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LONDON – Earlier this month, AviationSource had the opportunity to sit down with Matteo Bonecchi, the CEO of Italian start-up carrier Ego Airways to discuss the airline’s position and plans for the future.
The airline was founded in June 2019 with the first flights occurring only in March, nearly two months ago. At the moment, the airline only has one Embraer E190 in service, dubbed I-EGOA.
I-EGOA is on lease to the airline from German Airways, with the 13-year-old airframe starting its life with Copa Airlines originally before moving through the likes of Aero Republica, Copa Airlines Colombia, Azorra Aviation, and WDL Aviation respectively. The aircraft can carry 100 people in a two-class configuration of 12 in Business and 88 in Economy.
Without further ado, let’s get into the interview:
LZ: Ego is one of the leading start-up airlines in Europe and the one with one of the most innovative strategies out there. With this, why is this the best moment to start an airline in Europe right now, what are the advantages?
MB: We started before the pandemic spread out. We incorporated the company at the end of July 2018 as we started all our procedures after the summer and what we found out was that we were right in the middle of the certification process when the pandemic spread out.
We thought that could even be an opportunity though as the market was cleaned up, especially long-haul carriers were hit the most compared to us and we were setting up the entire strategy.
We didn’t have all the fixed costs that long-haul carriers have because we were in the intermediate procedures of this certification. The certification arrived at the end of 2020.
As you can imagine all of the operations were slowed down during the pandemic, especially when you are talking with private entities, smart working, new innovation for everybody so we took more time.
The second wave hit us the hardest as we were ready after the first as the second wave started to hit. With just one aircraft the heat on us was less than anybody else and we were ready to get the recovery of the market and said we’ll start flying in a couple of weeks.
The pandemic was the worst moment but at the same time was an opportunity to make the long story short.
LZ: What strategies are you using to combat legacies and low-cost as you are eating some of their pie as you expand into bigger markets from the smaller airports that you currently fly from?
MB: Not directly. What we are looking for are protected markets, meaning airports with special capabilities like Florence and other airports where low-costs have difficulties in landing as the length of the runway is limited but for Embraer it is not a problem operating to these airports.
Then we wish to connect these airports between them and these airports with main airports. Even if at the main airports there are Low-cost carriers but they cannot fly without limitation where we are departing is the type of protection we are looking for.
Secondly, Ego Airways is born with a specific beauty as we want to feed long-haul carriers, and doing everything from check-in to interlining and code sharing is not in the DNA of the Low-cost carriers.
We are a connector for established carriers which is another niche market we have defined and we are looking at. We need to wait for the long-hauls to start again though which is the last part of the industry to see the numbers coming back.
Here in Milan of the 33 airlines flying long-haul on a daily basis, there are now only around 10 to 11. Let’s hope that in September or October that it will go up to 20 or 25 and this is a number that could be interesting to start evaluating for serving this feeder market.
It depends on the speed of the recovery, North America and the Far East being the fastest ones to recover before the other but we need to wait for them to come back.
We will fly point-to-point in the meantime, where the Embraer can make a difference at the smaller airports in relation to the other airports as you know Easyjet, Ryanair cannot land without a strong limitation such as at Florence or London City where they are not equipped to land. We are choosing these types of airports.
LZ: You don’t want to be seen as a leisure-oriented carrier but also a transfer-oriented carrier correct as the majority of new low-cost carriers entering the market are leisure-oriented?
MB: Absolutely. Aviation is a mass industry, leisure could be your main market but you cannot forget other parts of the market. You have to survive 12 months per year. We are lucky that in Italy that the summer season is longer than in other countries.
November, December, January, and February even exist here though. We are also lucky though that our airports have both of the traffic and if I take Florence, for example, it is not only a leisure destination but it’s a big industrial city and the area has a lot of production.
Venice in the Veneto region is one of the richest areas in Europe in terms of GDP, so it’s not only Venice famous for tourism but there is a very vibrant and rich production and business part around that so we are trying to stimulate both of these traffics.
LZ: With this in mind, are you trying to stimulate the Malpensa hub during the year and leisure during the summer?
MB: Even in the point-to-point market there is a double part for sure, it depends which period of the year, which day during the week, as businessmen don’t leave on Saturday but we are trying to cover the leisure and business markets into our schedule for all markets.
LZ: What new technologies are you using today to be able to gain customers as the majority of companies entering the market are trying to have an app focused on the customer or other new technologies toward the customers?
MB: Now we are in the start-up phase exception made for all the booking tools. It is APP that we are focused on the definition of the new schedule. We are putting a big focus on the environmental part so all our services are done with recycled and compostable items.
It is not technological innovation but this is the part we are taking care of. At this moment too the company’s investment is towards IT, for making the booking and access to the company very easy.
Technological investments on aircraft we are not in the stage of as our flights are maximum an hour so Wifi, IFE are not a priority as 20 minutes take off, 20 minutes to land, to enjoy all these systems for only 10-15 minutes, those investments are not worth for our type of route structure that we have now.
Maybe in the future, if we have longer routes, we can revaluate that but not with this kind of route network that is very short.
LZ: Will you be working on a BOB (Buy-on-Board)?
MB: We are developing that. Now during the pandemic the services were blocked for safety reasons but all the items and products are ready to be offered to the public as soon as some of the rules are relaxed in what we have to apply towards safety to the flights.
Nowadays I prefer to have everybody wearing masks instead of having everybody and the person next to you who you don’t know that is eating something and breathing until the situation will be more clear and defined. Everything is ready to be put into the market once the condition will be ok to do that.
LZ: Some routes have competition from Air Dolomiti and Vueling. How do you plan on competing with them?
MB: Those carriers operate on the Florence-Catania route. With them we are trying to talk with and not compete, to work together in offering possibly a better service with one flying in the morning and the other flying in the evening trying to work together and offering a better product.
To me, the other one with the direct competition on the same airport will be Pisa. It is more dangerous than Ryanair is there because the carrier similar to us like Air Dolomiti, can work together towards offering a better product to the public.
When you have someone that competes with you 1 hour driving away (from Florence) with 9.99 Euros as a fare it’s a different story so we have invested into the service and quality and the items we offer on the flights.
That’s the only competition that we have is on the Florence-Catania though as all our routes are without any direct competition. From Pisa, you can go with Ryanair who is serving 46 destinations but it’s a different type of experience.
A good product but different from us. Those are the airlines we are trying to work together with though.
LZ: How has Covid influenced your cost structure enabling you to operate the routes and airfares that you do that without it you would have not been able to offer that airfare and services that you do?
MB: Yes at the beginning you have to have some seats at lower prices because we are a start-up, pricing is an element of choice by the customer but we have applied a variable of fare structures and our base fare is 48 Euros and we start to go from there up.
We will never have 4-6 Euros as a fare as we are not a low-cost carrier and we don’t want to be seen like that. Not because there is something wrong in that but it is not our market nor our model.
We are something different. Even the seat pitch in the interiors of the aircraft, the minimum pitch which we have is 31 then 33 and then 41 so even physically the aircraft is structured in another way. We even have physical differences. It is not just the question of price but it is a link between the price and what you find on the aircraft.
LZ: How is EGO building up a loyal customer base for example from the likes of Forli one of it’s biggest bases at the moment?
MB: We at the moment don’t have a loyalty program. We are starting up especially because when we start defining the market and working with 33 different airlines meaning 33 different loyalty programs it’s better to add to their loyalty program some points for the short flight connections.
It’s better to participate in theirs than starting our own. That will be the case for now.
When we will be bigger and start thinking of having something like ours, it will be especially for the point-to-point network but if you were meaning a direct loyalty program like Avios we prefer to join one of them in relation to the company seats that the company will choose to arrive on to its final destination.
In our case on our 45 minutes flight, the customer will get 1 point. This is not viable. It is better to add points to the loyalty program that the customer has so he can enjoy his milage program.
It would be a cost for us and a disadvantage for the customer to have our own loyalty program. To join the loyalty program of the legacy carriers which operate long-haul flights is the goal at this moment.
There you have a few cards in the pocket. Instead of having other cards, it’s better to give value to the one that you have. This is more or less our strategy at this moment especially to the programs for connections to the long-haul flights.
LZ: Did Forli and Catania’s airports approach you or did you approach them once realizing that the original strategy of having a Malpensa base needed to be put on hold?
MB: When we studied the business model we studied the market before and we saw that one of the richest areas of Europe had no airline or base there. Before 2007 we had part of Alitalia operating long-haul flights from Milan but then they moved most of the operations back to Rome.
Then the operations changed but instead of it being empty it was different. Instead of a Milan-Hong Kong- Milan’s long-haul services became Hong Kong-Milan-Hong Kong. Not a gigantic difference, before operated by Alitalia, now operated by Cathay Pacific, without any internal distribution to the Italian market.
If you multiply this example for 33 other destinations you will see that Milan is a final destination airport because it doesn’t offer any interlining or connecting transfers so by studying the model and going to the airport and visiting all the airlines, we built up this model.
The fortune is that today (before Covid) the long haul flights came in 2 waves, one in the morning, the third one was lighter in the evening.
With the two daily flights, you cover 70% percent of the long haul flights that arrive there and most of them are arriving in a window between a couple of hours so if you study perfectly the waves you can connect the majority of these airlines and it’s a win-win for the long-haul carriers so the flights via Milan they can offer Florence, Venice, Naples, and other destinations and for us, because we have 33 potential big customers who support us with the sales because you can imagine an airline that not only sells Hong Kong-Milan but Hong Kong-Florence via Milan, feeding up the flights to Milan with other
Italian destinations instead of affiliating into the alliances which are maybe not operating the flight will make two stops before arriving in Florence for example. In this way, they have a better load-factor on the Milan-bound flights, and then they can offer the connection here.
We visited all of them and went to the Routes World in Adelaide 2 years ago and now we are waiting for the Milan edition to set up everything for Summer season 2022 with this kind of program. Let’s hope that people come back to Italy soon to visit us.
LZ: As connectivity is your main center-point do you plan on using services like Dohop, Kiwi or Easyjet Worldwide which offer virtual interlining?
MB: No, we do direct interline with them. We use direct connectivity with our inventory and their inventory. Otherwise you can’t do that through check-in, it is a very important part. In the end it is a direct relationship between us and the airline. Everything will pass from IATA.
LZ: With the current democratization of the aviation market propelled by many new start-up airlines with a leisure focus and legacies such as Air France. Lufthansa and British Airways having so many problems, where do you see EGO and the European market in 5 years from now?
MB: In 5 years from now I will see EGO arrive to 20 aircraft based in these secondary protected airports, let’s say that will connect these airports. It will be a high-end niche market company that works for the legacies or all of them.
Malpensa is a special reality that is kind of unique in Europe because it is in the middle of one of the richest regions. Easyjet’s second-biggest base is in Milan-Malpensa after the U.K, which have 47 aircraft based there so the market is important but they connect with a low-cost model the main airports while we connect for other long-haul carriers the airports in connection with that.
The future in EGO will be connecting the small airports with them, on a point-to-point basis and then connecting the hub for multi-brand shuttle service for legacy carriers. We can do that because we don’t belong to any other airlines so for us feeding Alitalia, Air France, Lufthansa, or Cathay it’s the same.
The importance for them is feeding and filling up their long-haul flights. Here in Milan without having a carrier-based here, all the long-haul carriers fly to different destinations except for New York which is a bit crowded but for all the other destinations they are only served by one airline.
It’s an opportunity for everybody and this is what we’ll do. That is why we are studying other airports in Europe that have similar capabilities in Europe but for now, we will be focusing on Milan and then we will have to see what will happen with Alitalia because it’s a big question mark.
LZ: Matteo, thanks for speaking with me.
What remains clear is that Ego Airways is trying to set itself up for the future. As a start-up with just one aircraft at the moment, expanding to 20 aircraft in five years evidently highlights what level of demand there is going forward.
With the Alitalia story continuously ongoing, the new start-up carrier seems ready to pounce in all directions and seems well prepared for each outcome.
As we begin to come out of the pandemic, the airline obviously has good hopes for the future and its slow but well-guided line of direction is what is making this small carrier thrive.