Helvetic Airways CEO Tobias Pogorevc talks about how COVID-19 has affected his ACMI operator and future demand to wet-lease his all-Embraer fleet.

This interview is part of Air Transport Month, a detailed examination of the future of the air transport industry as we begin to climb out of the COVID-19 crisis.

 

Below is a rush transcript of the interview:

Kurt Hofmann:

Hello everyone. And welcome to another interview of our Aviation Week Network, ATW Leadership Forum. My name is Kurt Hofmann. I'm a correspondent for ATW. And I have the pleasure to talk today to Tobias Pogorevc. I hope I spell it right. Tobias?

Tobias Pogorevc:

Not too bad. Yes.

Kurt Hofmann:

Tobias is the CEO of Helvetic Airways based in Switzerland, operating a very modern Embraer fleet, also the latest E2 editions. And Helvetic is specialized actually in the ACMI business, wet-lease business. And especially for Swiss, you're operating many flights, actually. So Tobias but as we all know the Coronavirus pandemic changed a lot in the aviation industry.

And I can imagine that also the ACMI business, the wet-lease business is affected. How is it going for Helvetic? Even Swiss one of your main customers operating much less capacity. What does that mean for an airline like yours in times like this?

Tobias Pogorevc:

I mean, first Kurt thank you very much that I'm allowed to say a few words here for this interview. I mean, generally we can say ACMI or wet-lease business. This gives flexibility to the big carriers. It covers peaks in the production. And of course in today's environment, most airlines are confronted with over capacities with respect to the fleet or in the crew. So the business is surely more difficult than it used to be. However, we operate. We have a long-term contract with our major partner Swiss for the E2s.

And at the moment we operate about 30% of our fleet. But saying that and looking ahead to the year 2021 and later on. We already feel that there will be some future demand, not only by our main customer but as well from other airlines in this segment.

Kurt Hofmann:

Where do you see your possibilities? So there has been quite a lot of ACMI operators in Europe. Some of them now failed financially because we're still running out of money in terms of less business. Of course, you have smaller aircraft above 100 seats segments. So where you see your possibility, your chances in the future?

Tobias Pogorevc:

I mean, in the next few years, and for us this is a long-term project despite Corona. A lot of airlines will have to renew the regional fleet. And also Helvetic Airways, our renewable process will be finished by the year 2021. So by then we will have the most modern regional fleet in Europe. But the other carriers will still have to re-fleet it. And we know from the news and that a lot of airlines got a lot of state aid, which they have to pay back in the next few years. So before they can re-fleet, they will have to pay back.

And I think here we will be available solution for them because we operate already the most modern regional aircraft. And here I see quite potential within the whole Europe. And maybe it makes the Swiss airlines a little bit, especially now we have four languages in our country. So our staff, they're all fluent in German, French and English. So this gives us quite a good coverage for the demand in the next few years.

Kurt Hofmann:

Is it also the Swiss perfection that an airline we expect always from Switzerland, you are on time, you deliver? So is it also a kind of quality which maybe helps you in the ACMI business in the future where people can say you can deal with Helvetic for our feeder flights or as a regional partner?

Tobias Pogorevc:

Of course, the quality is the requirement number one. And I think we try to fulfill all these quality aspects. But on the other side, what will be more and more important is, I mean, ACMI businesses usually meet a long-term partnership. And for the big carriers, it's important that the small ACMI providers can provide financial stability. And for us, for Helvetic Airways, we are in the good position. As I said, that we have a modern fleet. And that we are financially stable with the strong balance sheet. And we didn't need state aid so far.

Kurt Hofmann:

How many Embraers you have now? How many E2s will arriving? And how you finance your owner? It is a private owned company Helvetic. How is the fleet being financed?

Tobias Pogorevc:

At the moment we operate five E2 190 and we operate eight E1 190s. In the next three weeks, we will take over another E2. We will pick it up in São José dos Campos in the first two weeks of November. And the next year we will get another two and four, 195-E2s. So by summer '21, we will have 12 E2s. These aircraft are fully owned by Helvetic aircraft, which is our sister company. And it was a clear task when we discussed it that we will not use lease solution. That we will acquire and purchase the aircraft.

And at the moment I have to say it was the right decision because especially in this crisis, we do not have an external leasing company where we need to pay these rates. So here we are in the Helvetic Airways group in a very comfortable situation. So they're all fully owned.

Kurt Hofmann:

That's a very comfortable situation sounds like. How did you manage so far the crisis, which kind of measures Helvetic Airways had to adjust?

Tobias Pogorevc:

Kurt the last time when we spoke together we were in the middle of a growing path. And actually it was planned that we will operate 16 aircraft in summer '20. And then when we had some indications in February already that there could be a crisis in Europe. We really made a halt in the growing path. So we said, we will operate a maximum 13 aircraft. We staggered the deliveries of the audit ones. And here I have to say, Embraer gave hands to that. So we will take them over only in November and next year. And then of course we had restructuring measures.

We have cost savings programs. We stopped all investments. And these were actually the measures that allowed us to come through this crisis, which is still going on. And of course we don't have state aids, but our crew is we call that short term work in Switzerland where you get from the state paid money for the people who are not working at the moment. So saying that, and with the liquidity rich from our owner, we will come through the summer and winter easily.

Kurt Hofmann:

Oh that sounds good. You came up with some interesting ideas, kind of a pop-up network. Can you explain that? We have to say in Europe, we are faced now with a lot of travel restrictions, ongoing changes of travel warnings. It's not easy to know where we can go tomorrow. And this idea as a result of this, can you explain how this worked so far.

Tobias Pogorevc:

Yes, that's right. We are already specialized in some special charter projects. We do special charter flights for several companies. With this pop-up flights, we tried to try something innovative, a new idea. We realized that the guests, the passengers, they do not book much in advance. We don't know what the travel restrictions are in the same in the countries. So we decided to make the so-called pop-up flights. They go to a destination, which we usually don't fly. They are sold through our distribution systems or with the travel agent.

And in case there is a travel ban or something like that, the passenger gets back the money immediately. So this gives the passenger a security that even if they buy tickets from Helvetic Airways and the flight is canceled due to travel restrictions, they get it back. And we were flying to Croatia. Of course, we had to cancel flights to Lithuania or to Montenegro or to Italia right now. But at the moment it was quite good. The pop-up flights we did so far are not that many.

They were very well booked. And what we must not underestimate all the recency issues with the pilots. These flights, they can gain regain flight experience which is very important. So they don't see the cockpit, not only in the simulator, both as well in real life.

Kurt Hofmann:

Yes. It's important these days for pilots to keep their license because they are not much flying anyway. Regarding aircraft's, how is the E2 already performing? And what's your feedback on this Embraer, the latest edition? How are you satisfied with the operations of the latest aircraft you have?

Tobias Pogorevc:

Yes, it's now almost one year. I mean, by 1st of November, it will be one year that we put the E2 into operation. Actually, we have three aspects. The first one is pure economics. So when Embraer ... when they promised us a fuel savings that we will have on our routes, I must say today, they were very conservative on our average route length. We have fuel savings of up to 28% compared to the E1, which has a pure economic impact. On the other side, we have less CO2 emissions. So these are hard facts we can prove by our measures.

On the other side, we have a little bit soft facts. The passengers are very satisfied, especially due to two reasons. The one is a bright cabin, a nice cabin with all these LED lights. But more important, the cabin is very, very quiet, and this is highly appreciated. And I think this gives us a new field. And last but not least the range of the E2 that we operate now of about 5,200 kilometers opens a complete new range for us. So we made already flights to ... imagine from Zurich to Ouagadougou or Accra in Africa, destinations that were only served by EA320 or 737 so far.

And we could fly with the E2. And so this gives us a complete new dimension, a new market that we can operate in the near future.

Kurt Hofmann:

New possibilities. And Tobias finally, while there are a lot of challenges, of course ahead for the airline business, what will be the main challenge for Helvetic Airways in the next few months as we enter the winter season which is quite a lower low season?

Tobias Pogorevc:

I mean, the next few months will be very tough for the whole aviation industry. We speak in Europe from the second wave. The figures in Switzerland not really optimistic. I have to admit. But most issues we face is we cannot look into the future with the clear view. The travel restrictions they change from week to week. So if Europe could make some uniform restrictions or requirements for the passengers, it would help every airline a lot.

But this is actually the major challenge that we cannot plan the year 2021 like we would like to. That we would like to train the pilots to recruit people. And this is the major issue. And the winter, it didn't start. We were still in the summer season until end of March. We'll be very, very long with a very, very low production in Europe. I'm afraid. And this will cost a lot of energy and money for all of airlines.

Kurt Hofmann:

Yeah. I agree with you. Tobias Pogorevc. Sorry, I apologize for not correctly spelling your name

Tobias Pogorevc:

No problem.

Kurt Hofmann:

Tobias, thank you very much for talking to us.

Tobias Pogorevc:

You're very welcome.

Kurt Hofmann:

We wish Helvetic Airways and your team all the best.

Tobias Pogorevc:

Thank you very much.

Kurt Hofmann:

I hope to see you soon again. And ladies and gentlemen at home, wherever you are thank you very much for joining our interview today and until the next time. Thank you. And bye-bye.