenge for Brussels Airlines now?
Dieter Vranckx:
And that's a very good question. We are on track with restructuring, so that's really going on a good path. But of course, I think that the biggest challenge of Brussels Airlines would be that if we speak again next year, same time in the end of November, beginning of December, and we are still operating at 10 or 20%. That will be a major challenge. That is really... And it would not be just a major challenge for Brussels Airlines. It would be a major challenge, I think for many, many airlines around Europe and the world.
Kurt Hofmann:
Yeah, the whole world.
Dieter Vranckx:
But we know that the vaccines are on the way. So, you know, we also have some hope for 2021, especially the second half of 2021.
Kurt Hofmann:
Dieter Vranckx, the CEO of Brussels Airlines. I thank you so much for your time. Talking to us, really pleasure. We wish you all the best for Brussels Airlines and your new position later on in Zurich. Thank you.
Dieter Vranckx:
Thank you very much. It was a pleasure.
Kurt Hofmann:
Thank you. Ladies and gentlemen, thank you very much for watching us and wish you all the best, take care and see you next time.
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