FOXTROTS*

 

2018 Review of CEO/head moves – died, fired, leaving, promoted

 

An excerpt from our monthly PinT (People-in-Travel) report. As this is a subscription report, the following item is not from the current edition.

Sections:

-Air heads.

-Hotel heads.

-Industry heads.

-Officialdom heads.

-Life/death.

-Words.

 

 

[] Air heads.

Air France-KLM (AFKL). Action by unions in France is threatening the existence of the group, or certainly the AF part of the troubled group.

Jean-Marc Janaillac, CEO of AFKL, resigned, following a vote by a majority of staff (only in France though, and AF, not KL) to continue their rolling strikes for higher pay, led by the pilots. In broad terms AF pilots (KL have different contracts) currently have existing pay terms that are about 25% better than competing airlines, and with easier work conditions.

Yet despite the fact that France and Air France broadly cause recurring problems for AFKL, and KLM’s performance keeps AFKL profitable, it has been French nationals who get the top AFKL job.

Notwithstanding any public statements, KL must be looking for a way out of its link with AF. The problem will be cost. The value of the company has fallen* since the strikes, and so KL would lose on selling its shares in the company.

*Notes:

-Share prices -44% in 2018, -58% since 2004.

-Travel Business Analyst spoke against the merger at the time, in 2004. Primary reason was the reasons that are causing today’s problems – the French penchant for strikes, whether there is a valid reason or not. Striking seems to be in the DNA of French workers.

 

Virgin Atlantic Airways (VAA). Shai Weiss, 50, was due to become CEO of after Craig Kreeger retired, due last month, after just five years in the job.

The appointment of Weiss seems to be related to the reduced importance of the job. He joined VA in 2012, became CFO and EVP July 2014, then CCO January 2017. He is an Israeli national, and was educated partly in the US.

VAA is now owned by Delta 49% and Air France-KLM 31%, with founder Richard Branson 20%. Yet only Virgin president Richard Branson and Delta CEO Ed Bastian made comments about Weiss’s appointment; nothing from 31% shareholder AF-KL.

Both owning airline groups have different strategies, and neither has a need for another airline – particularly one that operates on some of the same route patterns! In addition, VAA is not only probably losing money, but is not doing well with traffic either – its seat sales in 2018 probably ended +2%, in 2017 +0.1%, 2016 -9.9%. See Notes*.

In addition, AF-KLM is in a mess, and if KLM is not trying to get out of its joint-venture, it should be. Also, AF has always run AF-KLM, even if KLM’s managers, based on results at KLM, are clearly better.

We believe this means Weiss will simply work much as before in his EVP role, and Delta will run the airline. If AF-KL can resolve its own problems, then it might become more involved in VAA – which is not necessarily a good thing for strategic coordination.

Corporately, we think Delta will try to sell its share in VAA – although finding a buyer will not be easy. In the recent past, it could have been a Gulf airline, but after Etihad made giant mistakes with its airline-buying strategy, it would no longer be a contender.

Emirates, burned once with Sri Lankan, has shown no interest. Qatar might, which would lead to the ironic situation of Delta selling to its arch-business foe, Qatar.

For the above-mentioned reasons, AF-KLM has made a mistake in buying into VAA. When it announces this (from its new CEO?) it will also try to sell.

The other factor is the UK’s exit from the European Union, due this March. That makes VAA a less-attractive buy. Therefore, Delta and AF-KLM seem likely to have to hold on to their VAA burden.

*Notes: Presumably few will say that according to Kreeger’s brief at the time he was appointed CEO, he failed in the job. When he was appointed, Branson said: “[Kreeger] has the experience and passion to drive Virgin Atlantic forward and capitalise on the opportunities created by our new venture with Delta Airlines.”

 

-Virgin Australia‘s CEO, John Borghetti, is due to leave in 2020; he joined in 2010. He is generally considered a competent operator, although the airline’s future will not be secured when he leaves. The problems include:

-A strong local competitor in Qantas that has an FSA* and NFA* as does VA, although Qantas also has a LCA*. (That said, VA does not meet our definition of minimum 75mn seats sold annually to need three types of airline.)

-Strong competition and/or over capacity on domestic Australia routes and even on some international.

-An unclear business strategy. VA started as an NFA then moved to be partly an FSA after a competitor, Ansett, went out of business, and there appeared to be opportunities. Then much later it bought Tiger Australia, a failing NFA started by Singapore Airlines.

  (The existing Singapore-based Tiger is now unrelated to VA’s Tiger.) If VA wanted to buy TA as an ongoing business, it should have changed the Tiger name as soon as it could, and run old and new names for about 18 months.

On Day 1, then, VA’s new CEO should start writing a new strategy/business plan.

Best place to find the new person is probably to repeat the original Borghetti move, and hire someone from Qantas. However, as international search companies are involved, they will search the world first, then revert to a next-door solution.

 

-Others.

-Stephen Kavanagh is due to leave his CEO job at Aer Lingus this month; he started in March 2015. Due to take over is Sean Doyle, currently British Airways director of ‘network, fleet and alliances’. Because both airlines are part of ICAG, the CEO job is less important that at an independent airline – because many decisions are taken by, and strategy set by, ICAG.

-Remco Althuis named CEO of Air Seychelles. Before he worked with KLM, and with Etihad, which owns 40% of Air Seychelles, one of the few Etihad subsidiaries that are not doing badly or that is still in business.

-Alexis von Hoensbroech, 47, COO Lufthansa Cargo, became CEO and chairman of Austrian Airlines, succeeding Kay Kratky, retired at 60, and in the job only since August 2015.

-El Al, Israel. David Maimon resigned; Gonen Usishkin, former fighter pilot and with El Al since 2004, took over.

-Topi Manner named CEO of Finnair, from this month, replacing Pekka Vauramo. He was with Nordea, a financial group where he was head of personal banking – which does not seem relevant for an airline CEO job.

-Gusti Ngurah Askhara Danadiputra named President/CEO of Garuda Indonesia, taking over from Pahala Mansury.

Hawaiian. Mark Dunkerley retired, replaced by Peter Ingram, EVP/COO.

Icelandair president/CEO Bjorgolfur Johannsson resigned, taking responsibility for company changes that “have not been implemented well enough” and route network changes “that have resulted in an imbalance between Europe and North America flights.”

CFO Bogi Bogason took over on an interim basis.

-Joanna Geraghty named President and COO of Jet Blue, reporting to Robin Hayes, CEO.

-Sumeth Damrongchaitham named President and CEO of state-owned Thai Airways. He has no airline experience, but government experience. He was MD of Dhanarak Asset Development (a state-owned company under the finance ministry, established just to oversee a building project), and COO of GMM Grammy, a media company.

The previous head of Thai retired two years ago. Thailand’s current rulers took over following their military coup in 2014. However, even before this, Thai Airways’ president has often been a military man, but the CEO job has sometimes been outside the military, even if often government related.

-Jane Garvey named chairman of United Continental Holdings (owner of United Airlines), replacing Robert Milton. She was the first female FAA head (1997-2002) and is now United’s first female chairman.

 

[] Hotel heads.

-Jennifer Fox, who joined Millennium & Copthorne Hotels as CEO in June, had left before the year had ended. This is what we said when she was appointed:

‘Being M&C CEO is a tough and thankless job, presumably because Kwek Leng Beng, owner of the owning group, is a hard boss.

‘This has been a short-term position (under two years on average). There has not been a woman in the job, but given company mores, we would think her length-of-stay would be shorter than for a male incumbent.

‘M&C says Fox “will play a critical role in repositioning M&C’s key hotels, uplifting brand awareness of the group, as well as improving the overall performance of their portfolio”. A ‘critical’ role? That word usually means ‘important’, but surely as CEO she should be driving that role?

‘Previous CEOs have also tried repositioning M&C’s hotels, and working on the brand. The group has a solid portfolio, but its brands are not widely known, and it has different standards at hotels that should be the same. And its 3-star Copthorne seems a frozen brand. The impression is left that M&C is a real-estate company owning some hotels, rather than a hotel company.

‘In addition, Fox, an Australian national, has not shone in previous jobs, and seems to be considered good almost just because she is a female CEO. We think there should not be male, female, or Asian CEOs, but good, average, or bad CEOs.

‘In 2011, she was named president of Fairmont Hotels, part of the Toronto-based Fairmont Raffles group. And then as head of the owning company, FRHI (owner Fairmont, Raffles, Swissotel), which is actually owned by Accor. Before that, she was COO of managed operations for Europe (excluding the UK) at InterContinental.

‘The appearance, then, would appear to be that the FRHI job was not so important (as Accor decides strategy), and she moved on when what looked like a good offer came along.’

 

-Others.

-Jeff Wagoner named CEO Outrigger Hotels, taking over from Scott Dalecio, interim CEO who became chairman. Wagoner joins from Trump Hotels, where he was an EVP, and Wyndham Hotels.

The group has still not been able to break away from its Hawaii culture, even though it has hotels in Asia Pacific. Wagoner has no non-US experience.

Tommy Lai named CEO of Singapore-based GHM (née General Hotel Management), under co-founder and president Hans Jenni (other co-founder, and sleeping partner, is Adrian Zecha), who still directs the development of the company. Lai, a Singapore national, can be considered more a COO.

 

[] Industry heads.

-Another quick flip*. Late-June, ICCA announced that Martin Sirk, its CEO since 2002, would be leaving end July. It offered no amplification, prompting speculation of course. We speculate cancer, a ‘me-to’ sex-related matter, or a more ordinary bad-practice.

ICCA said that its search for a new CEO “signals ambitious changes ahead…”. That would indicate Sirk left because of incompetence or disagreement with the new policies – whatever they are.

ICCA did make some comment on policies, but in meaningless jargon – “…working with new leadership to drive the association forward over the coming decade, and to identify and implement new business models that will future-proof ICCA in what is certain to be a dynamic and hyper-competitive environment”.

The fact that ICCA is an industry body makes this more puzzling. We do not know, for instance, with what ICCA is in competition with. If this reference is related to its member companies, however, then the new strategy could be providing more business support to members, rather than just primarily, for instance, information.

ICCA gives member number growth to measure Sirk’s good work, growing from 600 members to 1100 in his 16 years. That calculates to a +3.9% annual average growth rate which, in business-growth terms, looks slow.

Dennis Speet, whose ICCA title is chief value officer, is named acting CEO.

And later, James Rees, executive director at Excel London (the location for the World Travel Market travel trade exhibition) was elected ICCA president. This is the highest position in ICCA, but the power is with the secretary general.

*Notes:

-ICCA was initially an abbreviation for the International Congress and Conventions Association. Then it used ICCA as a name, which it described as The International Meetings Association. It has now reverted to almost the same – ICCA, International Congress and Convention Association.

-In 2017 it was David Scowsill, whose June departure from the WTTC travel lobbying body was announced in May.

 

-Others.

-Guillaume Faury is due to take over from Tom Enders as Airbus CEO this year. Faury is currently president, Airbus Commercial Aircraft. Enders is due to remain CEO until the Airbus AGM in April, when the board should approve Faury’s appointment.

-New chairman of IATA is Akbar Al Baker, the head of Qatar Airways; a one-year appointment. He succeeds Goh Choon Phong, CEO of the Singapore Airlines group.

Sometimes, the post is taken by someone about to leave their ‘day job’. There has been no other indication that Al Baker is leaving QA, even though he has been in the job since 1997, and he did note “the difficult circumstances in which [QA] currently operates”. Why would he take on other responsibilities at this ‘difficult’ time?

-Christian Woronka, director of the Cologne Convention Bureau since 2012, named to head the Vienna Convention Bureau from this year.

 

[] Officialdom heads.

-Lionel Yeo left his job as chief executive of Singapore Tourism Board in June, after a 6-year term. Authorities had no immediate replacement, although they indicated that was normal, which it was not but we do not know the problem.

Then they named Keith Tan Kean Loong, then deputy secretary policy at Singapore’s ministry of defence, to start October.

We were told that Tan had been responsible for defence policy, strategic communications, national education, total defence – which made him seem like Ng Eng Hen, the minister himself. We presume STB meant Tan had responsibilities in those areas.

Whatever, none of them seem directly relevant to the STB job. And before this, all his experience has been in government jobs.

STB, like many DMOs, does not appear to act with the knowledge that a DMO-CEO’s work is almost entirely with the non-public sector. Thus private-sector experience would seem to be more important.

The STB added that Tan’s leadership experience “will equip him well to lead STB to achieve its next lap by pursuing quality tourism and driving tourism development”.

That is not true. There are no indications of any ‘leadership’ in his previous jobs, which were functional government-policy jobs.

And we add his experience would seem to be of no use to develop what STB describes as ‘quality tourism’. That remains undefined, but the STB is probably referring to the inbound visitor business.

It would also be better if STB defined ‘tourism development’. Adding more visitor attractions? hotels? something else?

 

-Others.

-David Lisnard, mayor of Cannes, re-elected head of the DMO (destination marketing organisation) for the south of France – CRT by its French initials. One problem is the region’s name. It is known as the Riviera, Cote d’Azur, South of France, or sometimes by its main centres, Monaco, Nice, Cannes, St Tropez, Marseille.

Lisnard had already served three years but this was marked by a July 2016 terrorist attack.

-The new government in Malaysia named Mohamaddin Ketapi its tourism minister, replacing Mohamed Nazri Abdul Aziz, from the former and now discredited government party. The fact Ketapi is from the state of Sabah has led some participants to hope he will boost Sabah’s image. That is not the responsibility of a federal minister.

PATA, the lobby association for Asia Pacific’s inbound visitor business, named Dr Chris Bottrill, director at Vancouver’s Capilano university, its chairman. He replaced Sarah Mathews, head of destination marketing AsPac for Trip Advisor, and in the PATA post for one year. It is a one-year post, but incumbents usually stay at least two years.

Bottrill did not name any specific focus, but this is a largely honorific post, and so not much is expected.

Non-Asians, working in or out of the region, are usually selected for this post because a Singaporean might have trouble being accepted by a Malaysian, a Taiwanese by a Chinese, and so on. Harmony in the travel business in Asia can be selective.

-Bernadette Romulo-Puyat moved from agriculture to become the Philippines equivalent to ministry of tourism. She succeeded Wanda Tulfo Teo, who resigned following a controversy after a US$1.2mn (P60mn) ad contract was awarded to a TV show hosted by two of her brothers.

 

 

[] Life/death.

Wang Jian, 57, chairman and co-founder of The China-based group HNAG*, died in France in July following an accidental fall.

Wang was not the person most people associate with HNA. That is Chen Feng, the public face of what is a secret company. Indeed, Chen is also described as co-founder and chairman. That would mean two chairmen; sometimes the term ‘co-chairman’ was used.

Before HNA, Wang worked with CAAC, the Civil Aviation Administration of China, when it was everything in aviation in China – including the country’s only operating airline. His connections helped HNA overcome the government-announced (via CAAC) structure of airlines in China to replace CAAC. HNA was not one of them (there were six, of which only three are operating today – Air China, China Eastern, China Southern), but nevertheless that did not stop HNA from being created and then expanding.

As with many operations in China, in the last 5-10 years, HNA expanded too fast and into too many different areas (geographical and type) – even if most were in the travel business. We seemed to be alone in writing that HNA’s expansion made no synergetic sense, and time would tell if it was to become a financial success. Most other reports – not just in China but outside – were fawning; HNA could do no wrong.

About profitability, time did tell, and for the past two years HNA has been unravelling much of its earlier expansion – notably, investments into Hilton Hotels, Radisson Hotels, Brazil’s Azul Airline.

It is not clear whether Chen, Wang, or both were responsible for these massive mis-investments. In the absence of evidence, we would think Chen – as Wang was important particularly for his political connections in Beijing, still a central part in business life in China.

A replacement for Wang was not needed. What is probably needed in a strong corporate position is a financial expert. But also, to handle the fallout from its mis-investments, someone like Wang to handle relations with CAAC and the political leaders in Beijing.

There are many unexplained matters concerning HNAG, which need to be noted in any report on the company. Firstly the changes (following our policy, mainly leaders) announced after Wang’s death:

-Xiangdong (usually known as Adam) Tan to chairman of HNA International (HNAI) replacing Wang Jian. But Tan also kept his jobs as vice-chairman and CEO of HNAG. In other companies we would therefore presume that those other jobs would be filled by other people later. But this is China, where ‘China-watching’ is still a skill needed to try to guess what is ‘really’ happening. As HNAG has expanded internationally, the obfuscation is easier to observe – if that is not an oxymoron.

-Chao (Dennis) Chen chief-investment-officer of HNAG replacing Shuang (James) Wang, and also named executive-chairman of HNAI.

Guang Yang stepped down as president of HNAG North America and as a trustee of the Hainan Cihang Charity Foundation, listed as an (important) owner of HNAG, see below.

-At HNAG’s Swissport, Ling Zhang to chairman, Xiaofeng (DanielChen vice-chairman.

The only comment from Chen Feng – now alone as chairman of HNAG – that might be significant was that he said the new team would help “… build a stronger, more focused [HNAG].”

Chen’s comment would appear to indicate that the acquisition push was driven by Wang, but HNAG has always presented Chen as the group’s driver. Is this comment a way to avoid loss of face for Chen rather than admitting much of its expansion was ill-advised?

Following are some facts concerning HNAG and HNAI:

-According to currently-known data, New York-based Hainan Cihang Charity Foundation owns 29.5% of HNAG, with China-based Hainan Province Cihang Foundation owning 22.75%.

-According to the Washington Post, Guo Wengui, an apparently-wealthy Chinese businessman who lives in self-imposed exile in the US, alleged that HNA has secret financial ties to top China Communist Party officials. HNA denied Guo’s claims and sued him in New York for defamation.

Before mid-2018, Guan Jun, until then a little-known investor, had been HNA’s biggest shareholder, with 29%, according to filings in China in late 2016. He was holding that on behalf of the company and its leadership, Bloomberg News reported.

HNA reorganised its ownership structure in early-2017 and Guan distributed most of his holdings to five individuals, who then donated the shares to HNA’s Cihang foundation. Guan donated his remaining stake, about 4.4%, to the charity as well.

Among the biggest remaining mysteries: Why did HNA executives place their shares with Guan in the first place? And what to make of the unproven allegations from Guo, shared on social media from his exile in New York, that seek to tie HNA’s acquisitions to corruption among Chinese leaders and their family members?

-Hainan Cihang Charity Foundation was formed in New York in December 2016, and owns 29.5% of HNA. In 2016, the Foundation reported the identity of its three directors – Adam Tan, now HNAG chairman; Chen Guoqing, brother of HNA co-founder Chen; and Guang Yang, who was then CEO of HNA Capital International, and who has now left HNAG – although HNAG says only that he has left as trustee, but says nothing about ownership.

-Little is known about how the charities are managed and how votes are cast, though the company says its donations have reached billions of dollars.

-HNAG has said it plans to update its ownership status annually and that the executives plan to donate all their shares to the charities should they resign or die. Eventually, HNAG expects the foundations to own 100% of the group.

-Some figures differ from available data as recently as late 2017, when corporate filings showed that Guan Jun owned that 29% via two holding companies. Guan is no longer listed in HNA’s statements. Little is known about him. Adam Tan has said he is just a Chinese businessman and Chen told a newspaper in Hong Kong that Guan was not a significant shareholder as he owns only a “tiny” share of the company. Yet at the time, corporate filings showed Guan owned a bigger share of HNAG than Chen and Tan combined. After this, HNAG said Guan had donated his shares to Cihang.

*Notes: HNA was originally a mis-acronym for Hainan Airlines; now a no-meaning corporate name for a Hainan-based conglomerate. We use ‘HNAG’ when covering the group.

 

-Others.

Aegean founder Theodoros Vassilakis died. Aegean began flying in 1999 and in 2013 bought Olympic Air, which had been Greece’s main airline.

 

 

[] Words (paraphrased).

-Luis Maroto CEO Amadeus.

All our acquisitions are significant in some way and they’ve allowed us to advance our business objectives.

Navitaire was the biggest, and important to allow us to get involved in the no-frills-airline segment. Newmarket was important as it opened new parts of the hospitality business – enabling us to broaden our portfolio.

It is important to understand that hospitality is completely different from airlines, and so we have to adapt and deliver on hoteliers’ specific needs. We do this with our Hospitality Platform.

-Sonia Cheng, CEO Rosewood Hotels.

We were one of the first to open a 5-star hotel in China. Her family’s New World group was not one of the first non-China groups to develop hotels in China. First, all in Beijing, were Peninsula (with the Jianguo hotel), Sheraton (Great Wall), Holiday Inn (Lido).

 

 

The Fox. Remember, I’m an industry expert in the parallel world.

*Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.

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