Cruz takes off with well-funded Clickair

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By Brendan Sobie

Alex Cruz is quick to point out how Clickair, with €120 million ($152 million) in its pockets, may be the best funded start-up carrier ever but you can hardly tell this from its headquarters building outside Barcelona’s El Prat Airport.

The Spanish carrier has rented a simple 38-desk single-story office and Clickair is spelled at the front entrance with letters made of styrophone or a similar cheap material Cruz is happy to say he got for free. “I don’t know if I’d consider this a low cost office but we got a good rate,” he said during an interview at his office just before Clickair´s 1 October launch.

Cruz joined Clickair at the beginning of September from consultant and Navitaire owner Accenture, where he was the head of its London-based airline division, but has since been staying at a €65 per night Barcelona hotel. He is now trying to using his negotiating skills, which so far has netted below market rates for Airbus A320 leases and jet fuel at all of Clickair´s initial airports, to get his room rate down to only €50 per night.

Clickair launched with a headquarters staff of only 20 and a fleet of three leased A320s formerly operated by Iberia, which owns 20% of the start-up. Cruz says the leases with Iberia had expired and Clickair has taken possession of the aircraft at higher rental rates.

“Unfortunately our terms are different (than Iberia’s) because we’re smaller. But I think the leases are slightly below market rate,” he says. “The process (of transferring the aircraft to Clickair) is quite smooth and the lessors appreciate that. It has value to them.”

Clickair has contracted Iberia to provide maintenance services, including re-painting and converting its A320s into single-class 180-seat configuration.

Clickair is carrying Iberia’s code on all its flights and some Clickair passengers will be able to accrue Iberia frequent flier miles. Iberia is also withdrawing from several routes and handing several airport slots to Clickair.

Not surprisingly, the Spanish media and public have been referring to Clickair as part of Iberia. But Cruz is trying to change this image and believes the public will soon realise, after visiting its website and flying in its aircraft, how different Clickair is. He stresses that all of Clickair´s arrangements with Iberia were done only because they made commercial sense and Clickair is completely independent and will have a distinctive product.

“There is a specific desire for Iberia and Air Nostrum to treat this as a separate investment,” Cruz says. “Iberia does not want to influence Clickair...We know the failures when bigger airlines get involved in smaller low-cost carriers,” Cruz adds.

Iberia regional partner Air Nostrum, through its parent Nefinsa, owns a 20% share in Clickair. Spanish construction company Cobra, tour company Grupo Iberostar and industrial group Grupo Quercus also have equal 20% stakes. Iberostar formerly owned Spanish charter carrier Iberworld before it was sold earlier this year to US investment firm Carlyle.

Iberia chairman Fernando Conte Garcia also stresses that Clickair will be independent and he says Iberia only decided to invest in Clickair after identifying the low-cost sector as a major growth market.

“Network airlines are in a different business. The question was did we want to participate (in the growing low-cost market). We decided yes,” says Conte.

When asked why Iberia is handing some of its routes to Clickair Conte says: “We don’t want routes that are losing money systematically.” Iberia dropped one of Clickair´s five initial routes, Barcelona-Seville, the day before Clickair launched services. Clickair also has launched services from Seville to Paris Orly and from Barcelona to Geneva, Lisbon and Zurich.

Cruz plans to use the €120 million its five owners have pledged to expand aggressively and quickly become a serious player in the fast-growing Spanish low-cost market which includes Barcelona-based Vueling, which ironically has its head office in the same building as Clickair.
By March 2007, Clickair plans to begin flights from Barcelona to Malaga, Frankfurt, Amsterdam, Geneva, Oporto, Zurich, Basel, Dublin, Moscow, Munich, Berlin and Prague as well as from Seville to London and from Valencia to London, Paris Orly, Rome and Milan.

It plans to take delivery of two more A320s in December and one additional aircraft per month from February. It aims to have 30 A320s operating on 70 routes to 55 cities by the end of 2008.

Domestically Clickair plans to focus on coastal areas and stay away from congested Madrid. “Madrid we are not interested in,” Cruz says. “It’s not a good time to go into Madrid when easyJet is putting a few planes there, Vueling is putting a few planes there and one of our investors has its base there. It looks too crowded.”

Clickair will focus internationally on point-to-point routes of up to four hours, in particular routes which are now underserved or not served at all such as Barcelona-Moscow. Cruz says Clickair is “interested in secondary airports at destination” but is also seeking slots at major European airports to support high-frequency services to major business destinations.

Cruz says after the initial few months, Clickair will not be taking over any more routes abandoned by Iberia. “After time this will disappear,” he says. “We got our sights on a lot of routes no one is serving period. This a jumpstarter.”

Cruz calls Clickair a third-generation low-cost carrier, a model pioneered by Australia’s Virgin Blue. As a third-generation low-cost carrier, Clickair provides low fares and no frills to those travellers which seek the lowest fares possible. But at the same time it provides optional frills to those travellers which are willing to pay a premium, primarily business travellers which have avoided earlier generations of low-cost carriers.

Beverages and meals will be sold on board and frequent flier miles on Iberia can be accrued at an extra cost. Passengers in the near future will also be able to pay for priority boarding. Clickair for now has open seating but with priority boarding passengers will be able board first, at a cost, and therefore pick the seats they prefer.

“If you want to travel cheap you can,” Cruz says. “We want to make it simple. We want to serve as many people who want access to low fares....We want to mix traditional low fare carriers with standard traditional carriers. At an incremental price we want to give whatever the customer is willing to pay for.”

Cruz is also quick to point out that Clickair will not charge the service fees several other European carriers, including most Spanish carriers, now charge on top of the normal air fare, airport taxes and fuel surcharges.

“We will show a straight fare. Whatever comes up will be airport charges or stuff we have to pay. It will be transparent. There will be other charges but these will be optional.”

Clickair is also breaking the mould of traditional low-cost carrier and making its tickets available to travel agent through its codeshare with Iberia. These tickets will be more expensive because of the distribution costs involved but Cruz believes by using this channel Clickair will able to reach a market other low-cost carriers including Vueling, Ryanair and easyJet now can’t access. “I don’t pay for it,” he says. “It’s covered by Iberia and charged to the passengers.”

Joining Clickair is a sort of homecoming for Cruz who grew up in Bilbao in a Basque family but left while he was in high school. After a year in Panama he studied in the USA, earning an industrial engineering bachelors degree from Central Michigan and a masters in industrial engineering from Ohio State.

He then began his career in Dallas, where he joined the field services group of American Airlines in 1990. But he spent much of his time outside Dallas selling software and doing consulting projects for other carriers.

In 1995 Cruz moved to London, still working for American Airlines and its Sabre unit which was later spun off. He left Sabre in 2000 for a consulting job at Arthur D Little, also in London. In 2002 he left to create his own London-based consulting company Alnad but he winded that up in 2004 to join Accenture, where he oversaw its 200-man airline division.

At Accenture, Cruz looked after its Navitaire reservations product and did several consulting projects for European low-cost carriers including a three-month project for Clickair which led to him getting the chief executive post.

“This project started as an Accenture project,” he explains. “I speak Spanish better than English and know the market very well. And I know aviation. From that perspective the transition (to CEO) is exactly as I expected. “The only thing I slightly underestimated is the amount of attention you need to give institutions and governments.”

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