The invitations for the big celebration of the 10th anniversary of the largest Slovak airline had already been sent out when the Covid-19 epidemic put a damper on the young airline’s plans. As probably one of the youngest airline founders in the history of European aviation, Martin Stulajter (CEO) started his airline exactly ten years ago with a Boeing 734 aircraft, which has since then been very successfully operating in the ACMI/Wet lease business for numerous renowned airlines. Martin Dichler spoke with the young businessman about the company anniversary and the current situation of his Air Explore.
Let us start with a current question, Air Explore (AXE) celebrates its 10th anniversary under particularly difficult circumstances. How is the company currently doing?
I wouldn’t say “celebration” is necessarily the word I would use for what we are going through during the last few weeks. We have been preparing for one of the strongest summer seasons that we expected in 2020. Over the winter, we have invested a lot of money to aircraft maintenance, required communication and navigation upgrades and necessary repairs. We have been getting ready for fleet growth and consequent staff increase. We have leased additional B737-800 and, a bit of an experimental step, additional A320. All this has taken a significant chunk from our cash reserves. Suddenly, in a very short period of time and just days before we were supposed to begin the high season with according revenues, Covid 19 has practically destroyed the aviation market in the world, making it the worst possible moment for our company. Despite having a relatively diversified portfolio of clients contracting our services, the effect of the pandemic resulted in losing business in every part of the world where we have based our airplanes. In order to cope with the adverse effects of this, we are heavily decreasing staff cost and renegotiating our lease agreements with lessors who lease aircrafts to us. We hope that we will be able to manage the situation until the aviation market at least partially picks up and our services will be needed again.
How many aircraft have been in service recently?
At this moment we are operating and leasing seven aircrafts. We were supposed to have nine in 2020.
All your aircrafts now grounded at your home base in Bratislava?
Six of our aircrafts are now parked in Bratislava and one is still subleased to Icelandair. This aircraft is based in Keflavik, Island.
They were still looking for flight attendants before the Covid crisis. How many people have worked for Air Explore recently and can you retain the staff?
We have various forms of employment of nearly 300 staff members. One of the first steps we were forced to do is layoff people who were in probation periods and who were employed as contractors. In Slovakia, the labor code is very protective for permanent staff, so our hands are very much tied in that regard and the only way to make changes to employment contracts is through a mutual agreement. I have to say though, that we have reached an agreement very quickly with all our staff members. The decrease in their salaries was quite radical, but on the other hand, there is only a hand-full of people who are required to come to the office these days. Nevertheless, I am very grateful to all our staff members for their flexibility when it comes to their contract changes. It shows that they really want to see the company survive and I think that this is largely due to the fact that we have been a fair employer throughout the 10-year existence of our company.
Granted, the following question is difficult to answer, but how optimistic are you that Air Explore will survive the crisis?
The true and simple answer to this difficult question is that I don’t know. There are many factors that influence the survival of any airline these days. The main question is whether there is going to be a demand, and if, how strong it is going to be. One can speculate and create optimistic or pessimistic scenarios. The fact is that the potential demand for aviation in the upcoming months cannot be controlled by the airlines. We can only do our best and do what is necessary to last as long as it is reasonable and possible and hope for the best. As for myself, I am positive that if demand for our services perseveres, our airline is going to survive.
At the age of 25 years you were one of the youngest airline founders in Europe, what made you so sure at that time that this business segment (ACMI) could become a success?
As time passed by, I can now say that youth has its benefits, but also its downsides as far as business goes. To create a proper business, you must have a good idea, right timing, willingness to take risks and ideally some experience. When you are young, you are willing to take more risks, but also have less experience. An older person has more experience and maybe because of that, he is no longer willing to take so much risk. There must be a proper balance in all of this. Before I worked in two other airlines and I saw the ACMI market emerging, but there wasn’t a lot of companies, which invested proper attention to this dimension of aviation. I felt this as an opportunity and given the circumstances in Slovakia when in 2008-10 all airlines went bankrupt, I wanted to use all the potential of available airline professionals to create a company dominantly serving the ACMI market. Time has shown that it was not a misstep. We have created a proper, well established and I think reputable company from one airplane: a „family“kind of operator. There was some luck, a lot of knowledge and extreme amount of time and effort invested into the project. So now, it is very difficult for me personally to look at things falling apart, especially as the current state of things is not our mistake.
When you look back, apart from the current Covid-19 crisis, what were the most important moments in the company’s 10-year history??
I would summarize our major milestones to three events. Firstly, aircraft delivery, changing from B737 Classic (CL) to B737 Next Generation (NG) during our cooperation with Ryanair in 2014 and lastly deciding for the Airbus product in 2020.
The most difficult airplane to get was our first aircraft as we were a company with no history and not exactly “a strong financial portfolio”. Lessors or banks would not support our project as the market was down and we were just a group of airline professionals without a proper financial backing, other than maybe a good idea. Luckily, we have found an aircraft owner in Germany; Mr. Gunther Eheim and his manager Mr. Udo Werner who we had a chance to meet and I could present the project of Air Explore. To cut a long and entertaining story short, they have come to a decision to believe in the project and entrusted their airplane B737-400 to us. This airplane has served us very well for 5 years and eventually we became owners of it. Later we sold the aircraft to another operator and used the funds for our first B737 NG leases. This brings me to a second milestone. B737NGs were more than twice the price of the then B737 CL, which we were familiar with. It was an inevitable decision to go to NGs, but the risk was in the timing. At the time we were operating an ACMI contract on behalf of Ryanair with B737 CL. The operation itself was a major challenge for us because we needed to adopt the same procedures like they had on their relatively young B737NG fleet, and we had to be up to speed with rotation times at airports just as they were. We have been able to manage this with their help on B737 CL and when they expressed their interest to work with us the next year, we committed to take B737 NG to establish the fleet and capacity similarity with them. It was a correct move because they really used the full capacity of our services on the NGs. Not many people know this, but we were also the first aircraft used when RYR opened base in Bratislava. We agreed with them on very special conditions for basing us in Bratislava due to logical synergies and I think that this has convinced them to open the base in Bratislava for their aircrafts also. If one of the roles of ACMI solution for airlines is testing the market, this has been the example of it. They are still operating their aircrafts from Bratislava now and I think it is a success story. Ryanair cooperation has taken our company to the next level as we took more NGs and really started to grow professionally and fleet wise. It was one of the most inspiring projects for me. Ryanair staff we worked with were great professionals, but also personally fantastic. They taught us a major lesson about the essence of each airline: to be safe, to be punctual and to be in the budget. The third milestone for us would be going into the Airbus product, and I hope we get the opportunity to find out if this was a good move.
Air Explore has taken on many a challenge in its 10-year history. Missions in Nigeria, Iraq, Afghanistan, Palau or a flight around the world were part of the AXE repertoire. Which mission was the biggest challenge for your crews so far?
Looking back to the past, we have done so many projects that it is hard to name the one, which was outstanding. We have based our planes in the Pacific, Asia, Middle East, Africa, Europe, South America. We have done hundreds of airports in all different weather conditions. We have based our aircrafts and crews in major capitals, middle size towns, „middle of nowhere “, picturesque islands, holiday destinations and places of public unrest and military activity. We have been evacuating people during Arab spring from Egypt, Tunisia, Libya. We have been based in Baghdad and Kabul. Every single project had its own peculiarities. Our role was to find ways how to overcome problems and deliver the service that our clients expect. I can say that we have done so in every case and I am proud of it.
The ACMI business has grown strongly in the last two years due to the Boeing 737MAX problems, could your company also benefit from this?
What is important to know is that the MAXes have been grounded in March and all our contracts have been negotiated and contracted a few months before that. We respected our agreements with our clients, and the fact that they happened to get into a difficult situation did not mean that we saw it as an opportunity to “exploit” them. Because of MAX grounding, we have operated a lot more flight hours that we expected and that has brought us some additional revenue. The other side of the story is that since we didn’t plan on such high utilization, our airplanes got „worn“ quicker than expected for less revenue and we had to invest a lot to get them back „ in shape“. However, we were still ready to operate a lot of hours in the season 2020, but now it seems, we are going to have the opposite problem J
As the Boeing 737 MAX is still not flying, I assume that long-term contracts for this summer were already signed?
Yes, we had contracts for all our fleet of 9 aircrafts. We have been preparing for a very good summer. We have invested a lot into our aircraft to make them reliable, comfortable and good-looking. We have been investing a lot to periodical training of current staff and training of newcomers. We have also invested a lot to the introduction of Airbus 320 and improvement of our internal processes to be able to deliver the same or better product that our clients are used to from us even with a larger fleet. As I said, just a few days before we were supposed to start „collecting the fruits“ of our effort and investment, the aviation industry practically stopped. Honestly, it is a hard one to digest for me, but aviation business is like that. It is fast and it goes up and down like airplanes themselves.
For the first time in your company’s history, you would soon have taken delivery of a first A320, I suppose that’s not going to happen?
The Lease agreement is executed and there are respective obligations. But there is also a new unprecedented reality we live in that cannot be ignored. I hope we will be able to find a compromise with the lessor: what is expected and what is possible.
Finally, a not serious question, for your birthday you always have a wish, what would you wish for the future of your company?
From what I heard; you cannot say the wish out loud if you want it to come true. What I will say is that I have spent a good part of my life in Air Explore. Going through this situation really breaks my heart. We are a great group of people with whom I have some of the finest memories of my life. I hope we are going to survive this crisis and spend some more quality time in the future.
Many thanks for the interview and good luck!
Martin Dichler
(Photo copyright: Maros Marko, Martin Dichler, Air Explore)