Kay Kratky, Austrian Airlines CEO, discusses the carrier’s attempts to grow despite a looming congestion crisis.
Austrian Airlines went from strength to strength last year. The airline carried 13 million passengers—and it expects even more to fly in 2018.
Kay Kratky, Austrian Airlines CEO, says economic and political stability in Eastern Europe and Russia can drive traffic growth in this region, with Austrian primed to capitalize.
However, if European aviation is to reach its full potential, Kratky believes infrastructure improvements are crucial—both on the ground and in the air.
In an interview with Airlines editor Graham Newton, Kratky also discusses the airline’s recruitment drive, and explains why aviation is still a “sexy industry” to work in.
In brief... Kay Kratky:
A former pilot, Kratky started his career in aviation in 1981. He worked for Deutsche Lufthansa and later Lufthansa Cargo - where he was captain of a Boeing 747-200.
He held various management duties at Lufthansa Cargo between 2000 and 2008, before becoming Ceo at Jade Cargo International in Shenzhen in southern China.
Move to Austrian
He returned to Lufthansa in 2011, and was made Lufthansa German Airlines COO, before being appointed Austrian Airlines CEO in August 2015.
What was the strategy behind your successful 2017 results?
We did a good job on restructuring. This was started a few years ago but it was finalized and fine-tuned in 2017.
Our capacity increased because we completed the switchover from Fokkers to our new Embraers, but we were able to sell the extra seats and the yields were good.
A number of other factors helped us. The fuel price was supportive, the industry is generally running well, and the economies in most of our markets were performing strongly. So, there was a good framework for success.
Will the new Embraers, Boeing 777s and long-haul destinations help you to improve again in 2018?
The Boeing 777s arrive in May 2018 and will make a real difference to our long-haul network. There are two new destinations too, Tokyo and Cape Town.
There is still the potential to increase our load factor, which was close to 77% last year. This is something that is high on our agenda. We are not doing badly but we can always do better. The airline flew 13 million passengers safely in 2017 and we expect to do better in 2018.
We also expect the stable, supportive market conditions to continue.
Why choose to install premium economy on your long-haul fleet now and what difference do you think it will make to your revenue?
The decision to implement premium economy was taken soon after I became CEO in late 2015. To be honest, I was surprised we didn’t have it. I knew from my experience at Lufthansa that this is a very promising segment. It will definitely boost revenue.
If you look at revenue per square metre on the aircraft, then premium economy is the best performing cabin class across the Lufthansa Group. I’m sure that will be the case for Austrian too. It is taken some time to prepare but we are spending €15 million on refurbishing the fleet and the expectation is for a good return on the investment.
How important are the Lufthansa Group and Star Alliance in influencing your day-to-day decisions as well as your overall strategy?
Austrian certainly benefits from both the Lufthansa Group and the Star Alliance. It is about what the customer offer and ensuring the right products are available.
On a day-to-day basis, within the Lufthansa Group we discuss our networks and who is best positioned to serve certain destinations. And we always look at the processes in place and how they can be improved. The collaboration between Group members is now well established.
And, of course, one of the cornerstones of the Group’s strategy is the Star Alliance. That brings opportunities even beyond the extensive reach of the Group.
Do you think alliances still have a role to play or do you see airline groups – with ownership or at least equity involved – as the best way forward?
The alliance model has been a strong foundation for the industry for a number of years now. It is still relevant because it continues to deliver benefits for passengers.
There are new models of cooperation coming into the industry and these models do not necessarily correspond with alliance groupings. But they do not have to conflict with alliance membership.
Often, they are complementary ways of broadening the scope of an airline and making it more profitable.
What are the opportunities and challenges in Eastern Europe?
Eastern Europe and Russia and the CIS are big markets. About 15 or so years ago, these markets were 30%-40% of Austrian’s business. It was a real focus for the airline.
But the markets suffered economically and there was political instability too. The Austrian network had to change to lessen our exposure.
We are starting to see some stability return to the region and there are some positive signs. And although we minimized our operations, we kept our foot in the door.
We do want to strengthen our presence there again and the situation is being watched closely.
Over the next two or three years there may be some new routes. It is a slow process but there is room for growth in the region and Austrian is well placed to take advantage.
What is your view of EU Aviation Policy? Where should regulation be strengthened or reduced?
The EU Aviation Strategy is an important step because it’s the first time that aviation was recognized as a backbone of European economies.
Of course, there are areas of policy that can be improved. Look at CO2 emissions.
There is still an emissions trading scheme within Europe. And now there is also the Carbon Offset Reduction Scheme for International Aviation (CORSIA).
We don’t know yet how these systems will work together.
It would not be fair to have to pay twice for the same emissions, so we hope there is a clearer picture in the months ahead.
Passenger rights, the Airport Charges Directive and the Single European Sky (SES) are ongoing challenges. SESAR Deployment Manager is making some progress on SES but, as with the other issues, there is a long way to go.
The important thing is to ensure we have a European perspective on global issues and see European aviation in the context of a global market.
European carriers need to have a level playing field. They need to be competitive if they are to continue boosting European GDP and jobs.
What can be done to tackle congestion in Europe as air traffic grows?
There is always resistance from local communities and other campaigners with regards to big infrastructure projects. I don’t think this will go away and it may even become stronger even though the benefits of aviation are clear.
Added to this is the length of time it takes to go from the first proposal to completion. Runways and terminals now being considered are years, even decades, away.
Therefore, I don’t see many opportunities for big infrastructure projects on the ground and if there is an opportunity it takes too long to seize it. A bottleneck is coming, and it should be a priority discussion if Europe is to remain competitive in aviation and prosperous as a region.
And we should not forget the infrastructure in the sky. Already the congestion in Central European skies hurts Austrian quite badly.
Air traffic control (ATC) in Europe has cost €12 billion in lost GDP since 2010. Let’s see what the SES2+ package brings but at the very least it must call for faster action and more stringent targets
The continual ATC strikes are also a problem. As long as air navigation service providers are owned by governments then local issues will take precedence over regional needs. There is no structured approach, too many single units and too few synergies. There are some promising initiatives but, in general, progress is too slow and not comprehensive enough.
You are doing extensive hiring of new employees. Is aviation seen as a good career and an airline as a secure job?
It is difficult to give a general answer as I think people look mostly at specific companies. But I think aviation is still a sexy industry. The glamour has gone a little bit, but people are still fascinated by it.
Nevertheless, recruitment is guided by local factors and the company’s standing compared with other local companies. Austrian is lucky as we have a good brand and very positive feedback. There are always hundreds or thousands of applicants for our vacancies.
At Austrian, 20% of our maintenance apprentices are female. There’s a long way to go but that’s a huge improvement over just a few years ago
In particular, what can be done to attract more women into the industry?
At Austrian, 20% of our maintenance apprentices are female. There’s a long way to go but that’s a huge improvement over just a few years ago. But this is not just about the industry. This is also a societal issue.
Women need to be convinced these types of jobs are good careers for them. More needs to be done to help females pursue a technical career. We do also need to encourage women to take up senior management roles. Many senior managers in aviation do have technical backgrounds so that is part of the reason for the lack of women. But, again, more can be done.
As with general recruitment, each airline needs to be seen as a leader in the local context as well as in the industry. I believe Austrian is that and that we represent an attractive proposition for any job seeker, male or female.