AVIATION: Recovery after COVID..how?

AVIATION DIGEST | JARED KALERA | As we discuss the recovery process of the aviation industry after COVID-19, we need to have in mind what the pandemic has done to Aviation and the different sectors of aviation business.

In Aviation we have passenger – both Business and leisure travel,  then cargo – corporate/ private and military. As far as it goes, Cargo services have had it going.

But with thousands of crafts around the world grounded and some airlines crumbling, how will recovery look like?

First we should remember that aviation is a business of marginal profit and requires top notch skills to get the milk out of the sophisticated cow. Due to the immense expenses involved in running the business ,it becomes hard to break even. Unnecessary self aggrandizement of top executives at the deprivation of an airline  will only debilitate the situation.

Secondly we need to know that most travellers are leisure flyers and thus  will not travel because they have not been making money to save for those tickets. The tourist resorts in the meantime have been the last places to be opened ,hence travel by them is just catching up.

Business travellers will however move but also on a small scale because the world has become a small community with technology allowing meetings by Skype , zoom , conference calls, remote workstations. Distribution chains and networks or Virtual teamwork, rendering travel an unnecessary expense. Even if the Business people travelled most likely to revamp their businesses after corona, they will not fly the extravagant First or business classes offered by airlines. They  travel out of absolute necessity. Therefore the Business lounges which bring good revenue to airlines will largely remain empty for the time being.

The other factor is the difference between Long Haul Narrow Vs Long Haul Wide Body crafts. Examples of the former being the A320s,737s and Bombardier models and the latter being the A380s,A350s,A340s, Boeing 747s,777 and 787s.

Because countries had closed their boarders, inter state travels have been very low rendering the wide body crafts bad for Business in the interim. These wide body crafts make good profits for airlines if they fill up . Smaller point to point crafts have been  the way to go for airlines initially because internal and regional travel will commence. However there is a catch: Airlines must put good incentives and models to attract scared passengers. Trips no more than 500 kilometers are  driven by many in their cars.

Airlines during the lockdown period have had to strategize and restructure their business models to look at tertiary Airports and copy low cost airline models. Price sensitive leisure travellers have to be convinced.

As it transpires ,with the Oil prices dangerously rising internationally airlines find themselves between a rock and a hard place ,trying to lure passengers while keeping tickets high . This leads to airlines cutting on other expenses including  remuneration for personnel.

Airline managers have history to learn from. The 9/11, SARS, 2008 Economic Crash, and the 737 Max events all have learning experiences that can guide them. If an Airline places it’s attention on Shareholder and Equity values instead of  Comfort of Customers and employees, then their energies  will be misplaced. They should bring together managers, unions, and employees to have one common goal.

A wait and see attitude is as dangerous. While planes are grounded, it’s the time to strategize on survivability, changing the mission, operations, sales approach, and convincing the customers to the new offers and plans.

Finally , government bailouts and loan acquisition may be the last resort. Not all governments are ready to give bailouts to struggling airlines. The same applies to banks which will most likely dread granting loans in such uncertain times.

Bailouts and loans will not rescue an airline if no proper models and pay back plans which reflect the limitations of new plans are properly thought out.

The good news is that the market has grudgingly begun to look up with many airlines ordering for new crafts including taking the wide body A380s and the good old Queen of the skies ,the 747s  out of retirement.

It’s all a complicated ball game that has many inter dependent factors . In the meantime , airline CEOs have had to scratch their heads in the face of the widest shutdown of the world in as many years not made any better by the war in Ukraine which has fundamentally  affected the globe.

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Jared is an aviation researcher and trained motor rally safety official. He is the General Manager Legal Compliance and Human Resource, Muttico Technical Services Ltd and co director at Amputee Self Help Network Uganda.