Europe’s Airline Giants: Who’s Winning?

0:00Jay Shabat: ZS is a global consulting and technology firm that partners with companies to improve life and how we live it. Working with the world's top hospitality brands, ZS brings together data, science, technology, and human ingenuity to transform ideas into customer loyalty. They're ready to help you elevate guest experiences, improve operations, and uncover preferences and motivations through their AI-powered solutions. With more than 1 ,700 clients in over 170 countries, ZS has built the expertise, fortitude, and vision to help you deliver impact right where it matters. Hello and welcome to the Airline Weekly Launch.

0:40Jay Shabat: I'm your host Gordon Smith and I'm joined as usual by co-host Jay Shebbett. In this week's show, we're rounding up an enormous week for European airline earnings.

1:05Gordon Smith: Hey, Jay, how's it going? All right, Gordon. How's it going? Happy European Airline Earnings Week.

1:11Jay Shabat: Absolutely. We should say at the very start, we're recording here a little earlier than normal because we've got the Skift Aviation Forum in New York City. So as you're hearing this, it's likely Jay and I will be at the TWA Hotel at JFK. So we're being mindful of that. We didn't want a crazy week to be any crazier. So we're recording this on the 5th of November, and this will be with you the following week. We've got a good number of European airline earnings in, with the notable exception of IAG, which is coming in tomorrow. But we'll have Luis Gallego on stage at the TWA. So, you know, IAG giveth, IAG taketh.

1:42Jay Shabat: But we'll get a lot more insight there. And I know you're a little bit raspy. There's a lot of sort of flu and viruses going around. I'm also a little raspy, not because of poor health, but because I went to see Duran Duran two nights ago. So if anyone is wondering why I'm a little husky, that's why I was screaming at Duran Duran. I forgot how many good songs they had.

2:03Gordon Smith: Yeah, they were playing in Denver when I was in. It was probably two years ago. We went to that Red Rocks amphitheater. I should have asked our producer, Will. We were just chatting with him. I think he lives out there. He's probably very familiar with it. And the day we visited, Duran Duran was playing that night. I didn't see him, but they were in town. Okay, so it was good?

2:23Jay Shabat: It was amazing, but it was one of those bands, you knew that you had sort of five, six good songs in them. And I was like, is this them? Oh my, this is them. This is them. I was like, wow. I think there was more songs that I knew that I didn't know. So that's always a good starting block. Jay, let's bring it back to aviation as much as we could speak about Duran Duran, I'm sure all afternoon.

2:40Gordon Smith: I was going to ask you if that song, I was going to ask you that song Rio, right? Is that about the Brazilian airline market?

2:47Jay Shabat: Absolutely. Yeah, I thought so. in my world everything is aviation so yeah i asked the band afterwards at the stage door i said just one question guys rio is that in relation to uh the booming south american market madrid is the

3:00Gordon Smith: new miami i hear yeah were they talking about the uh what is it uh the uh downtown airport or um

3:07Jay Shabat: the santo de mont yeah or is that absolutely santo de mont yeah how's this for a duran duran to Aviation Segway. These airlines are hungry like a wolf.

3:18Gordon Smith: Good one. There we go. I could just picture like just people walking away, just turning us off right now. Or fast forward, knowing that we'll probably do that. Fast forward, yeah, you could do that.

3:29Jay Shabat: They were like, okay, these guys are going to speak about the end of the room for two minutes. Because they're wasting my time. Let's get to the real numbers. Exactly. These are busy people. We know you're busy. Let's get back to the hard numbers here, because we've had a huge week for European airline earnings in particular, but also loads of others. We've had numbers out of Allegiant, Turkish Emirates, and others. But for the purposes of this conversation, we're going to focus on Europe. Jay, so many places that we can begin. Let's kick off with Ryanair because they were first out of the gates on Monday.

3:57Jay Shabat: Obviously, a very, very profitable carrier. But even Ryanair, as we know, isn't immune to the fuel shock despite being very well hedged. What was the headline numbers out of O 'Leary and Team?

4:07Gordon Smith: Yeah, they were good as usual for the summer. Remember, this is the summer period we're talking about, July through September. And this summer was, people were traveling in Europe for sure. One caveat, just something that I always think about with Ryanair, it sometimes maybe gets overlooked. I'll ask you, Gordon, does Ryanair fly long haul passengers? No, right? I mean, in the literal sense, they don't. But do remember that they fly a lot of Americans, Asians, Middle Eastern, people visiting Europe that come for the summer and they fly, you know, they'll fly to London, they'll jump on a Ryanair flight from Stansted or whatever to Rome.

4:47Gordon Smith: So they do benefit from good times overall when the tourism industry is booming, you know, as it is now in Europe internationally, they'll benefit from that too. But even short haul, it was a pretty good, good summer. 32 % operating margin, which is, you know, most, most airlines can't even dream about a number that high for any quarter. 32%. but just in the context of Ryanair itself, they did 36 last year. So you can see some year-over-year deterioration. Ryanair is, like other European airlines, many other European airlines, very well hedged on their fuel, but not completely. And when you have prices at the levels that they started to get at the end of the third quarter, you can see why there was some year-over-year margin deterioration.

5:40Gordon Smith: Ryanair, just a very quick word. We won't belabor. Since there's so many airlines to get to here, we won't belabor each one. But with Ryanair, they were clear that fares were pretty weak over most of the summer. And that's in very stark contrast to what we've seen on the other side of the Atlantic here in the U.S., where fares have been very, very strong, very, very strong increases year over year. That said, Ryanair more recently after the quarter ended, I think they even said just in the past couple of weeks, they've seen that begin to inflect where year over year fares are starting to rise quite substantially now.

6:25Gordon Smith: So it looks better. Obviously, we're going into a slower period of the year seasonally, but the revenue traction is starting to get a little bit better. of course the fuel prices are getting that situation is getting worse but um so that's

6:42Jay Shabat: Reiner who's next well I was just going to say it's just something to watch for our regular listeners our regular viewers our regular readers is that strike action is not out of the question for Reiner I listened to the conference call in full with O 'Leary and team and you know O 'Leary being bombastic as usual and you can say this is him just talking it up as a bit of a negotiation card for the unions and so on. But he essentially said, quote, it would be helpful to us if there were strikes, I think, in April or May of next year. From a financial point of view, he continued in the short term, they would save us money.

7:16Jay Shabat: The implication being that there are some major pilot deals, I think, in UK, Portugal, Ireland, Spain, and others that are coming up for renewal. And Ryan are given their slightly deteriorating finances, all relative, of course, as we established at the start of the show, saying, you know, we can't afford to give you enormous pay rises. We're going to have to cut a cloth accordingly. And O 'Leary suggesting that if they do the deal now, ahead of time when they're up for renewal, a deal might be able to be struck. But if they hang out until the spring, maybe there won't be anything. It might be a pay freeze or worse.

7:49Jay Shabat: He was also using in his defense that they've got almost no attrition in terms of pilots and cabin crew right now. Airlines traditionally need to account for the fact that a certain number of pilots and cabin crew and all the staff leave the business. Either they either retire or they move on to another carrier, particularly Ryanair. That's often a place where some people start out in their careers and then move up the ladder a little bit for whatever reason. Not to say that you don't have senior people there as well, but it is generally a place where you can often sort of make your name. But he's saying at the moment, given the stake of the industry and everything else, people aren't really leaving.

8:20Jay Shabat: So they don't need to replace a huge number of pilots. So that may take a little bit of the wind out of the sails in terms of those negotiations there, Jay. And it is worth saying for anyone that's not familiar with Reiner, which I think is a very small number of people considering the podcast, but Reiner is one of the world's largest airlines and it's on track to become the world's largest airline. By 2034, financial year 2034, they aim to carry 300 million passengers a year. That'll be up from their current 214, 216 or thereabouts. So this is an airline that has got enormous expansion plans.

8:53Jay Shabat: So everything that they say, yes, there is a bit of bluster there, but it is also backed up by the fact that they are an enormous force. More on Ryanair, I dare say, in the next issue of Airline Weekly?

9:03Gordon Smith: For sure. I was going to ask you, Gordon, I think that was probably the first time, the last time that we'll ever hear an airline CEO say that a strike, a labor strike, will be a good thing for them. I was chuckling in the beginning when you mentioned Ryanair might go on strike because I, you know, I've just, yeah, that's one I've never heard before.

9:26Jay Shabat: Yeah, it's a new one. You only have to look at, you know, like to be a Canada, Finnair, Lufthansa. This is usually something, you know, labor disruption. It's obviously a huge human impact. And we don't want to trivialize the fact that, you know, people's lifestyles and people's wages are on a strain. So there is a human element there. But at a corporate level, if you're looking at just the dollars and dimes here, there is usually a very, very heavy cost for the airline, the corporation, when you have some labor unrest. but Ryanair here saying, you know what, I could do us a favor. So we will keep a watch and brief on that, Jay.

9:56Jay Shabat: But like we said - And that's the thing, by the way,

9:57Gordon Smith: just in a more, I'm sorry to cut you off there. I just wanted, before we move on with that strike thing, remember that this winter, I mean, Ryanair likes to keep planes on the ground during the off-peak winter, regardless of the fuel price. But where fuel prices are now, you could sort of understand where a strike probably wouldn't be that debilitating and even you know maybe o 'leary's being a little hyperbolic but uh you can see where he he may be there's some sincerity to that where there actually could could uh be better off just not flying the planes you know just taking a strike so you know i guess the memo to the pilots is if you want to strike do it in peak summer and do it when fuel prices are cheap uh not not official advice but uh certainly no

10:44Jay Shabat: But certainly a perspective that maybe...

10:47Gordon Smith: I should charge for my consulting advice. Any pilot humans want to hire me. Okay, let's move on.

10:55Jay Shabat: Let's move on because we had Lufthansa Group as well. So that was on Tuesday the 3rd. Again, as we're recording here on the 5th, Jay. Lufthansa Group, a sprawling empire, a conglomerate in the truest sense. Obviously, we've discussed time and time again the idea of this Lufthansa. The Lufthansa problem, the core mainline airline, really sort of dragging down the results. A huge portion of the business, but not nearly as profitable as some other sections. Was Q3 any more favorable for the Lufthansa Group?

11:23Gordon Smith: I think it's the same old song. It's, you know, I think the third quarter earnings group-wide were okay. They did an 11.5 % operating margin. It was 11.9 % last year. So, you know, they actually regressed a little bit, which again, you know, with fuel, It can't be too upset about that, but I think they're hoping for much more progress given all the restructuring that they're doing, particularly, as I mentioned, at that core Lufthansa-branded airline, which they sometimes call Lufthansa Classic. Its operating margin is just 6 % for the summer. That's really bad. It was 9 % last year. They, it looks like, and you know, I should have issued this surgeon general's warning before we spoke, but a lot of these numbers are just coming in as we, as we speak.

12:14Gordon Smith: We're still, again, as you mentioned before, Gordon, it's Thursday. We're still kind of certain anything out for, for anything more official, you know, make sure to read airline weekly on Monday, which by the time you'll, you're listening or watching this, you'll have that in your hands, ready to go. on your phones, on your laptops. So we'll kind of flush that out a little bit with a little more detail. But apparently Lufthansa did incur, the core Lufthansa Classic, did incur some additional costs related to strikes in the previous quarter earlier in the year. I guess there were some, I'm looking from the, what do they call it?

12:55Gordon Smith: Additional customer claims related to March and April strikes. So that probably was a factor. They are still, for those who don't recall, one of Lufthansa's big problems is that their aircraft, their fleet is all messed up. Their long-haul fleet is, they've got older four-engine planes still sticking around, and they had planned to replace them with, you know, particularly 787s, A350s as well. But the 787s were just delayed and delayed and delayed, and it really interfered with their ability to not only control cost, but also introduce their new business class product, their Allegis product, which as we've talked about ad nauseum, Gordon, that's where the money is right now, the premium.

13:46Gordon Smith: them so they've they've really been saying and that's starting to get better now boeing is delivering more planes in there but it's obviously you know not showing up in the earnings just yet so they're still waiting for the triple x triple 7x they are yeah they are so that's uh and you know that's uh that's gonna be delayed that keeps getting delayed as as well you know i think they're they did mention it in the call i think they're looking still gonna come in 27 by next year but i don't have it in front of me i'm trying to do it from memory but i think they originally expected maybe early in the year maybe first quarter now second quarter or maybe it's even pushed back in the second half you can check me on that but uh yeah it's it's messy yeah another plane where they really you know great unit economics don't forget leftanzas is a giant cargo carrier i think we'll talk about cargo a little bit in a moment but uh you know the triple seven nine is going to be a fantastic cargo plane so they don't have it um at a time when cargo is doing very well they also were going to use that plane to yeah debut i mean it's going to have a whole bunch of those premium seats which well can't sell so meanwhile they're stuck with a lot of these older gas guzzling planes at a time when you know fuel prices are to the moon so yeah not not a good situation not a great situation but for any of the true

15:12Jay Shabat: have geeks out there and they've seen in one of the recent issues we had a beautiful photo of the hangar i think it was in frankfurt or munich of the a340 600 almost nose to nose with the 787 um obviously the the uh a340 being retired now i think it was the last flight from washington dallas back across to to germany so a nice photo call there whoever the photographer was on the lufthansa team more power to you it was a beautiful shot i just want to bring in a bit of commentary from jens ritter he's the ceo of lufthansa airlines the classic airline that jay was mentioning not the Lufthansa Group as of course Karsten Spohr.

15:43Jay Shabat: He took to LinkedIn yesterday and he said the turnaround works but it doesn't go far enough. An honest look here at our third quarter and why we will adjust our current course. I won't go into detail. You can jump onto LinkedIn and take a look at it. But he says here, while it's wonderful to be a part of the successful Lufthansa Group we want and need to contribute more to it financially. That is why we are looking at further structural steps. He continues, change is not always easy and this one comes with deep respect for the task ahead. The time to adjust our current course is now. So as you'll hear a little bit later in the episode, that is not the only European CEO that's had a really sort of sobering warning, but yeah, it feels like Jens has got a bit of a tough task still ahead because the labor union seemed to be resisting almost anything that him and his team try to do.

16:35Jay Shabat: And without going into great detail here, we know that we've got like Lufthansa City, they closed Lufthansa City line. There's obviously Discover Airlines. And then you've also got sort of the proliferation of smaller carriers. And a cynic would say that they're trying to shift as much away from Lufthansa Classic as possible onto these airlines that have got maybe slightly more nimble employment contracts and lower cost bases. And that obviously isn't pleasing everyone on the traditional side of things so a messy situation jay um but one that

17:05Gordon Smith: we'll continue to watch closely and now now they're bringing tap air portugal in so the complexity gets even just that much more uh you know it takes another level up so it is uh in fact um ben smith of air france klm uh on that call on his call uh called attention to the fact that uh lufthansa the little tons of group might be, you know, biting off a little bit more than it can chew in terms of complexity. Those are my words, not his, but, you know, he was trying to make that point when asked about, you know, losing out in the tap sweepstakes.

17:42Jay Shabat: A little bit of Portuguese for our listeners, as we would say in Lisbon, boa sorte. Good luck. I think they will need it for the integration of Tap Air Portugal. Jay, let's just jump into the break because we've got a lot more to get into in part two a quick reminder before we do get into the break a send any questions or comments that you might have for us to podcasts at skiff.com that's podcast with an s at the end and please don't forget to follow or subscribe to the podcast whether you're listening or watching and if you're enjoying the show please remember to rate us five stars leave us a possible review so we can continue to spread the word about the airline weekly lines don't go anywhere we're going to be continuing our European review in part two.

18:24Jay Shabat: Hello and welcome back to the Airline Weekly Lounge. I'm your host Gordon Smith, joined as usual by co-host Jay Shabbat. We are firing through the European Airlines, Jay, because it's been a huge week for earnings. We've covered off Ryanair and Lufthansa Group at speed. Well, we acknowledge that. If you want more detail, go into the Airline Weekly issue, airlineweekly.com for the full details there, Jay. Let's get on to our friends KLM. you mentioned Ben Smith just at the tail end of part one. How did they fare?

18:50Gordon Smith: Yeah. So I think I mentioned it before that they had about a 14 % operating margin. Maybe I did, maybe I can't remember, but that was a little bit better than they did last year. So good sign there that they had a year-to-year improvement despite the fuel increase. Like Lufthansa and Ryanair, They are well hedged, but even just the portion of the fuel that they're buying that's not protected by hedges is just going up so much that it does have, you know, it's a meaningful headwind on earnings. And that'll show up even more in the fourth quarter unless anything changes in the next two months. But that clearly is an issue.

19:31Gordon Smith: But on the demand side, everything, you know, in Lufthansa too, same thing. Everything is really strong. The, you know, flights, the transcontinental, transatlantic flights, sorry, from the U.S. and Canada, very good. Both of these airlines, love tons of both these airline groups are benefiting still from what we might call, you know, Gulf diversion. where people, even though Emirates and Qatar Airways, they're mostly operating full schedules, again, similar to their pre-war levels, maybe a little bit under. Yet the European carriers and the Asian carriers are still benefiting because a lot of corporations, Air France and Lufthansa both talked about that, A lot of European companies, a lot of Asian companies are still not letting their employees connect through the Gulf.

20:32Gordon Smith: So they're taking a great example. Turkish Airlines actually said this too, that their Australian routes are doing really well. And that's a good example of, okay, I need to go from whatever, Germany to Australia instead of connecting through Dubai, connect through Istanbul. there's a lot of those kind of itineraries that are also uh a lot of the same thing is happening through paris through amsterdam through frankfurt through vienna etc so um still some benefit there um air france did better again than klm they had a 14 operating margin klm 11 and klm is you know the group is not happy about that mr smith and uh his team are not happy that klm is still lagging and as you wrote about um gordon they're doing something they're they're acting again to try to

21:24Jay Shabat: change that they sure are when you said mr smith isn't happy about it i had to do a double take i thought you am i not happy about it oh yeah you know what i i have to be careful here because we have too many smiths the the perils of having an incredibly common surname you sort of you think

21:39Gordon Smith: you're being spoken to when you're not i you know it's funny that i didn't even think about it when i said when i was talking about ben smith yeah that's uh you could um maybe long you guys are

21:49Jay Shabat: long lost relatives i think you'd need to sort of zoom out on the family tree very very very far to uh to find us but who knows who knows uh if if anyone's got the uh the smith family tree handy take a look ben smith to gordon smith um but yeah jay as you mentioned klm still struggling and it feels like every time certainly of the past i'd say six quarters past year and a half two years it feels like every time you get a quarterly release from KLM not the market filing but the more public facing press statement is really sort of Debbie Downer it is sort of like oh things are not good enough we need to keep turning things around and we've I think we discussed this in the podcast before that actually you know this could be a tool in order to be communicating greasing the wheels to the workforce by saying some tough changes are coming this is why because things are still not good enough.

22:41Jay Shabat: And there's various ways to cut it. Some of the numbers out of KLM were an improvement on previous quarter. There are ways that you could say the transformation is progressing in the right way, but clearly not to the satisfaction of KLM and certainly not to the satisfaction of Air France KLM at a group level, I suspect. So what are we talking about? we're talking about a series of job cuts already. There's been a reduction in the workforce at KLM, but KLM announced today alongside the earnings and everything else, it's preparing to shrink its workforce by almost 15%. That's 1.5 % as part of a major restructuring aimed at cutting costs and improving its long-term competitiveness.

23:23Jay Shabat: Ideally, if this all goes to plan, and that's not to say that the unions might not be unhappy and various other bits and pieces, but the overall aim is to deliver an additional 1 billion euro of annual earnings improvements, bringing the total target improvement to 1.4 billion. So these are big numbers, Jay, but again, not without some friction, let's say, because we know that the labor unions are already unhappy with what's going on at KLM. And you could argue there's been parallels with actually what happened at Air France almost a decade plus ago. That used to be the airline within the group, certainly, and even across Europe that was often prone to strikes and prone to union unrest.

24:03Jay Shabat: And if I had an option to fly through Charles de Gaulle, I probably wouldn't at that time because of the risk of strikes and my flight being disrupted. And you could argue that perhaps we're getting closer to something like that at KLM. But what teams are affected? More detail on the airline weekly issue. I know on skiff.com, but top line, it's looking like some catering positions. They've already gone across to an external provider, the gate group, another 800 positions in grand services expected to be transferred again to third-party providers, including baggage handling at Schiphol and Grand Operations supporting KLM Cityhopper, that's its regional subsidiary.

24:35Jay Shabat: They say a further 2 ,000 positions, including 1 ,500 at its customer contact center, are being transferred to Air France KLM. That's the pairing group, of course. And it says here the remaining reduction of around 1 ,000 positions will come through, quote, planned structural productivity improvements. There's bit of corporate jargon if ever I heard it. But we should stress that not every role is going to be cut. Some are going to be changed. Some are going to be moved to other parties. There's going to be some movement around. So it's not going to be a case that everyone affected is going to be laid off.

25:07Jay Shabat: But there is going to be some significant change there. You might be wondering what the management team is going to say about that. Marjane Rintel, who is the CEO of KLM, not KLM Group, she again took to LinkedIn. And LinkedIn, I don't know about you, Jay, is a pretty good place to to get a little bit more of a personal take. This was in Dutch originally, so the caveat that it may not be a perfect translation, but I've double-checked it. It seems to be reasonably accurate. Marjan says on LinkedIn today, for more than 100 years, KLM has connected the Netherlands with the world. She goes on to say, to fulfill this connecting role in the future, we need to become financially stronger.

25:39Jay Shabat: The competition is fierce. Our costs are rising, and we are not earning enough to invest in what makes KLM stand out. And she continues, That is why we are announcing drastic measures today. We realize that these affect our organization, our work, and especially our colleagues. They can create uncertainty about what this means personally, and we don't underestimate that impact. She continues on. I won't go into full detail, but it is available for everyone listening, watching to take a look at, Jay. So it looks like they're rolling up the sleeves at KLM. It's going to get worse before it gets better in terms of the operational changes and the efficiency drive.

26:14Gordon Smith: Yeah, I was going to say, I like to think of KLM as the perfect airline for the 2010s and Air France is the perfect airline for the 2020s. What I mean by that is that if you think about Amsterdam is not a hugely premium market. Paris is. Think about the markets that are booming in the 2020s. Paris is just leisure. Premium leisure is where it's at. right in the 2020s and paris is the archetype you know premium leisure market you can't think of anything more premium leisure than that and klm has always been more the you know let's get by with lower costs let's get by with you know connecting traffic let's get by well look at connecting traffic i mean to a certain extent they're benefiting from the gulf disruption but to a different extent there's a lot fewer people traveling from the united states to, let's say, India, to the Middle East right now, that's KLM's bread and butter.

27:16Gordon Smith: So, you know, that's a 2020s market that's not doing well, and that's what KLM's specialty is. And then, of course, you have a lot of inflationary factors in the 2020s that I think are hurting KLM more than the hurting Air France, including airport inflation at Schiphol Airport and government taxation, things like that. So you can see why sort of KLM is suddenly in more of a bind. Whereas if you go back in the 2010s, they were kind of the superstar airline in the group. So now we've got this new airline in there, SAS, which makes things a little more interesting. And it sounds like, let me back up a minute here.

28:00Gordon Smith: Do you watch Squid Games?

28:02Jay Shabat: The Korean show? yeah yeah yeah yeah i watched the first series i can't claim to have seen anything else after that

28:08Gordon Smith: okay i i don't but i i know about it i know i know the whole premise of the show and i and i guess it's like everybody's trying to compete and it's kind of like a brutal competition to survive right do or die do or die so i think what's happening with these european very let's say um key strategic focus of the three big european groups is to kind of have their individual airline units battle against each other for resources, for planes, for growth. IAG pioneered this. I mean, this was one of Willie Walsh's, you know, the brainchild of Mr. Walsh and kind of helped him become famous. You know, Iberia's got, hey, Iberia, you've got higher margins?

28:55Gordon Smith: Sure, we'll give you some more growth and more planes. means, oh, you know, Voiling is not doing so well this quarter. We're going to take some growth away from you. Kind of makes them compete. So, you know, not quite the squid games. I call it the hub games. So that's my, you know, my bad metaphor. But that's what's happening. At Lufthansa, absolutely, they're doing that between all their different, you know, what do they have, seven different hubs now, including ITA in Rome. I think Air France with SAS is going to push towards that as well. Interesting. hands out. But I think that they're going to become more of an IAG type group where they have a management team kind of running it from the top and then the individual airlines kind of competing for resources.

29:44Gordon Smith: Whichever hubs do best will get more resources. So keep an eye on that, the hub games.

29:50Jay Shabat: The hub games. Just a couple of key themes to wrap up on, Jay. We don't have time to go into everything in detail. Again, get into the airline weekly issue if you're looking for that. But cargo, it's worth saying, has just been fairly strong across the board.

30:04Gordon Smith: Yeah, don't overlook that. I mean, these are, in the US, it's just less of a percentage of total revenues. Cargo is pretty big for Lufthansa, actually very big for Lufthansa. It's pretty big for Air France KLM too. And what's happening with cargo is, I mean, one, you would have thought if a couple of years ago, oh, this is why it's not a good idea to get into the predictions business. You would have thought a couple of years ago that cargo is headed for trouble because of all the tariff wars and trade disputes. What's in fact happened is that you have this giant artificial intelligence investment boom.

30:41Gordon Smith: So you have all these expensive computer equipment, chips and whatnot, servers that are going from Asia to the United States and from Europe and whatever. the netherlands actually has a very critical company that produces a lot of these that helps produce a lot of these chips it's the only company in the world that can do it so you can see there's there's actually quite a lot of cargo and then on top of all that on top of the ai boom you also have the fact that the middle east disruption has created um or has driven up the price of maritime shipping like dramatically so stuff that used to not be so economic to ship by air has become more economic relative to what you have to pay by shipping now some cases even too dangerous to ship um through you know portions we know what's happening and you know through the straight horror movies and things like that so uh air cargo is benefiting that as well so a meaningful contribution air france doesn't break it out air france k-land they don't break out their cargo business but Lufthansa does and excuse me it made a 16 % operating margin this summer compared to 6 % last year so you can see and it's no you know it's just in the quarter 1.2 billion US dollars in revenues so nothing to sneeze at not too shabby thank you for that

32:03Jay Shabat: inside Jay I was trying to think you know we yeah we generally try and cover one or two airlines per episode I think we got three in there We could have done a lot more. So apologies if your favorite airline wasn't covered. But like I said, get into the issue, either the most recent issue or the issue before that, as we're recording on the 5th of November. Much more detail there. And we should also say this is going out next week, but we also have the SCIFT Global Forum East. So if you're thinking, oh, I've missed you guys in New York, we forgive you. Come and join us in Abu Dhabi. Abu Dhabi, December 8th and 9th.

32:38Jay Shabat: this is not an aviation specific event but we do have Anton Odo Nivish the CEO of Etihad Airways and a little birdie tells me that we've got another very big name speaker from the Middle East aviation scene not announced yet but I think they are they're on the way um so that's gonna that's a tease yeah yeah watch this space live.skiff.com for the latest agenda if you're wondering how to get involved complimentary registration is available subject to approval to senior leaders from tourism authorities and destinations hotels and hospitality airlines and airports online travel and distribution platforms as well as a few other groups all others are welcome to attend through a standard pass for the full details at live.skiff.com and i will see you there in abu dhabi december 8th and 9th great um anything to add before we wrap up jay i got a quiz

33:22Gordon Smith: for you to close what uh what james bond film did duran duran do oh that's too easy you do a kill okay all right sorry we we can we can end i'm so sorry yeah

33:38Jay Shabat: the next for next week give me a duren duren question that will stump me all right you got it challenge challenges on all right i'll work on that uh actually uh without going down duren duren rabbit hole he um laban the the lead singer he's like um you guys i i really feel a good connection with you i feel like we're really bonding tonight and then they did the James Bond theme and then they went straight into a view to kill us. So good to know that they're a fan of segues as well as we are on the podcast.

34:09Gordon Smith: Nice. It'd be funny if he was into airlines. It's like, oh, wow, you got an airline podcast. I love hearing about KLM.

34:19Jay Shabat: Who knows? Stranger Things Have Happened podcast. It's gif.com with Joran Joran. Are you listening?

34:24Gordon Smith: If there are any famous musicians out there that are into aviation, just, yeah. You know to ask for info.

34:30Jay Shabat: You know who to ask. Great. All right. Thanks for that run through, Jay. Always appreciate your insights. Thanks also to our producers, Jean, Kelsey, Monica, and Will, and wherever you are in the world. Thanks for listening, and we'll catch you next time. Bye for now. Whether you're listening to us on Spotify, Apple, or wherever you get your podcasts, please remember to subscribe, rate us five stars, or leave us a positive review. This really helps us get the word out about the Airline Weekly Lounge so we can continue to bring you this podcast every week absolutely free of charge. And if you're watching us on YouTube, be sure to subscribe to the Skiff channel and hit the notification bell to find out whenever a new video drops.

35:27Jay Shabat: improve operations, and uncover preferences and motivations through their AI-powered solutions. With more than 1 ,700 clients in over 170 countries, ZS has built the expertise, fortitude, and vision to help you deliver impact right where it matters.