THE BIGGEST CRISIS EVER

The global airline industry has been hit by a new virus and is going through its biggest crisis ever. Several airlines went into bankruptcy or voluntary administration and some may not survive. State owned airlines will get government financial support. The silver lining might be a „new normal“ in airline operations with several changes for the future.

Several governments have agreed to financially support their national or domestic airlines, in order to avoid bankruptcy, large scale unemployment and the decrease of the public domestic travel options and the deletion of the national transportation backbone. The global airline industry is hit by an unprecedented crisis which has almost completely grounded world passenger air travel. Airlines who were able to quickly convert their passenger aircraft to fit an air cargo operations are now ensuring the world supply chain and make new revenue from airfreight, in order to keep some cash flowing. At the moment, air cargo carrier and freight forwarder at mostly the only airline companies having aircraft up in the air. 

Airline CEO’s are doing everything possible, in order to protect as many airline employees as possible, while also consider how and when to restart their airline business. Unfortunately, nobody knows exactly when this new start will come. This uncertainty makes it difficult for the airline management to plan ahead. And to be clear, the main focus is managing cash flow during the crisis.

The aviation industry supports 65.5 million jobs around the world. Airlines are an important factor for country’s economies, trade and international connectivity. Domestic or leisure travel and commuting capabilities are vital for employees and the national GDP. Millions of global tax payers are working in the aviation industry and are employed from global airlines and airports. Airlines contribute to the nations GDP and tax treasury bottom line and are certainly very much system relevant and also very often national assets and pride. A world without airlines and travel is not imaginable and therefore we will have certainly airlines in the future, too.

Fortunately, many airlines are currently benefiting from huge financial government support and furloughed airline staff, pilots and cabin crew get a good portion of their salaries paid via national payment scheme and government aid, however without knowing how long the crisis will be all airlines look in an uncertain future.

One airline CEO has challenged the notion of state aid as inherently unfair and detrimental to pricing power for those carriers still standing on their own feet.

Most people recognize that furloughing is considered much more cost effective than laying off or firing staff, not only because of the quicker restart and recovery for a company and the economy, but also the fact that long term economic impact of 10-15% unemployment across 1st world countries, the longer term cost would be significantly higher for the Government.

However, the questions is: Will airlines get back to the earlier state of the industry or will the crisis stimulate airlines to create a „new normal“ in airline operations? A „new normal“ and therefore silver lining which will be positively influenced by current global crisis management and the related new measures, technologies, industry regulations, innovations and legal requirements?

THE CRISIS IS A DRIVER FOR CHANGE

Every crisis provides opportunities, because under the unique situation and pressure, decisions are sometimes possible and especially quickly necessary which were always „impossible“ or out-of-question during usual times. Human beings have a big energy and motivation to take quick decisions in very difficult and challenging times, because the crisis situation is vital and the pain is big. This is exactly the current crisis and the daily news are painful to read.

The German minister of Economy Peter Altmaier recently made an astonishing statement on 19 March 2020 when he said „the time for long debates and discussions are over, because the current and dramatic crisis requires important and quick decisions“. The health and safety of national citizens are important to every government. The same is true for every company and its employees. So for airlines and its employees and passengers.

Airlines are complex organizations who have mostly a very traditional and safety oriented thinking and a legacy from the good old times of flying. Safety is the main gene in their DNA. Change during standard times is a challenge, because processes are almost made in stone and involve plenty of stakeholders who have a different perspectives and interests. The agreement and implementation of an airline operations process takes time and nerves and once it‘s implemented it‘s untouched for years. The process is the process and every airline believes to have the best processes in places.

While working for an airline IT vendor and reading through Request For Proposals (RFP) for airline operations IT systems, I have been learning the fact that airlines mostly ask for the same and existing things decades over decades and evolutions are only marginal.

SUSTAINABILITY

Some months ago, airlines were put on the spot from green and climate activist and the topic of CO2 emission reduction and world travel was discussed on airline industry events.

The airline industry body lobbied that airlines only account for 2-3% of global CO2 emissions, however air travel got a negative perception in Scandinavian countries where people suddenly avoided to fly and took other transport means.

The global topic of CO2 emission reduction and environment and climate saving initiatives within the airline industry has been completely replaced from the current crisis, however some green activists and national governments are linking the amount of the state aid to sustainability requirements for the supported airlines.

Even in the USA and other countries, more and more people request to link state aid to sustainability requirements for airlines and airports. This will lead that airlines will only keep those aircraft in their shrinking fleet which are new and have a better fuel performance than old and noisy aircraft. The oil price from now will probably not stay at these low price points and go up, especially when the airlines restart to operate again. The state aid will be spend for many necessary costs items and fuel is one of the biggest at airlines.

PHYSICAL DISTANCE

The current physical distance requirements in many countries and on the ground have created ideas on how to implement the same distance in the airline industry under the new normal circumstances.

Some airlines have already decided to block middle seats or even entire seating rows for just one passenger. This has a big impact on load factors and the revenue of airlines and impact the bottom line. Low cost carriers (LCC) have usually a very high aircraft seat density with low seat pitches. Physical distance questions the entire LCC business model. The „new normal“ aircraft seating requirements will put an entire market segment under enormous cost pressure, because the current revenues will vanish and certainly increase ticket prices. The price of physical distance will be visible soon.

Physical distance will be also necessary at airports and affect ground operations and flight schedules. Aircraft boarding procedures will be different and longer and affect current tight aircraft turnaround times. Low cost carriers will have to rethink their current business model and cost basis completely.

Airport business is build on duty free and shops, real-estate revenues, landing and service fees. Less flights due to higher ticket prices and social distance means less passengers per flight and day and will affect the revenues of airports, too.

In the coming weeks, I'm going to touch

• Changes in Operations
• Pilot Shortage
• Pilots on demand
• Collaboration 2.0
• Operations Control Center
• Process Changes
• Digitization
• Digital Potential for Airlines
• Cost Savings
• Outlook

The "New Normal" in Airline Operations - Part 2 

https://www.linkedin.com/pulse/new-normal-airline-operations-part-2-daniel-stecher

Stay healthy and safe.

Best, Daniel

ABOUT THE AUTHOR

While visiting globally 121 airlines and their OCC's Daniel is exploring airline IT environments and processes. As Vice President and Head of Global Sales for Airline Operations he is responsible for global sales and business development of the brand new airline operations digital platform "iFlight". Daniel has more than 25 years of experience spanning over the logistics industry (e.g. courier, express, parcel, air cargo, airport ground handling, freight forwarder, cargo carriers, airlines) and has been traveling almost two million miles, in order to meet with industry experts and customers from the air cargo industry and airline business IT solutions industry.