The Airline Industry is Dead. Long Live the Airline Industry
By Peter Evans, CEO and Founder of Air Pool.
To suggest that the COVID-19 pandemic has killed the airline industry may seem an extreme statement. Of course, the airline industry is not dead but, like a change of monarch, it is not going to be the same going forward as it has been historically.
Industry ‘experts’ have been professing estimations of when the industry will return to “pre-COVID levels”. What they really talk about is when they believe [hope] the industry will return to how it was. In my opinion, it never will.
Pre-COVID traffic levels will return indeed, they will be exceeded as population growth and ongoing globalisation support continuing, compounded growth. However, it is unlikely to be the same mix of traffic and the industry will change structurally. The last major shock event, 9-11, had a profound impact on the way we transit airports; this event - in concert with other influences - will have a fundamental impact on when, where and how people fly.
COVID has acted as a prism to focus attention on some of the changes but it is not the sole driver. Increasing concern for the environment and technology advances within and without aviation are aligning to influence a seismic shift. Governments are focused on climate change and supporting the development of new, clean flight technologies - which will only be a capable of operating in sub-regional and regional markets for at least a decade.
Meanwhile, Zoom, Teams and Google Chat have enabled remote working like never before and business has appreciated the potential and productivity advantages of working from home. Of course, hygiene has also become influential in travel choices.
Those within the airlines who have suspended their modus operandi and are primed ready to roll out the same legacy model will find it hard to survive or thrive. Those that are not the leading player in their markets will be exposed and will, likely, wither away eventually. A crisis like COVID presents challenges. But it also presents opportunities. Successful businesses will be thinking like start-ups, analysing the market as it stands, not as it was, and adapting schedules, networks and customer proposition to face the new order.
A number of themes are emerging:
• Greater use of much smaller, fuel efficient aircraft operating more direct point-to-point services
• More focus on value-based fare rather than cost-based fare structure
• Leisure travel becoming more significant and more resilient than business travel has been
• Blurring of the distinction between commercial airlines and business aviation
These changes will, I believe, give rise to a shift in travel behaviour.
In a recent LinkedIn article entitled Living at Work, Simon Talling-Smith Chief Commercial Office of Qatar Airways said “I do not subscribe to the view that remote working will kill business travel. New work-styles make business more efficient, driving economic growth and globalisation. That in turn is likely to create demand for business travel, even amongst the swelling ranks of the home-workers. Furthermore, as many professionals choose to spend more time away from the pressure of city life the need for improved connectivity between urban and countryside regions will grow as well”. He says shorter-thinner routes will become more prevalent, peak hours will change and there will be less reliance on HQ cities.
Bigger role for smaller airports
At the 2019 Routes Americas Conference - pre-COVID - respected author and speaker, Nawal Taneja, said “Smaller airports are going to play a much bigger role in the coming years thanks to aircraft technology and consumer preference”. He said four main forces would drive change: consumer preference, technological advances, the complexity of the industry today and new, disruptive competitors - like AirPool - will converge to realign the market. Remember, this was pre-COVID. COVID has simply accelerated some of the activities he refers to and therefore the pace of change.
I agree wholeheartedly with both Simon and Nawal.
We have already witnessed the wholesale disposal of large aircraft that underpinned the hub-based networks. The process will probably cascade down as more small, thin routes evolve and the strength of hub networks erodes. Like a cotton-bud, comfort at both ends [of the journey] will be more critical than the bit in between [the flight] and smaller airports are better placed to manage that.
Electrification will be a great enabler for change and some airlines, rightly so, are already assessing how to adopt these new ultra-short haul tools to fit into their strategy. The distinction between airlines and business aviation will be increasingly blurred. Collaborations between the ‘old’ industries can create value for both.
Airlines and bizav operators blend with new aircraft models
Aircraft like the Tecnam P2012 Traveller, Textron Sky Courier and, recently announced, 10-seat commuter-fit Pilatus PC-24 give airlines and bizav operators tools to start working on the ‘new’ industry ahead of the arrival of electrically powered aircraft that could exponentially grow market opportunities and deliver huge operating cost benefits.
COVID isn’t a death knell; it’s the sound of opportunity.
Peter Evans has over 35 years' commercial airline experience, including senior roles in a variety of start-up airlines in low-cost, full service, all-business class and subscription models.
He has led flight operations, scheduling, engineering, business development and strategy at airlines such as Virgin Atlantic, MyTravel, all business class Silverjet, Flyjet, and most recently Surf Air. He is a proponent of modern turboprop aircraft and future gen models.
Currently, he is CEO and founder of Air Pool (Resilient Aviation Issue 9) an innovative start up focused on providing regional connectivity through identifying communities currently ill-served by airline service or by time consuming and stressful surface transport. Typically, business aviation utilization averages 450 to 750 hours pa, versus 2,000 to 4,000 pa by commercial airlines, so Air Pool, on course for formal launch early next year, is confident it can gain access to the capacity required to operate these routes working closely with business aviation partners. http://www.air-pool.com.
BlueSky Business Aviation News | 19th November 2020 | Issue #582
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