By Anton Ambrose
CHANGE will do you good, the single that catapulted Sheryl Crow to fame and changed her life forever may also be the best advice for airlines figuring out what’s in store post Covid-19 and how to survive in that world.
For decades, the airline industry has stubbornly brushed off calls to change. We have survived SARS, MERS, 9/11, the crisis of 2008 and everything that’s been thrown at us. “We will survive this too” has been the defiant cry coming out of Montreal, where the International Air Transport Association (IATA), the body which represents some 290 airlines or roughly 82% of global total air traffic, is headquartered.
If anything, we should applaud IATA for being resolute in the face of what is arguably the industry’s strongest headwind post World War II. Some may call it being in denial or even delusional.
The pandemic is a wake-up call to everyone in the airline industry. It remains one of the last remaining few that has not been disrupted. In turbulent times, innovation gains traction. The business needs to be disruptive and innovative with the purpose of being simple, unique and efficient across all areas of its business.
Once the world recovers from this pandemic, we are destined to see the impact technology has on our lives and the dramatic changes in the way we work, travel and play. Afterall, Airbnb, Uber, WhatsApp and Slack were founded during the last recession.
Data the fuel of the new economy
Situations like the one we find ourselves in make big tech stronger than ever. Given the amount of data an airline collects, it befuddles one to think it is one of the last remaining few industries that hasn’t embraced data. The faster airlines embrace data as the fuel that drives the next boom, the better it would be for them and the industry.
Covid-19 precipitated the largest work-from-home experiment in history with video-conferencing tools emerging as the biggest winner. Almost overnight words like Zoom and Hangout became part of the corporate lexicon and it’s no surprise that at close on April 8, Zoom has a working capital of US$31.73 bil versus the combined value of Hilton (US$18.26 bil), American Airlines (US$7.91 bil) and Expedia (US$4.35 bil) which stood at US$30.52 bil.
The biggest loser? You guessed it, airlines. Things could get worse if airlines continue to resist calls to change.
Business travel will experience change as businesses and executives get used to meetings over Zoom, Hangout and no longer see the need to travel thousands of miles and spend an equal amount of money for a two-hour meeting.
Similarly with long-haul travel. Not many will want to travel long distances until all traces of this pandemic are etched in the annals of history and becomes a distant memory. Then, there’s social distancing and the paranoia of being confined in a metal tube with hundreds of total strangers for long periods of time.
There’s opportunity in every difficulty
What the industry needs now is a plan (any plan) on how to leverage these opportunities and navigate through its current turbulence. What it does not not need is soundbites or empty rhetoric. Unprecedented times call for innovative measures.
Covid-19 has shown us the potential the logistics industry has on the airline business. The logistics industry was worth US$10.32 bil in 2017 and it is estimated to grow to US$12.68 bil by 2023 with a CAGR of 3.49% between 2017 and 2023. Those numbers are expected to increase significantly following the pandemic. As e-commerce grows, total addressable markets will also grow and therein lie opportunities for the airline industry.
The faster airlines realise it’s not just the passenger business that can fuel the bottom line, the better it is for them and for the taxpayer. No private-owned airline should be bailed out with taxpayers’ money.
Taxpayers’ money should be used on people, not to bail out airlines or any corporation. Running to governments for a bailout or loan is not a plan. It’s an easy way out. How the airlines overcomes this tailwind WITHOUT big daddy coming to its rescue will tell you volumes of its real state of being and how it’s being run.
While knowledge of the industry will keep it connected with its guests and customers, innovation is key to drive the airline and the industry forward. The sooner airlines and airline boards realise this, the better it will be for their survival and its position in that new world.
Otherwise, airline executives will have to seek set-offs, sponsorship or tee-time with people in the corridors of power to survive until the next crisis comes calling. — April 9, 2020
Anton Ambrose is a former senior airline executive
