Krishnan Menon, Wunderman Thompson's chief client officer, Asia Pacific, shares how Covid-19 can present growth opportunities for the aviation sector, urging airlines to evolve business models, revamp their fleet, and adopt hybrid models to build towards a more resilient tomorrow.
Back in February, a group of aviation journalists I follow began to compile a list of airlines who were cancelling operations or reducing capacity.
I started to keep track of the sheet, but gave up some weeks later when it all seemed quite pointless. The entire business of commercial passenger aviation was hurtling towards the ground like it would never recover, and airline operators and manufacturers were taking a beating like never before.
If you have ever flown through bad weather, you know that there is always brilliant sunshine and an endless blue sky somewhere beyond or above the storm, and you have a choice – keep climbing to it or turn back and wait until the good weather comes to you.
I think the industry should focus on fighting through the storm to find the sunshine. I am talking about growth. Yes, growth, even at a time like this.
But, unlike any other time in history, it will be growth driven by efficiency and will only be for those airlines who have the courage to radically transform into the most efficient version of themselves.
They can do this in three ways.
Business transformation
Growth in the post-Covid-19 travel industry will only go to ambitious brands who can transform their entire business with efficiency as the north star. Brands that win, will be those that that can innovate quickly to deliver a high-value experience in a low-contact environment to passengers right through consideration, research and booking phases of the customer experience journey and then again at the post-flight and repeat phases.
This means that the focus on rapid design and implementation of a seamless, connected and personalised travel experience through online, mobile and automated-offline will be the key differentiator between those that thrive and those that don’t survive after this crisis. Technology, platform and partner choices will make all the difference here.
Fleet transformation
The current crisis has ensured that the age of big, four-engine white elephants in the sky is at an end. Personally, I don’t think that’s a bad thing, especially with the A380. Though, I will miss the Boeing 747.
Airlines will now have to make the tough fleet choices that a lot of them have been avoiding. Belt-tightening and financial watchdogs will ensure that the aircraft chosen to keep flying will need to deliver operational and cost-efficiency. They will need to burn less fuel per hour with cleaner emissions, and provide operational flexibility so a company can swap the same aircraft type for medium-haul and long-haul routes to make flight crews more versatile and maintenance or ground handling more cost-effective.
The fleets will also, critically, need to be future-ready to ensure that the technology onboard can also connect seamlessly to the transformed service delivery the travelling passenger expects. The crucial ‘day-of-travel’ experience will motivate airline choices more than ever and they will be measured on not just comfort and service but also on the new expectations of personal safety in the low-contact world.
In the new future, all long- and medium-haul travel will be confined to the most efficient of aircraft. Most of these already exist and have been part of airline fleets for the last few years and a couple are about to join service. These aircraft will be kinder to the environment, to passengers and to the airlines’ own profits.
Category transformation
The effect of the current crisis combined with the focus on growth through efficiency presents an opportunity for the emergence of a hybrid airline model, a “low-cost-full-service” airline if you like. The low-cost-carrier (LCC) model has been tried and tested and the world’s biggest airline by market capitalisation (Southwest) is one of them.
LCCs have a bad rep though, mainly because most people believe that low-cost refers to the cost of tickets for no-frills flights rather than the cost to operate the airline. So, they get called “budget airlines” among a lot of other unpleasant names and get rude jokes made about how they remind the passenger at every stage that they are cheap. It is hard to keep costs low and operate well and there are only a few who do it brilliantly. Scoot, Southwest, AirAsia, Indigo & Jetstar come to mind. One interesting airline model that stands out is FlyDubai, a medium-sized middle eastern low-cost-carrier but with all the frills.
As airlines focus on transforming their businesses through technology and automation and rationalising their operating fleets, many opportunities for consistency, standardisation and economies of scale open up in the most expensive parts of an airline’s operation.
Some additional effort on route rationalisation, airport selection and optimisation could deliver huge cost efficiencies without an impact on passenger service delivery standards and then, they will truly be flying open, sunny skies into a profitable and predictable future.
