Five questions to Estuardo Ortiz, CEO JetSMART
1) From your perspective, what is the key to JetSMART’s success in Chile, Argentina and Peru?
The key is simple: Cost. We are an Ultra-Low-Cost-Carrier (ULCC) and therefore JetSMART's entire strategy is focused on maximizing efficiency to be the lowest cost airline in the market. Key for our success is what we call the JetSMART factor. Since we started, prices to consumers have dropped up to 50 percent and this stimulated the market, allowing people who could not travel, or traveled very little, to fly JetSMART. We brought innovation to the airline market, introducing one-way fares allowing people more flexibility and the SMART fare which only includes your trip from A to B, and allows the customer to decide and pay only for the services they need, such as baggage, seating or others. Soon competitors rolled out similar models and aviation changed. We are thankful to our 12 million passengers flying SMART, who believed in the model and helped us transform the market.
The JetSMART factor has been key in the industry transformation by breaking paradigms - such as the need to have operating bases only in capital cities - and providing direct connectivity with non-stop flights between secondary cities - the SMART routes – and now people can travel direct, and avoid lengthy connections in Santiago, Buenos Aires or Lima. Today we offer more than 70 routes in seven countries, most of them connected with SMART routes, saving customers both time and money.
We have managed to implement a high quality ULCC model by flying in a new Airbus A320 fleet, safe, reliable and on time, for a few pesos. This was evidenced by being awarded as the best low cost in South America and ranking third on the SKYTRAX World Airline Awards, also by winning the ProCalidad service quality award in Chile, and the highest reliability benchmark in Latin America. Our Airbus fleet has been a key element in JetSMART's success.
We still have a lot to do, but I believe that after five years of operations we have changed the way people fly, positively influenced the industry, society and South Americans quality of life, from people traveling 30 hours by bus to an hour by plane and at lower prices. Special thanks to the JetSMART Rockstar team, who flight after flight has made this happen.
2) A few years after starting operations and in the midst of JetSMART’s ambitious expansion plans, the Covid-19 crisis broke out in the world. How did you manage to overcome the crisis and continue growing?
Going back to 2019, we were still starting and still far from a minimum scale of operations to be fully effective, when in late 2019 the social unrest happened in Chile and grounded part of our fleet. Then the COVID-19 pandemic in March 2020, grounded the fleet around the world. We had just completed the purchase of Norwegian Air Argentina and the government suspended aviation in the country for over eight months. Finally, by end of 2021 when we started to see the light, in March 2022 the war in Ukraine skyrocketed fuel prices to the highest in history. It was a very difficult time for us to absorb these shocks.
So, most of our history has been thru crisis. I think you should never waste a good crisis. It is all about the attitude towards it. From seeing our sales plummet by 90 percent to having our team focused on opportunity, it changes everything.
We quickly changed strategy, aligned the team on what we call SMART WorkCells to focus on the reality of the market. During the pandemic we certified Cargo for all airlines and implemented an operating model with zero cost and zero complexity; improved all distribution channels, implemented charters, developed ancillary products portfolio, renegotiated contracts and reduced our CASK, while keeping our team well focused. We implemented new routes and markets, including Medellín and Montevideo, and during the pandemic crisis we obtained a new AOC in Peru to take advantage of the recovery of domestic markets and have a solid basis for growth. The support from Indigo Partners was crucial, as well as, the exchange of best practices with the other airlines in the portfolio.
Without a doubt it has been and still is a huge challenge that we, as a team, have been able to face successfully. In the face of adversity, uncertainty, and volatility, you can only change your attitude. And ours was to see opportunities, not challenges.
And we came to the end of 2021 as planned, with a more competitive and better performing airline with high fleet utilization, and ready to resume growth at the end of 2022.
3) What does the arrival of the new A321neo represent for JetSMART?
I am a fan of the A321neo, and we are finally operating it. It is the aircraft of the future for us.
Taking delivery of our first A321neo marks the beginning of a new era for JetSMART boasting the most sustainable and full-efficient aircraft in the region while lowering our operating costs compared to our competitors. This will allow us to offer lower prices to our customers so they can continue to fly comfortably, safely and at ultra-low prices.
Certainly, the A321neo will support our vision to reach the milestone of 100 aircraft and serve 100 million passengers by 2028, and it is important step in becoming the leading ULCC in South America.
4) JetSMART has shown an ambitious sustainability strategy. What are the main cornerstones of this strategy for the airline?
We expect our fleet of Airbus A320s and A321s to enable us to reduce our CO2 emissions by more than 30 percent by the end of the decade. Today, our fleet is one of the most modern in the world and has reduced its noise footprint by 50 percent and saved 20 percent on fuel vs previous generation aircraft. In addition, our future A321XLR will help us save 30 percent on fuel, playing a key role in decarbonizing the industry.
However, I acknowledge this is not enough. We must continue working on solutions to achieve net zero by 2050.
In February 2021, we made a flight from Toulouse (France), as we did recently from Hamburg with the A321neo in June 2022, using biofuel. The use of Sustainable Aviation Fuel (SAF) is the most impactful and immediate measure for reducing emissions. However, public-private collaboration is needed to boost production on a regional and global scale that optimizes costs and increases production capacity to meet demand.
In addition to this, we are recycling all our operational waste in Argentina, will soon start in Chile and Peru; and have also implemented a 100 percent paperless cockpit, ensuring more efficient and safe operations. We also implemented a smartphone accessible e-menu, thus avoiding printing leaflets.
In addition, we have lighter seats covered with remaining leather from the leather industry, which are 48 percent lighter than traditional leather, contributing to fuel savings, and giving them a useful life in the aircraft seats.
JetSMART is committed to sustainability in all areas. In the social area we actively participate in labor inclusion programs to promote more women in the company, not only in the operational areas but in all others, and work closely with the Ministry of Women and Gender Equality’s programs. Today our company benefits from a workforce 50-50 between women and men.
5) Do you still pursue the goal of serving 100 million passengers by 2028, and what is JetSMART’s strategy to achieve this goal?
That is our vision, added to our goal of reaching a fleet of 100 Airbus A320 and A321.
The strategy is simple: follow the ULCC model to stimulate the market with ultra-low prices.
In South America, with a population of nearly 500 million, there is still very little presence of ULCC operators. At least half of the population has never traveled by air. In 2019, there were 268 million trips across the region, or less than 0.6 trips per capita, compared to the US or Europe, with three or four trips per capita. So, the market can easily double, but we need to increase connectivity and provide more affordable prices.
However, to do thus we need to reduce the international airport fees, expanding airport infrastructure and have standard regulation aligned with open skies. We see Europe as good example, where operators have access to markets regardless of their country AOC, hire pilots of other nationalities and benefit from growth incentive programs.