Charles van Thiel Experience in management : Brussels airlines (25/11/10) BERNARD GUSTIN History since 2001 weird.

Crisis management is daily management. Who is BA ? number 1 in Belgium, still a small company, 50 aircrafts, 3000 employees, 5 millions passengers, turnover close to 1 billion, 70 destinations. Low margin business, cie was profitable, last 2 years not, this year back profitable. Highlights of 2 last years : Find partners, finalize the deal with lufthansa, shareholders at 45%, virgin has 15% and the rest is belgian institutions, big companies (Lufthansa is the biggest). Program : Miles & more : when you travel in lufthansa destination you gain miles and you can use them on the whole network (pratique). Expend in africa and europe Partnership with club med 6 extra aircrafts (bcp compar 50 !) Have a vision : have one big market : intra africa market because huge distances, there are bad airline companies (black list), will link big cities. Huge potential of growth. A whole strategy has been developped for that. Our Network They concentrated on one side of the world where there is a heritage (by Sabena). 18 destinations in africa for 20 next year. Brussels = hub for Africa Need to create a hub because be dont have enough travellers in Belgium to Africa to be profitable they need to find their niche (which is Brussels). Brussels will be this hub. So we need a good infrastructure in the airport, its important because the more big % of sales are from USA, because travellers first go to Brussels then to Africa (not directly). hence the picture. We have a Winwin because we have people who travel and stop in Bxl to just continue to travel after airline important, its the link for many travellers around the world. History Born by accident. 2001 : catastrophe in Belgium, Sabena went bankrupt. Moves to a private airline. But Bxl needs to have a airport, and be connected to the rest of the world create job, is the Europe capital, so restart a private venture. There was still a sub part of Sabena (DAT), which were not bankrupt. 92% hold by SN Air. Objectives : create job, create links, survive.

Pressure on their business plan (by state): if you fail, the state cant run this business and youre dead, you will look stupid so many challenges. They needed a business plan. They want news planes, all news things people around them said thaht they had to make a network everywhere, Tokyo etc. But its not true, you have to limit your network, base your objective, but if you do only Europe, you loose money. You need long hall (courier longue distance) otherwise you loose money, you dont get subsidies. Airport slots: ? They needed to recuperate the slots of Sabena, so they paid these slots. You need to give this money to the creditors (big problem). We sold those slots 2 years later. - Aircraft lessors discussions: Ils ont pu diminu de 250 000 100 000 leur couts fixes en rengociant les leasings contracts. - Social negatiations: finally could come to a 1/3 lower amount of the one of Sabena had. - Murger negociations with Virgin, done in 2004. Birth of SN Brussels Airlines. This name because not enough money to change to tails of planes because it was to expensive, so they kept the S, the named had to start with an S. Second reason: when you come in Africa, Sabena was very well know so they kept a S on planes tails. 2005: realizing that the market was too small murger. Ctait la carpe et le lapin entre B airlines et Virgin, lun a Bruxelles, regional et afrique et lautre RAV. The best was to keep 2 brands because SN B airlines was a business airline et virgin was low cost, so marketers were right (mais ils ne lont pas fait). Marketers told him that they needed to keep 2 brands to eat { la carte ou le menu, and the staff of Virgin couldnt make their job for SN Brussels and vice versa. So they needed to have a simple company because 2 cies, 2 types of planes, 2 staff, 2 names.. to complicated (mais ils ont eu tord!) this multidimension is key to attract new shareholders. Restarting an airline was great, a great profit, but major issues : we can make perspective in this company, you cant satisfy your shareholders (no growth opportunities) partnership with Lufthansa. It was the right partner because its strategy was multi hub/multi brand. Important to say that we will not become Lufthansa Belgium, we will remain Brussels airlines. London airlines can affort to stay locally because they have 20 millions of people around London, its enough. Concerning Frankfurt, they are also obliged to be a kind of hub they were completely complementary with Brussels airlines. Interesting of Lufthansa because weak in Africa, and Brussels will become the link, and will compete Air France. (on parle du pass l{, tout a a sest dj{ pass!). If we look at the map we can see that Brussels has the good place, between Paris, Suiss, UK and Germany.

Slide with the Africa map. Africa: biggest growth potential in the world. Many destinations were not in the Lufthansa destinations, so BA has a real added value AB gave them 12 news products. Star alliance Air Canada fly a lot to Paris and doesnt find the partner to go further to Marseille etc, so Air Canada said to go direct to Paris for Paris travellers, and go to Brussles for other people, and it worked. Today, a client can travel around the world with the same services, same quality, like there would have been only one airline. 2008: taugh crisis! 2010: volcano but administration problems because air situation was worst when they restart to fly, in comparison when the day they had to stop flying. Advice: stick to your strategy line (cut your costs), keep your core business. 30% growth in Africa today. In 2001 it was easy not to invest in Africa, but it was the strategy and have to follow it. First thing they did is decrease planes costs thank to leasing. If you had your own planes you cant do anything. Other advice: you have to take decision, move. If you dont youre dead.

First thing when he came to BA is to cut all consulting costs. What do you do when youre in a crisis? Have a strategy and keep it, optimizing. EG: have a network optimize this network. If we make the same as RyaAir they are dead so they keep following their strategy. -Review management processes: cut ALL costs. Procurement, dont hesitate to review all you contracts. -financial optimization : stop investment sauf ceux qui vont dans la strategy. -give trust to the people inside, (they stop hiring), coach them.

QUESTIONS: -How to be sure that you deserve interest of everyone? For him (board manager), Lufthansa is the biggest shareholder, in all decision they have a decision and make sure that they satisfy all shareholders. They clearly respect the governance, make a vote if needed if majority: decision is taken.

Reserve matters: Lufthansa can block investments that it doesnt agree with, even if other shareholders want to invest. Thats the financial aspect, but operationally speaking Lufthansa is the most important because its a huge airline, he takes that into account. -BA is part of star alliance, how will you organize to meet expectations profits or star alliance? Benefit number one is considering Brussels as a hub. But this year all his growth comes from star alliance. To increase benefits: codeshares with other airlines. Star alliance is a tool to meet the overall business plan. -Is it difficult to share responsibility with a co-CEO complete similar responsibility. Not a good solution to not give the same responsibilities, have to have the same, be responsible for the full company. Other aspect: be complementary, he is more communication than his brother for example. Third thing: mustnt be in competition (not the case: not the same age, ) -What decision was to be taken to avoid Sabena bankruptcy? Sabena was a very strong airlines et respectful people. Mistakes: governance problem, governance gave to Suisse air and Suisse air had folie des grandeurs. Today, Lufthansa can rely on another huge market (Europe) and it was not the case of Suisse Air. Wages were not in the line what the current situation. So yes, the bankruptcy could have been avoidable -how does is work with relationship between airlines? BA before Lufthansa was the biggest client with no growth perspective, so you need to find other way to growth. Easy jet wasnt a good partner for Lufthansa. Lower growth but sustainable not as RyanAir (histiore avec laroport dans le sud de lEspagne et Madrid, not sustainable). Charleroi is a regional airport so they dont have to pay air traffic control. -How do we manager capacity? Successful airlines: decrease the number of aircraft when you feel the crisis is coming and you increase your number of aircraft when you feel the crisis is done. Anti trust immunity: if problem, Lufthansa just calls him. -consequences on the management if Lufthansa doesnt do the 55%.