Print headline: Portugalia Airlines
Valter Fernandes became CEO of Portugalia Airlines, which operates as TAP Express, in January. This follows a career with TAP Portugal that started in 2001 and includes serving as base maintenance general manager at TAP M&E Portugal. In advance of MRO Europe, he spoke with Lee Ann Shay about aircraft changes, digital innovation and growth constraints at the airport in Lisbon.
Portugalia Airlines renewed its fleet in 2016 by adding Embraer 190s, phasing out two fleets and starting to fly as TAP Express. How is the operation performing 1.5 years after these changes?
It was a tough transition, but we are happy we did it. The E190s are a vastly superior aircraft compared to what we had, in terms of fuel consumption and comfort. But we are still learning the aircraft and are not there 100% operationally yet. For example, we still operate into some airports with extra fuel as a precaution, but as we learn the aircraft, we can drop buffers like that. Our customers really like the aircraft and appreciate not having a middle seat. Because we act as a feeder to TAP’s long-haul operation, the fact it’s very reliable and has shorter turnaround times is good, too.
Do you plan to add an additional aircraft type, or will you stick to the one fleet type?
I’d like to answer yes, but we do not have a firm date. We have a scope clause between the main airline and us, so our growth is limited by that. We still have margin to grow but the sky is not the limit. I hope to have a larger regional jet in the future—in the 110-140-seat bracket to keep it below the Airbus A319. We will definitely keep one fleet type only because we are not big enough to justify more than one or multiple manufacturers, so we will try to maximize our capacity in the sub-140-seat range. I don’t think we’ll grow next year, but there’s a strong chance we’ll grow in 2020.
You’ve had a long and varied career at TAP, since before joining Portugalia. How different are the operations?
They are different, of course, but not that different: Time is paramount in both operations. There are two main differences. I think maintenance is more restrictive in terms of regulations than operations, as far as rules go. You can still be creative in finding solutions for flight operations, much more than in maintenance, which has a more restrictive environment, in my opinion. The second issue is how to deal with staff. In maintenance, you’re in hangars or in offices—you can reach out to people because you see them every day and can talk to them face to face. To broadcast a message or foster a cultural change is easier because it’s a static environment. In an airline, to get the message across to pilots and flight attendants who are flying is hard. You have to invest the time in a good communication system. Having said that, we’re improving, but we’re not there yet.
What are the main changes you’re trying to implement?
Portugalia was founded as an independent regional airline, and now it’s more and more integrated with TAP. It’s also really no longer a regional airline—increasingly, it’s more of a feeder into TAP’s long-haul operation and operating in a hub environment, which brings cultural changes. We have to have a very punctual operation to serve the end of the line—the long-haul flights and TAP as a group. Before being acquired by TAP, this company was thinking as a standalone entity—not one that impacts TAP. Scope clauses are a new thing for us a well. Dealing with unions and scope clauses is a challenge. You’re not entirely free to dictate your future. But Portugalia is very solid and has a can-do mentality: It’s flexible and adapts to new circumstances.
What are Portugalia’s strengths and weaknesses?
Our agility—we are a very nimble airline. It’s simple to open new routes and to fly to new airports. We are quick to adapt to new circumstances. One strength is our human resources, who are very engaged and committed to the company. They are very loyal to this company and our turnover is low. Being part of the main airline is also a strength, because otherwise it would be hard to survive independently and as a low-cost carrier here in Lisbon. For weaknesses, we have a small fleet—only 13 jets. With only 13 jets, it’s hard to dilute fixed costs. Also, we have a pilot-union scope clause, which isn’t a weakness but it influences our growth. One of the biggest challenges is our location: We are located in Lisbon, which is a very sought-after destination, and it is booming. The airport traffic is growing by double-digit figures, but there are lots of operational struggles: ATC limitations, slot limitations, parking. It’s hard to have a strong on-time performance here, so we struggle a bit because of that. This airport is not coping, and it’s overloaded.
Are there plans to upgrade the airport?
Yes, there is a plan to invest in this airport because it’s old, and there are also plans to build a new airport in the next four years, probably. The government is working actively to solve this, but we still have to cope over the next 3-4 years. We have to minimize the struggles; for instance, we try to avoid rotations in peak times. For growth, if we can’t have more slots, when we want, we have to upgrade the aircraft to offer more seats. Everything is on the table: no decisions yet.
What synergies exist between Portugalia and TAP?
For the existing ones, Portugalia doesn’t decide new routes or deal with sales or marketing. Also, our IT department and medical services are shared, and ground handling and catering are defined as a single airline. As for new possible synergies, we are always considering them—such as the crew control center, maybe eventually even maintenance—partially or totally. There is always a balance between group synergies and cost-cutting, which is good, and reducing the agility of the small company. When you depend on big group-wide solutions, sometimes you lose the speed and agility to adapt and create new solutions.
What maintenance do you perform in-house and what do you outsource?
In-house, we do everything airframe-related: line maintenance at our two main airports, light and heavy checks in our Lisbon hangar. For airframes, we cover everything from night stops to heavy C checks. We outsource components and engines. We have a contract with Embraer for component maintenance, and we have a power-by-the-hour agreement with GE for engine maintenance. When you go to the OEM, you pay the price—but we chose that route. There is always room for improvement, and we talk with them to get better deals, but we are not unhappy to the point that we’re looking for other solutions.
What digital functions—such as electronic signature, electronic logbook, remote inspections, predictive maintenance—is your airline using? Are you considering blockchain?
We are currently performing predictive maintenance with tools provided by Embraer. We are trying internally to develop solutions through an agreement with a local engineering university to go deeper in predictive maintenance. Also, we are finalizing the certification of an electronic flight bag that will be an enabler for the next step, which will be an electronic logbook. As for remote inspection, we’re not there yet, but it’s part of our plan for 2019. Blockchain: It’s a cross-industry technology that we think could add value to aviation, especially for maintenance data and the way it is shared, but we are still in the monitoring phase. We are also looking at customer-facing solutions, like Wi-Fi onboard, which is definitely something we will consider sooner rather than later. We are also improving our maintenance control center, especially the production control rooms. We are going much more into visual management—to know exactly if you are ahead or behind in maintenance activities.
Does Portugalia provide maintenance services to any external customers?
No, because third-party maintenance is not our core business and we are limited by space. However, in our off-peak season for maintenance, which is the peak season for flight, we have agreements with local MROs so we can outsource our manpower to work in their places. We started doing it this year. It works because we don’t lay [workers] off, we don’t fluctuate our staffing and they keep their jobs—and they get paid extra when they go to a different facility, per day. Because we don’t have to adjust our manpower for peak and off-peak periods, we can offset our costs by doing this—and for local MROs, it’s good because of the personnel shortage. c