Discussion with Eftichis Vassilakis, Vlassis Georgatos & Vassilis Fourlis
Continuing its webinar series which aims to shed light on the impact of the Coronavirus crisis, Endeavor Greece invited Eftichios Vassilakis, Chairman of Aegean Airlines and member of the Board of Directors of Endeavor Greece, Vlassis Georgatos, Managing Director of Gregory’s, and Vassilis Fourlis, Chairman of Fourlis S.A., on a web-based discussion called “Rethink: Leadership in Turbulent Times,” which was moderated by journalist Pavlos Tsimas, on Thursday, April 30, 2020.
A Crisis Like No Other
Pavlos Tsimas opened the discussion by making an interesting reference to Carmen Reinhart and Kenneth Rogoff’s best-seller “This Time Is Different: Eight Centuries of Financial Folly” which was published in the aftermath of the previous great global crisis of 2008. The title of the book confronts with irony all those experts who again and again talk about “crises without precedent,” while in fact, if we resort to the study of history, we come up with the same repetitive patterns.
But what if this time things are actually different, Mr. Tsimas wondered. After all, even Mr. Rogoff remarked on the new crisis by saying that “the ongoing short-term collapse of the global production is likely to be equal to or surpass any other recession that took place in the last 150 years.” It is actually difficult to bring to mind a past crisis in which the demand collapsed overnight, while at the same time the offer was disrupted, and economies throughout the world “froze.” It is therefore hard to predict the outcome of the crisis in an environment of extreme uncertainty. Mr. Rogoff compared what we are going through with the invasion of aliens on earth. So unprecedented are the conditions of this crisis.
In any case, we somehow have to move forward in this unprecedented environment, in which the quality and characteristics of leaders prove to be of extreme importance at the level of politics, but in the world of business as well. The ability to make quick decisions without “manual,” which ultimately prove to be correct is crucial. Mr. Tsimas asked the participants to talk about how they experienced this period, what decisions they were called to make, what they think and what they expect in the coming months.
When the Red Light Went On
Vassilis Fourlis shared with us some fundamental characteristics of his group, which is based on 2 retail concepts, with 160 retail stores and more than 4,000 employees – some of them being in the “front line” of the stores and the rest in the company’s headquarters or in the logistics section. “In just one week all the retail stores in all countries closed, and the monthly expenses of the Group amount to 15 million euros if we do not take the state subsidies into account. We had to retain our employees’ trust and to pass on the message that all those people have a future. This was just the beginning of the adventure.”
Vlassis Georgatos also provided some information on “Gregory’s” network, which includes 350 stores, most of them situated in Greece, but they have also developed ventures in Romania, Germany and Cyprus, and some of them are within airports. “On a Monday in March, we found out that more than 80% of our customers disappeared. The bet for us was different. As long as ‘We Stay Home’ was running, our own motto was ‘We Stay Open.’” On the one hand, our stores were not expected to close, and on the other hand, we thought that it was important to keep them going for our few remaining customers, and for those people whose daily lives changed dramatically. We wanted to pass the message on to our employees that we had to stay calm and be on the alert. With respect to the franchisees, we had to help them overcome their fears, to persuade them to remain on business so that they could face the situation calmly.” Then there were other groups we had to communicate with and coordinate our action: suppliers, property owners and so on.
“The most difficult part is to persuade everyone to do something for which you yourself have already doubts about being the right thing.” Vlassis Georgatos
The case of Aegean Airlines is completely different from the previous ones. As Eftichios Vassilakis explained, “we had to stay open and had no customers whatsoever.” Since February 24, when the first Coronavirus case was confirmed in Italy, the airlines were on the alarm for the of event of coronavirus cases on the airplanes. We changed the cleaning process and the service in a way that corresponds to the new conditions. “Already in the first weeks, our operation had been affected due to the public health risk of the passengers and the aviation workers.”
In the first month, Mr. Vassilakis stated that their goal was to keep on operating safely, and that was where we placed emphasis on, without realizing the upcoming costs. Then, the best part of our people went home, although there is still quite a number of employees that support our call center, take care of cancellations and changes, and work on mandatory flights (repatriation flights, transportation of medical and health equipment, meeting internal needs etc.). With respect to the next day, Mr. Vassilakis highlighted that it is not yet clear, because the first stage of the crisis, which seems to have come to an end with the removal of the measures taken for the best part of the economy, seems to last longer for Aegean.
As far as “when the first red light went on,” he stated that we face a deep and long crisis which is difficult to resolve. The three entrepreneurs admitted that due to the vast uncertainty generated at the beginning of the crisis and still present at the moment, their perspectives changed radically. “I am not embarrassed to admit that the CEO of the company and I were making forecasts that proved to be wrong, not with regard to health issues, but concerning the recovery speed,” Mr. Vassilakis said. “The fact that our retail stores would be closed for 10 weeks was past our imagination up to the second week of March. Every week we came up with a new estimate. The uncertainty is still dominant in our field,” Mr. Fourlis remarked. From my point of view, Mr. Georgatos admitted that after February, which was a very good month, and the first two dynamic weeks of March, a decrease of 80% was something they could not imagine. “This crisis came from the other side of beyond. It came so fast and abruptly, and we were not prepared at all.”
Table-top Exercises
When asked which are the dilemmas they have faced so far and what are the most difficult decisions they had to make, the human resource management proved to be the most critical factor for all three of them.
“At the beginning one cannot do much, other than experience the storm. For us the most critical question to be answered was whether we should keep our stores open.” According to Mr. Georgatos, there were two major factors to be taken into consideration; on the one hand, the likelihood that the employees and the customers would be exposed to any health-related risks, and on the other hand, the fact that every day that the Gregory’s stores were open, the financial impact was worse than the one they would face if the stores were closed. “We had to adjust constantly to the new reality.”
“One lesson we need to learn from this crisis is that we should try to have champions both at the state and business level.” Vassilis Fourlis
Mr. Fourlis reminded us that in case of his own business there had been no dilemmas in terms of its operation. “They shut us down in all countries,” he remarked. However, they had to make other decisions which had to do with the business continuity and cash flow. “We had ongoing financial obligations and zero revenues. This means that we had to make some very difficult decisions on who to pay, who not to pay, regarding the suppliers, the rent etc.” With respect to the company’s employee expenses, there has been a state aid, but the next major expense for a group such as Fourlis S.A. is the rents, and this fact troubles the leadership team to a great extent. “Apart from the state regulations, it is a matter of the reality of the new market and how we decide to go on.” He pointed out that it is in tough times that you only know who is truly at your side. “It is when things get tough that you find out who your true partners are.”
At this point, Mr. Tsimas raised the question of the partners and human resource management. In case of Aegean, Mr. Vassilakis pointed out that at the beginning of the crisis the most difficult thing was to persuade the cabin crews and the employees to go to work, to tell them they would be safe if they adhered to the safety procedures. “To be able to say such a thing and be truthful, we had to spend at least 2 hours every day at our operational center,” overcoming the fear of a potential health risk. “In the early days, such a thing seemed to be rather simple, but as time went by, it became more and more difficult,” he recollects. Another difficult equation was which flights should be canceled and which should be realized and this issue should be resolved every time again and again at an operational level. “Due to this situation we did not have the chance to deal with the financial issues,” and the cash reserves available gave us a sense of safety.
“At the beginning we had to communicate with all our people to tell them to be careful, and that we would be there and we would be open,” Mr. Georgatos brings back in mind, a process that would require a lot of one-to-one conversations with the franchisees, in order to persuade them to follow the choices we made. “After that, there followed a time when we had several doubts about the strategy we chose. “The most difficult part is to persuade everyone to do something for which you yourself have already doubts about being the right thing,” he admits. “When you feel sure about something, it is easier to convince the others. What happens when you have doubts? How could you convince his own people?” It is a lonely choice, because you cannot share your doubts with anyone. “If you share your thoughts, your effort to persuade others weakens considerably.”
“3,200 out of our 4,000 employees had to stay at home so it was important to keep their moral high and to persuade them that they have a future with us,” Mr. Fourlis pointed out. “We made good use of our internal network to give out information about the pandemic of COVID-19, about our products, our in-house trainings, and messages to keep our personnel calm and optimistic.” The employees working at the logistics and the e-commerce sections kept on working, most of them remotely. “We realized how productive we are from home. It is one of the new perceptions we gained from this adventure.”
The Next Steps
When asked by Mr. Tsimas about the extent to which they have noticed changes in their business model in the aftermath of the crisis, Mr. Fourlis admitted this is a very important factor for his leadership team. “We have to realize which changes are temporary and which will acquire a more permanent imprint on the people’s behavior. We need to single out the short-term from the long-term changes because our business model should respond to the latter ones. There is quite a number of people who did not trust themselves in the past to buy anything online, but now they do it, and this is the evident prospect for a retail business. Our answer to this is that our business model should accelerate and perform the changes it should have already done. It is a very important issue for us to regain the consumers’ trust, and most importantly the new consumers’ trust. The next day is our greatest bet.”
Mr. Vassilakis reminded us that the digital dimension, which has suddenly gained pace because of the current crisis, was already implemented in case of Aegean, as it covered around 60-70% of the distribution of its product. Within the airport more procedures can be potentially carried out digitally, in the on-line check-in and in the baggage procedures, but we are not in need of a new business model. “Traveling for pleasure will still depend on whether someone wishes to reach a specific destination. Traveling for business is more likely to change in the long run.” At the same time, two very important aspects of the public health emergency is the duration of the crisis and if there will be another one. In such a case, traveling, especially traveling for business, will be most affected. “For the time being, in the aviation industry there will be no major changes, other than the fact that there will be fewer airlines, much more efficient in terms of the cost.”
With respect to the traveling protocols, Mr. Vassilakis explained that the difficulty does not lie in the air travel itself. “What is of major significance is the criteria that one country accepts travelers from another country and this is the basic protocol that has to be established,” which is due to be decided by the states and the sanitary services. “Let’s try to give the sanitary services the necessary time to work out how our daily lives will get back to normal so that we can move forward. A reasonable protocol ensures that the tourist wants to go where they go, it must not affect the attractiveness of the destination. Besides, the experience of reaching a destination is the product. The experience is not the airplane; the airplane is the necessary evil. It is the experience we have to protect and safeguard. Maybe we need some more time, let’s give the chance to the sanitary services to take action.”
“In the aviation industry, for the time being, there will be no major changes, other than the fact that there will be fewer airlines, much more efficient in terms of the cost,” Eftichios Vassilakis.
Mr. Georgatos thinks that the employee and the business flexibility will be accelerated. “Remote working has some advantages and it is here to stay. There is also no turning back for the part of technology and its penetration in the organization. It is happening in a violent way, but one way or another it is where we would resort to. By the time the public health risk is out of the way, most companies, more or less, will have changed the way they work, the way they control their products and procedures, and the contact between them and their clients will have changed as well.” With regard to the lessons they learned from the current crisis so far, Mr. Georgatos pointed out that “the first and foremost is that no matter how many plans you make, no matter if you feel that you have met all the requirements for ensuring the health and the liveliness of our company, you can never be sure of what is awaiting you on the next day. What we are going through has so vast implications, that it ceases to be a problem since it is global.”
From his point of view, Mr. Vassilakis pointed out that it is very early to talk about conclusions made and lessons learned at this first stage of the marathon. He made a specific reference to the extent of differentiation of the business risk, which is much broader than what we used to think in the past. “We thought that we could move 20% to one or to the other side, but in this occasion we moved from the penthouse to the ground floor in just one month.” However, this time in Greece, we seemed to have made a good start and we are considered to be among the “good students” in the classroom. However, as Mr. Vassilakis stated, “if the problems grows beyond a certain extent, then both the good and the bad student fall off the cliff.”
In any case, in spite of the uncertainty, all companies need to plan their future on the grounds of some fundamental forecasts. Mr. Tsimas asked what these forecasts are and what the participants expect from the next day in their business industry. Mr. Vassilakis stated that it is crucial to ensure that Aegean will be present on the next day despite the status of operating restrictions. “We are working on extending the time period during which we can operate without customers. The issue here is not to betray things which in the future will cost us a great deal, either in relation to the employees, to the customers or to our suppliers. To secure the necessary runway in an extremely difficult environment. I cannot claim that it is the easiest of all times, but at least it is not boring. Keeping the balance is difficult, every choice is crucial with regard to our partners both inside and outside the company. In our case, there is a third factor as well, and this is our relation to the state.”
In the question of what the demand of the airline company towards the state is at this juncture, Mr. Vassilakis stated how proud he was of Aegean Airlines, as it has managed to make Greece free from a company that used to cost a lot of money to the state, and it has evolved into a company that offers. However, due to the special nature of their business, the public health emergency has had a huge cost, and as a result, airlines all over the world accept or demand a state aid. Although there is a European framework, the rules and the potential to provide an aid is different from state to state, and this applies to a number of things, among which unemployment benefits and the kind of aid provided to the airlines. “The difficulty for Greece, in the European framework, is to bring together the rules and its own potential, and be competitive on these terms.”
According to Mr. Fourlis, the next day for us is namely Monday, May 4 and it will depend on the levels of the consumption, as a decrease in the GDP entails a decrease in consumption. At the same time, there are questions to be answered such as how long the working hours will be, what our attitude towards the property owners or the suppliers are. “We rely on macroeconomic projections that change from week to week. We have ensured our cash flow in case of the unfavorable scenario, but it is difficult.”
Mr. Georgatos placed emphasis on the point of development of a company when the crisis broke out. “It is a factor that will play a significant role on the next day. With respect to the restaurants and the cafés, the length of the lockdown along with the different way of operation after the lockdown will have a great impact. We have to focus on the next day when the fear is eliminated. This will be the result of the length and of the imprint that the crisis has left on our behavior and on the economy. We might get used to purchasing from the internet, but we might prefer to eat at home, because we could no longer afford eating out. Food and drink will be closely intertwined with various aspects of our lives, but what is going to change is the channels that serve this need. People have started to cook more at home, so it is a matter of how much our behaviors are going to change.
Greece: A Country of Quality Champions
As far as the wider consequences on the economy are concerned, Mr. Vassilakis shared his view that this time the size of the company does not play an important role. “In the aviation industry, it does not play a role. This does not mean that in Greece the number of companies should not decrease. In tourism, with regard to the accommodation services, there is a great deal of segmentation. Small companies should become less and better, the medium-size companies need to be less and better as well, and big companies should grow bigger. Greece is dependent on tourism and dependency is not in favor of the economy. I have never supported the concentration on one, two or three sectors. Dispersion is preferable, but it is not going to be easy and it requires time.”
With regard to the country as a whole, Mr. Georgatos stated that it is unlikely to weather such a major crisis without any changes at the business map, and as a consequence, we are about to experience quite a few of them. “There are opportunities, and there is a state that astonishes us in its effort to implement some necessary practices, something that was absent in the past. The state facilitates, listens and adjusts, affecting the companies and people’s everyday lives positively. There are some hopeful developments that could partly counterbalance the impact of what is happening.”
This crisis reaffirms our belief that our country is in need of quality champions, Mr. Fourlis said. “I believe that if we want Greece to be competitive in the global economic environment, then we are in need of big companies. A lesson we should learn from the current crisis is that we have to try to have champions on a state and business level.”
“We have realized how productive we are when working from home. It is one of the new things we have acquired from this adventure.” Vassilis Fourlis
Regarding the employment issues, Mr. Vassilakis pointed out that this stage of returning to normal life has not begun yet for Aegean. “In order to go back to our previous level we will need 2-3 years. Obviously, the toughest measure was to dismiss employees. We hope that a comprehensive employment support program will be implemented for all the people in need and for those of us who have so many employees and would like to provide them with all the possible help. Dismissing an employee is always the hardest choice.” “Much will depend on the top-line. I would not like and, in fact, I’m in no position to talk about the measures we will take, because everything depends on how things evolve. However, we are certain of one thing, and that is that 90% of our operating costs are salaries and rents,” Mr. Fourlis stated.
According to Mr. Georgatos, “in any case, the boat has to cross over bearing the least possible losses,” and although the state strategy is very important, it should be focused on subsidizing employment and not unemployment. “From then on, whether you resort to a certain number of dismissals or to across-the-board cuts, it is a secondary issue. It is certain, however, that from the moment someone comes to that, they have to act in a way contrary to their nature. Someone becomes an entrepreneur because they tend to look into the positive issues, and downplay the negatives.” The moment the entrepreneur has to tackle this kind of issues, they play a role which is contrary to their optimistic nature.
Concluding the discussion, Mr. Vassilakis looked positively at the future and talked about his main positive occupation these days: “the only thing that brings me joy on the professional level is that we came to the conclusion that we have to choose a group of people and accelerate their development. To choose young people and bring them forward. These people we will remind us what creation is and we will win back our dynamic pace.”