There’s no other way to say it: The past 15 months have been sheer hell.
And, while parts of the world, and parts of the world’s air transport industry, have begun to emerge into the bright warm light of both health and business recovery, it’s essential to acknowledge that not every region or country, and thus not every organization that works in or with the industry, has begun that process. Business recovery will occur at an uneven pace.
But, business recovery will occur. And it is imperative that the air transport industry be prepared to benefit as it occurs.
On the commercial side, where my company, Atmosphere Research Group, focuses most of its research and work, we see signs of preparedness. From research we conducted in Q2 among 59 airline commercial (marketing, distribution, digital commerce, product, pricing/revenue management) and technology professionals at network airlines, LCCs, and ULCCs, we learned:
- Change is certain. Almost all – 97% – agree that the Covid pandemic will fundamentally change how their airline does business during the next five years. Change won’t be limited to airlines. Eighty-nine percent believe the pandemic will impact their passengers’ behaviors during the next five years as well. Of course, this begs the question, should airlines change first, or wait to see how their passengers’ behaviors evolve?
- Recovery outlooks vary. When asked when they expect their gross passenger revenues will return to pre-Covid, 2019 levels, airlines’ perspectives varied greatly. US-based carriers were the most confident; 40% believe 2022 will be the magic year when revenues return to 2019 levels, and 37% expect revenues to return to pre-Covid levels by 2023 (only four percent expect to return to pre-Covid revenues this year). European-based carriers expect recovery to take longer. While 23% of the professionals working at European airlines expect revenues to return to “normal” in 2022, one in four don’t expect that to occur until 2023, and 27% don’t anticipate being back at pre-Covid revenue until 2024.The discrepancy between US and European airlines is understandable, given the different pace of vaccinations taking place in the two regions and how varied the recovery is occurring across Europe. This is reinforced by the differing levels of uncertainty between the regions. Twelve percent of the US-based airline professionals in our survey were uncertain when their carriers will return to pre-Covid revenues, compared to 22% of those working at airlines in Europe.
- Streamlined organizations are good. The pandemic’s toll on industry employment was devastating. IATA has estimated that airlines worldwide cut more than 1,000,000 jobs between 2019 and 2020. Those cuts occurred across entire organizations, including management, where some carriers cut 20% or more of their management ranks. The human toll of this is terrible. But there are also upsides. Silos between departments were knocked down. Managers and executives were forced to act with focus. Airline professionals like this. More than four in five view working in smaller organizations as positive. Almost as many – 76% – agree that working in smaller organizations places greater focus on action rather than deliberation. And 61% say that streamlined, less-siloed organizations have led to greater collaboration between departments.
Thankfully, we are now in a time when many airlines are engaged in business recovery plans (a handful have even told me they’ve begun working on “post-recovery” strategies). How well-prepared are airlines to benefit from the forthcoming business recovery? Some clues from our Q2 2021 industry study:
- Airlines say innovation matters more now than pre-Covid. At various World Aviation Festivals and other industry events, we have heard airlines discuss the importance of innovation, sometimes with great passion. Before Covid, 53% of airlines viewed innovation as somewhat or very important to their commercial activities. Post-Covid, that surges to 86%. This is encouraging and impressive. Talk, however, is cheap. If there’s no genuine commitment to turn this from sentiment into action, then we have nothing more than empty statements.
- Planning, pricing, and retailing lead planned commercial IT investments. Demand forecasting (91%), pricing/revenue management (88%), customer/commercial data (82%), merchandising/retailing (81%) and contactless/touchless technologies (80%) were the most-cited commercial IT applications airline professionals expect their airlines to prioritize during the next five years. All are logical areas to concentrate on. Three – pricing/revenue management, customer/commercial data, and merchandising/retailing – are somewhat inter-related. None of these choices surprise us; if anything, we are reassured airlines recognize the importance to invest in improved pricing/RM tools, their data, and better retailing solutions. All can help airlines better distinguish themselves from one another in traveler’s minds, improve their customer value propositions, and strengthen their financial results.
- Budget and headcount are potential chokepoints. The two perennial party-poopers, inadequate budget and inadequate headcount, lead airline professionals’ concerns about not being able to achieve their objectives. In 2021 – and likely for 2022 as well – these concerns are legitimate, given the financial devastation that affected the industry during pandemic. As airlines rebuild, financial and human capital will be precious commodities. Does this mean no money will be available for new projects and programs, or hiring the people needed to do the work? Of course not. However, smaller-scale incremental, tactical enhancements are acceptable achievements now, while we that recovery will enable more generous funding and, thus, more substantial progress and innovation starting in 2022. And, as economies reopen, the competition for talent will increase. Will workers want to return to, or join, airlines or will jobs in other industries be more appealing?
Even before the pandemic occurred, the industry trailed many other consumer-facing service industries in areas such as digital commerce, customer loyalty, and personalization. Few had – and few currently have – compelling retailing experiences. That wasn’t acceptable before, and it’s not acceptable now. Fortunately, the industry is very “present” right now. There is a tangibly greater recognition now, compared to 2019 and before, across the industry that improvement, progress, and action are essential. During the next few months, ahead of the World Aviation Festival in London this coming December, I’ll chronicle some of the industry’s most critical commercial challenges and the actions that carriers, airports, and others are taking to ensure success and a return to sustained profitability. We hope you’ll join us. If you have ideas for topics, or would like to share how your airline or airport are working to succeed, I invite you to get in touch.