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Interview: Peter Baumgartner, Etihad

 

A key personality at the heart of Etihad’s aircraft interiors investments is Peter Baumgartner, the airline’s chief commercial officer at the time of writing, and CEO as of May 2016, who was so deeply involved in the interiors project he could tell you what is in any given square inch of either aircraft type, why it is there, what passengers will think of it, and how much it cost.

The story begins in 2009, when Etihad decided to reimagine its offer to become the world’s best airline, complete with expensive new aircraft. That was at a time when the world was in the midst of a global economic crisis – which also affected the United Arab Emirates – so it was a particularly bold decision. However, Baumgartner never doubted the strategy, “We know the world does get out of economic recessions; it’s not the state of play for the next 100 years. We also know that Etihad’s growth development plans are derived from the Abu Dhabi 2030 Vision, and as Abu Dhabi’s airline, Etihad plays a very clearly defined role in bringing the masterplan to life.” The plan is multifaceted and links to strategies for tourism, economic diversification, air links, capital flow and people flow. Etihad is a key pillar of the economic diversification strategy for Abu Dhabi.

“There was a global financial crisis when we ordered the aircraft, but there was a clear plan of where we had to be in 5, 10 and 15 years. We knew that the crisis would not be there in that period. Maybe there will be another – who knows? – but it is essential to follow the masterplan. Anything else would be crazy.”

Baumgartner won’t reveal the scale of the investments in the new aircraft interiors, but as you would expect, the expenditure on cabin product and development is “significant”. This was not an open checkbook program though, as he explains, “It was a clearly planned and defined investment from the top, up front, before we had even embarked on thinking about how the cabins should look, and the program has been delivered within these parameters.”

Indeed, beyond the design and innovation, it is the success of the overall project that makes Baumgartner proudest. “It’s not the fact that we have all these unique cabins, it’s that what came first was a very, very clear direction and brief on what the aircraft have to do, in terms of seat count, capital expenditure budget available, and the economics that have to stack up to fly these aircraft profitably.

“That was the initial brief, and not one dollar more was spent than was set out. There is not one seat less than was in the target seat count, and not one commercial or economic parameter was compromised. And within those parameters we came up with these aircraft, and that makes me proud,” states the Swiss-born CCO. “It’s probably not that difficult to create the greatest ever cabin interior prototype if you ignore all other factors, but if you start with parameters, KPIs and consumer research, and then bring all that together and create what we have, that’s an achievement.”



Above: Projects in the Abu Dhabi 2030 Vision such as the Louvre have inspired Etihad's design language


On the right track
With a plan and a budget in place, Baumgartner sees conducting systematic concept and qualitative research as the next step toward creating excellence. As he states, “I can’t think of any innovation in our cabins that would have been possible, or come to our mind, or become a priority, without the first phase of the whole project, which was research.”

Etihad, the Etihad Design Consortium (comprising Honour Branding, Factorydesign and Acumen Design Associates), and brand and insight planning specialist Promise Communispace embarked on a ‘customer co-creation’ program that saw two-day workshops held in New York, London, Sydney and Abu Dhabi. In these workshops – known as Etihad Big Talks – 50 people comprising Etihad frequent flyers, Etihad non-frequent flyers, frequent flyers from other airlines, economy, business and first class flyers, and high net-worth individuals were all put together in a room to discuss what they wanted from tomorrow’s flying experience. They were even encouraged to use cardboard and fabrics to create their own vision of each class of travel – some even appropriated items from neighboring rooms – and this was all monitored by Etihad representatives, with in some cases psychologists and marketing experts observing through one-way glass.

Key insights from the Big Talks have been implemented, such as the separation of the bed and seat in first class, making seats across all classes into more of a personal space, and the idea of destination areas on board, such as galleys that are welcoming enough to be social spaces, and the upper deck lounge, which is more than just a bar area.

“It was so eye-opening, refreshing and delightful to go through that experience,” says Baumgartner. “It has given us not just guidance on where to put our focus when it comes to design, but it also has given us a full innovation guideline for years to come.”

Broaden your benchmarks
It would make sense when planning product to simply benchmark other airlines, but Etihad’s vision was to push the brand and experience beyond the boundaries of the airline industry. “If you want to push boundaries, you need to find your benchmarks. They must be outside your industry, otherwise you won’t challenge it,” says Baumgartner.

Thus Etihad was looking for the best in class, not the best in category. For example, Baumgartner’s benchmark for food and beverage is his favorite restaurant in Zurich, not the best airline caterer. That level of expertise and service has consequences, as an onboard chef and a food and beverage manager are required, each with the right skill, talent, background and mindset.

“Even just the look of the chef is important because a meal just tastes so much better if you think the cook knows what he’s doing. If the environment where you sit and enjoy a steak and a glass of wine is enjoyable, then it tastes better. That’s just a fact,” he says. “You need to recreate that five-star restaurant ambience, otherwise you don’t get the experience. This is not a marketing gimmick; it’s us being serious about it.”

The same approach was taken with the cabin designs. In terms of delivering luxury in an innovative and space-efficient way, Baumgartner considers yacht design to be the pinnacle. This stems from some enjoyable times as a teenager, sailing a 12m yacht from Italy to the Greek Islands. “It was a big yacht in Lake Zurich, but on the Mediterranean it was a very small yacht – especially when you have 12 people plus a dog onboard,” he recalls. “That’s when you start to appreciate genius design. When a dining table turns into a bed and the kitchen becomes a bathroom, you start to understand that space is, to a certain extent, about perception. So for this project I said, ‘Let’s manage that sense of perception, and let’s be cool about it.’

“For example, there is a prayer space in front of each aircraft door, which didn’t cost us a thing apart from the price of a curtain, but with that we created a space that is very respectful for people from the Middle East, and better than having to find some space on the cabin floor with no privacy. It would otherwise just have been an unused space, so how great is that? It doesn’t cost anything, it’s just a good idea, and it came out of the Big Talk workshops in Abu Dhabi.”


Above: The on board prayer spaces include automatic Qibla finders


An efficient halo
The prayer areas are certainly a great use of typically unused space, but the three-room Residence takes that efficiency a step further. Many A380 operators have used the spaces either side of the stairs on the upper floor to create spacious lavatories or slim lounges, but by installing a shower room and lav/changing room on one side for the use of all first class guests, and using the other side to add a bedroom and shower room to a first class suite suitable for two, Etihad really added something special.


Above: The Residence features one of the most desirable beds in the world


“This is really nothing more than a clever use of that space, because the bedroom is not a space where you could have fitted a seat,” says Baumgartner. “It’s commercially interesting, and at the same time gives us access to a complete new clientele: the elite top tier who normally travel only by private charter.

“The Residence gives us access to an extended market segment, it uses that space efficiently, and creates a big halo effect,” he continues. “The Residence by Etihad is the most luxurious commercial aircraft interior ever built and it goes around the world. Everybody loves the story, so everybody talks about it. And that halo effect means that people say, ‘Well, if they have the Residence, I don’t have to worry about their economy class also being good.’ It’s like if the Mac Pro is great, Apple will obviously also get the iPod Shuffle right. That’s how it works, and it did work, as the social media has shown.”

As a young brand – only 11 years old in 2014 and Baumgartner has been there since its early days, having learned the industry at Swiss International Air Lines – Etihad is breaking into markets with established premium carriers, so products like the A380 and its innovative cabins are key to establishing itself as a major player. “I, as a marketeer, do believe in the halo effect and I do believe it gives the brand prestige, which makes it more desirable,” he says.

“Our brand strategy is based on being a remarkable brand, with ‘remarkable’ meaning that we want to be a brand that people remark on. We have seen it work in social media, where people have said, ‘Wow! I’ve never flown with Etihad, but this is just amazing. I wonder what economy class is like. This seems to be a special airline, so I want to try it.”

Is first class still relevant?
With many airlines looking into downsizing or removing their first class offer from their fleets, Etihad could have been forgiven for considering reconfiguring its new fleet to something more modest during the program. However, for Baumgartner and the team it was never a consideration. “Our position is to stay committed to first class. We are seeing a good demand for first class,” he says, adding that as part of its flexible and efficient fleet planning, not every long-haul aircraft in the Etihad fleet will have a three-class cabin – only those that link key markets and traffic flows. “It’s a very targeted strategy, with different aircraft types with different configurations for different markets. There is no mandate that we have to have a first class, and there is no expectation other than to do what is right for the business. We have no intention other than to do exactly that.

“Therefore, where we have first class, we clearly see a first class market. Every airline wants to grow first class and grab market share from the competition. We stay firm and committed to premium travel, and this part of the world has the potential to source those high-end travelers from the markets in which we are flying. I’ve no doubt that with the London market we will have a very healthy first class loading from the UK.”

First-class passengers are one thing, but the Residence is a step beyond, not only in terms of the experience, but also in the fare. It’s unlikely to be occupied on every flight, so will it become a potential upgrade perk for frequent first class flyers?

“We won’t compromise the integrity of that product, so you will not see any upgrades into it; you won’t see any staff in it; you won’t even see me traveling in there. It will be very strictly managed. If you want a seat in the Residence, if you want to see behind the door, then you have to pay for it. I think that’s the right thing to do with flagship products. You don’t want to dilute the value. If you want to be attractive to the upper end of your segment, then you have to give them that exclusivity that they are expecting.”

This means that Etihad won’t be satisfied with its halo product simply breaking even; it needs to earn its place in the A380. “We wouldn’t have created the Residence if we did not believe in it commercially. And I do believe in it. Commercially, even if there is lower occupancy than in the first class apartments, they will both be equally profitable. We are very bullish and I think the Residence will be a very successful product.”

Residence residents
So who will be a typical Residence occupant? “I think it’s probably fair to say that it is a product that is only accessible to wealthy individuals, possibly private jet customers,” states Baumgartner. That would be true of any market, but the UAE market introduces potential beyond single bookings. “In this part of the world, where you have big families traveling in premium or first class, it can be a very attractive proposition if you can sell the whole first class cabin. You could have the head of a family in the Residence and then the family in the Apartments, and then the entourage in business class. We can deliver that to perfection and offer the privacy that such customers desire and expect.”

Etihad already has experience with such individuals through its current long-haul first class, and also through private charters of some of its fleet, chosen because many families prefer Etihad’s food, service, IFE and seat quality to that of many conventional charter aircraft. “There is a demand for that service and it is probably a little unique to our part of the world,” adds Baumgartner.

However, he also foresees people who have saved for a special trip – a honeymoon perhaps – who will want the most exclusive special hotel at the most exclusive destination, and who can now take that a step further by, as Baumgartner says, “travelling in the most special cabin ever created”. He adds, “There are many individuals who want the ultimate in lifestyle, convenience and privacy. That means more to them than the price of the ticket.”


Above: The inaugural flight in The Residence on December 27, 2014 was booked by Miami-based businessman and aviation enthusiast, Gino Bertuccio. Bertuccio flew on his first inaugural 25 years ago and has since travelled on 22 inaugural and final flights in premium class cabins – and counting

What about economy passengers?
Looking at the other end of the scale (or downstairs on the A380), will economy passengers really benefit from the investments?

“Probably the hardest area in which to deliver innovation is in economy,” says Baumgartner. “Being innovative in premium classes is easier, as you have a little more space and a little more budget to work with, so if you spend a couple of dirhams more on a premium product, that’s okay. If you spend half a dirham more per passenger place in economy, when multiplied by 417 seats on an A380 it becomes very expensive.

“Believe me, what we are introducing in economy, even if it just seems like little things, like the fixed headrest, the IFE panel, and the ergonomics, was hard work.”


Above: The headrest in economy, trimmed in camel leather, offers a little extra comfort, as well as something a little different

Catalogs cast off
It’s one thing specifying and developing innovative product such as a curved aisle and a new ceiling in the B787 first class cabin, galleys that run in a new direction, and a dual-occupancy suite, but certifying them is just as big a challenge.

“Because no one has done these things before, someone has to think about whether they have an impact on safety. You know how strict certification standards are in aviation. You have to go through the whole process of coming up with something new, finding time for the authorities to look at it, consider what they think about it, and then go through the whole certification process. It’s a huge effort.”

The airline industry as a whole benefits from such work, though. For example, in the case of adding custom product to the Dreamliner, Baumgartner thinks that the Etihad project will benefit all future customers. “Initially, the 787 was meant to be just a catalog aircraft. However, we looked at the catalog and said, “Goodness me, this is not what we want.” We went to Boeing, at the time they were having battery issues, and said, “We have another little project for you. We don’t accept your catalog; you have to move away from the idea of us just picking items from it. As you can imagine, that was not easy.

“So, now we’re kind of making Boeing more flexible. The way we acknowledge that is to say, ‘We’ll give you a little preview of what we’re doing in the A380. Do you want the new Etihad Boeing cabin interior coming out second best compared with the Airbus interior, or do you want us to have two great aircraft?’

“They looked at what we have done in the A380 and said, ‘Yes, if that is where the world is going, we have to compete.’ We very much appreciate that increased flexibility, and we applaud them for the support. It all benefits the industry.”

Never stop innovating
So what is Baumgartner’s advice for airlines looking to create an interior that will wow the world? “You can’t buy innovation off the shelf. It has to be your own creation,” he says. “If innovation is your ambition, as it is at Etihad, then you need to allow five to six years, knowing that one product cycle is between six and eight years. You need to have a constant innovation pipeline, because there is constant development. In fact, the day after we launched the new product we began working on what will come out seven years from now – otherwise we won’t be ready in time.”

Adam Gavine spoke to Peter Baumgartner in 2014

 

12 May 2016

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