Bernd Bauer, CEO of Edelweiss Air
On Thursday, January 20th, I had the privilege to interview Bernd Bauer. Mr. Bauer is the Chief Executive Officer at Edelweiss Air. He has over 25 years of experience in the aviation industry working for Crossair, Swiss International Air Lines, and Edelweiss. This interview has been edited for length and clarity.
Joshua Kupietzky: How did you start your career in the aviation industry?
Bernd Bauer: In university I was studying economics, with a focus on logistics and transportation. The airline industry was fascinating to me at the time. I tried to get my first position in the airline industry, and it worked out. I started in a small regional airline in Switzerland, called Crossair at the time, and I started in the sales department for two to three years. I moved from there to the cargo department of the same airline, always with a focus that one day I want to do planning because I was fascinated by network planning and fleet development. Then there was an opportunity after a while to move into the network planning department, and from there it all started. I became the head of the planning department, and then— lucky for me, unlucky for many others—in 2001 Swiss Air, then the national carrier of Switzerland, went bankrupt and the new airline, the new national airline of Switzerland, was built on the foundation of Crossair. I was then promoted to build up the network department of Swiss International Air Lines. Headed that one for some years, moved on to sales responsibility for all over Europe, and then revenue management. I had a commercial career in Swiss International Air Lines until 2014, when I was promoted to CEO of Edelweiss. Edelweiss is the leisure carrier of Switzerland and sister carrier to Swiss International Air Lines.
JK: You said you worked at Swiss International Air Lines before working at Edelweiss. What was the hardest part of making the transition from a business-oriented legacy carrier like Swiss to a leisure carrier like Edelweiss?
BB: It was definitely something completely different because I used to work in Swiss International Air Lines—a really international environment. We were in joint ventures with United, with Air Canada, with ANA in Japan; we built up a joint venture with the Lufthansa Group of course, with Air China. And so I was traveling a lot. I was in Chicago a lot working with United, in Canada working with Air Canada. The leisure part was much more local, so moving to Edelweiss was much more Swiss-focused. The international part got kind of lost because Edelweiss was a small airline at the time. Edelweiss had three aircraft short-haul and two aircraft long-haul, one of which was operated on behalf of Swiss. It was really a small operation we had in the leisure business, but we had big plans, and we were moving forward relatively quickly.
JK: Now is perhaps the most difficult time in the history of the aviation industry. What do you see as your current top challenges and opportunities? And how do you think Edelweiss has navigated out of the COVID crisis?
BB: I mean, it is very different travel behavior. people are booking on very short notice. Usually in the leisure business in general you have 30%, 40%, 50% of the bookings for the year already in the system. And nowadays, people are booking with two to four weeks of lead time–so that's probably the biggest challenge. You have to adjust the network, not knowing what will be the demand, and not knowing how certain countries are reacting, which travel restrictions are imposed, which are loosened. That makes it really challenging for reliable planning. Because on one hand, of course, we have to have a network that our passengers can rely on and that they have confidence that everything will work out. That's probably the biggest challenge. Then of course we have the time where we are right now. It's not only the pandemic, it's also the whole environmental issue— the climate discussion, which is where we are facing externally imposed fees, which makes the operation more complicated, more difficult, and more expensive. So these are probably the biggest challenges, but there are quite a lot of new possibilities coming up. We are much more digital than we have been before, so we can work anytime from everywhere. It sounds very normal now, but it was not before—we were much more focused on the analog processes—and now we have clearly very new ways to work without the need for as many people.
JK: Compared to other segments of travel, leisure travel has bounced back really nicely. How do you plan to capitalize on a larger demand for leisure travel? Are there plans to add more routes or planes?
BB: I have a two-fold opinion on that. On the long-haul business, we had certain markets which were always easy to fly to—mostly in the Caribbean and Central America. They were keeping open, and we could always operate. For the US, Canada and a lot of markets in Asia, it's very different. You have to be able to adjust on very short notice, and that's impacting business and leisure basically the same way, so there's not a big difference. In Europe, it looks very different. If we consider our medium-haul operation within Europe, there we realize that as soon as travel restrictions are eased, we can operate and we have full flights. The demand is there from one day to the other, so that gives hope that as soon as the pandemic is somehow contained, we will be able to get back to levels from before the crisis. Of course, we had to adjust the network to try new destinations and new markets. The Americas is a huge market for us, and as we couldn't operate last year, we tried new markets like the Maldives in Asia, the Seychelles, Mauritius in the Indian Ocean, and they proved successful, which gives us new possibilities for later. For this year, we think that we will operate to the US and Canada, but we want to maintain the new markets we are building up, and the same is valid for Europe. There are certain markets that were difficult, others were more easy, and, of course, competition was hardly reduced. We could use our possibilities there, and this is why we decided for 2022 to build up two additional medium- and short-haul aircraft to be able to exploit this whole potential in Europe. On the long-haul we are a little bit more careful, so we reduce the fleet slightly, and we'll build up probably in ‘23 again.
JK: You just mentioned Edelweiss’s fleet. Do you see the Airbus A330 coming back into service for Edelweiss in the future? What planes are you looking to replace the A340? Maybe the A350 or 787?
BB: The A330 I don't see really coming back to Edelweiss because it was more coincidental. We had two A330 and four A340 and for such a small fleet it's always good to have one aircraft model to operate. It gives much more synergies and allows for much more efficient operation. So I don't really see the A330 coming back. The A340 for us is a perfect airplane because we have a good performance, we have a good range, and we can basically cover all our network with itven difficult airports like San Jose in Costa Rica, with obstacles, or markets like Buenos Aires, which we could never operate with another type of plane. So from that perspective, the A340 for us is a perfect aircraft. On the other hand, of course we have to replace it at a certain point. The 777 would be too large—too many seats for a market like Switzerland in the leisure sector. The A350 is probably the solution we would go for. But our A340s will definitely operate still for the next four to five years. So we are looking into this replacement, but it's not very urgent or imminent. On the short-haul sector, we are looking into the A320neo or even alternative models where we can do short-haul and medium-haul flying. The A320 classic is a little bit limited in range. We would prefer an aircraft where we can extend the range a little bit, but also this will be due in about four to five years.
JK: Edelweiss is owned by the Lufthansa Group, which means you have Austrian Airlines as a Star Alliance partner, in Italy you have Lufthansa Italia, and Munich which does a lot of Northern Italy business as well. When you are looking at route planning, how do you fit those all together? How closely are you tied with other Lufthansa Group partners?
BB: Firstly, we are checking the potential out of Zurich, so that's the main factor we are considering: how big is the potential out of Zurich for a certain destination? Then on the short-haul, we are coordinating very closely with Swiss International Air Lines. And we have a clear market segmentation. Edelweiss is operating all the main leisure markets, and Swiss is operating mainly business driven markets. So we have a clear market segmentation on the short-haul. On the long-haul, it's a little bit more complex because clearly Europe is small. We have four or five hubs, two in Germany, one in Austria, one in Brussels, and one in Zurich. We have to coordinate with the other airlines on the long-haul flights. I always say on the weekends, it's not a big deal; Friday, Saturday, and Sunday, the demand for leisure traffic is big out of all markets and big enough to fill an aircraft. But during the weekdays, Monday to Thursday, it's better that we coordinate closely, and this is what we’ve tried to do. We try to alternate so that we don't operate on the same days to the same destinations. Through that we have a bigger potential for each and every carrier. We offer much more flexibility to our passengers because we are all interlinable, so they can fly to a destination with Edelweiss and back with Lufthansa or Swiss, or Austrian or even Brussels Airlines. It’s not that it's an easy thing to do, but it helps us and it's probably one of our unique selling propositions to the market.
JK: Edelweiss is known as a premium leisure carrier. What differentiates Edelweiss from other leisure carriers in Europe? And do you target the same customer base as them?
BB: First, we are completely focused on leisure business. So we are not a hybrid carrier. Our product is tailored to the leisure market. We try to operate as many nonstop flights as possible, and as many direct flights as possible, but our product is tailored to the leisure market. You always can take your luggage included in the fare, and you always get food and drinks on board. We transport sport luggage, which is basically included in the fare. All this stuff, including our service concept, is really tailored to the needs of the leisure traveler. Then clearly we are also focused on the Swiss home market. We know what the Swiss people want, where they want to go on vacation, what they want to do, and how they want to be treated. And I think that makes us stand out from the other carriers.
JK: How do you view the main changes that have come about in the aviation sector because of the pandemic? For example, a lot of flyers think about change fees. Many airlines, including Swiss International Air Lines, have waived them. Do you think change fees are gone for good, and how would you adapt that part of your business if they were?
BB: Flexibility for the customer is really really key at the moment. Of course the change fees were there for something;it's kind of a possibility to increase revenues besides the classic revenue management. So you have different fair products on the shelf. And in theory, that's a good thing. But in times like this, where flexibility goes over everything and all the passages are looking for it to book in the first place, I think it's good that we all waived the change fees. I don't see that this will be permanent. I believe that the whole industry will come back to the classic tools. All the industry is heavily under pressure when it comes to revenue generation. And I think we all are looking for possibilities to increase our revenues. The tendency you see in the market is toward auxiliary revenues, so everybody tries to sell everything in addition to the fare and the seat. I mentioned before that we are not focusing on that; we want to have an inclusive product to make travel easy, especially for not-so-seasoned travelers who are traveling for business reasons.
JK: Do you find that a majority of your passengers are first time travelers? And are most of your travelers traveling for leisure or business, or is it a mix?
BB: It's really a mix. I think everybody who travels for business needs vacation from time to time, but there are even a lot of travelers who don't travel for business and they want to fly to the Caribbean, or they want to fly somewhere to the Mediterranean here in Europe. It's really a mix. We can’t say we have only first-time travelers, but we also don't have only very, very frequent travelers. That makes it a little bit difficult, because we have to tailor our products, fitting to both kinds.We cannot allow ourselves to stand back behind the other premium carriers mostly operating in the business segments. I think our passengers, especially those who travel a lot for business, expect the same service from us. And so we have to cope with these expectations. But we also have to make it possible for travelers who are not used to traveling a lot to easily book our services and travel with us to their dream destination.
JK: Thinking to the future, how do you see Edelweiss unfolding in the wake of the pandemic in terms of fleet, network, and workforce size?
BB: I guess because we are positioned in this segment, which will emerge quicker out of the crisis. We have a lot of possibilities, and as I mentioned before, already for ’22 we increased the short-haul medium-haul fleet by two units. And I can imagine that if we do it right we will see further growth also for Edelweiss back in the long-haul segment. So I don't see us as at the end of the possibilities in the short- and medium-haul segment. But I don't see us in the long-haul segment. We will see a growth of Edelweiss in ’23 and ’24. In terms of aircraft, in terms of destinations, in terms of passengers, in terms of revenue.
JK: What aspects of the aviation industry would you like to see improve in the next couple of years?
BB: I think the most important thing is that we cope with the climate discussions. We have to find ways to make flying more sustainable, even though flying per se is probably not very sustainable, as long as we don't have alternative fuels. Sustainable aviation fuel is one of the programs we have to develop quickly—we need to invest to get enough alternative fuels to be able to operate our aircraft in a more sustainable way. And in the meantime, we all have to take responsibility and work on those elements which can be influenced right now. I'm talking about plastic on board; I'm talking about food waste;, I'm talking about unnecessary flights, which are quickly in and quickly out. If we want to act responsible, we have to design our products and we have to design our network in a way that we can cope with the requirements.
JK: We started by talking about your background in the aviation industry. What advice do you have for young people trying to start a career in the aviation industry?
BB: That's a very difficult question. I mean the aviation industry is a fascinating industry, definitely, because it's very international. You see a lot and you learn a lot, but it's also an industry which is constantly impacted by everything that is happening in the world. So it's not really an easy ride. If you want to start in the aviation industry, it's definitely a ride worth taking on, because it has a lot of energy, and it brings a lot of satisfaction. The only advice I can give there is you need to have passion for this industry; you need to have passion for traveling, for the international part of the industry. And then you have to get started somewhere. Follow your dreams and wishes and be persistent. Be persistent, because it's not an easy ride.
