PART 1 (PART 2 available here)
Since the beginning of the crisis we have kept in touch with most of our counterparts - airlines, IT / Solution providers peers, consultants - to keep a large and objective view of the situation of the airlines and find out what the needs were and mainly where we could help.
For 2 months, we led some interviews and participated to webinars dedicated to airline topics. We would now like to share our takeaways : what were the immediate topics of concerns for airlines during the crisis and what would be the next topics to focus on in the near future.
This article is the first of a series of two.
The COVID-19 breakout totally collapsed the air industry, immediately impacting all players whose revenue is based on a fee per boarded passenger - airlines of course but also most of (if not all) their IT providers (PSS, GDS, ecommerce platforms…).
All airlines had to reduce their flights schedule to a very limited percentage, with a very slow foreseen restart, which led in some cases to bankruptcy.
Despite an increasing push to preserve some tourism activity in countries where summer holidays represent an important part of the economy up to 10% of GDP (see EU propositions of mid-may and travel restrictions status on June 13 per country), and besides the end of countries’ lockdown, experts agree that full recovery will take time. Some say that the situation will be back to normal not before end of 2021 or later (as illustrated in these articles: Emirates may take years until it flies all of its routes again or Delta CEO: Business will take ‘two to three years’ to recover from coronavirus. In such context, making predictions is seemingly an impossible task .
Airlines current forecasting tools and algorithms are based on past information. They are worthless in a once-in-a-lifetime situation such as today airlines need to reinvent part of their processes.
Rebuilding specific indicators and management dashboards is mandatory So is a higher level of agility including, the ability to correctly process data, volumes, revenues, demand. In this context - real time is the new motto.
Most actors agree that operating environment for our industry will have to be reshaped to, as some called the ‘new normal’. But details of this “new normal” remain blurry .
Assessing the immediate impacts, observing trends and projects prioritised by the aviation industry help to understand the airline industry shape-to-be and how to get there. As EY -Parthenon presented it end of May, the reaction to a crisis such as the COVID-19, can be split in 3 different phases:
- Resistance : manage the emergency, stabilize the situation
- Recovery : get out of emergency situations and relaunch the activity
- Rebound : Imagine what’s next and get prepared
Our industry is today at the beginning of the recovery. Let’s come back on what happened during the “resistance” and try to see what will be the priority for the “recovery”.
Resistance : what airlines had to manage in the emergency
During the “resistance” phase, airlines had to very quickly adjust their organisation and operations. Here are a synthesis of the hot topics, airlines have had to manage as countries announced travel restrictions and lockdown starting January 2020.
The COVID19 crisis generated an enormous volume of cancellation : 90% of the flights got grounded.
The impact for airlines was an exponential number of requests to the customer service - 10 times above the norm - and a massive work to either reschedule when possible -or cancel with refunds or vouchers- 90% of the bookings.
To handle this massive flow of demand, many airline turned toward Customer service automation whenever possible.
CRM and chatbots providers had been heavily contacted and lots of new projects have been launched.
Air Asia managed to tune its AI chatbot - implemented since january 2019 - . It allowed them to handle ten times the normal number of queries without problems : up to 500,000 per day in April.
In the beginning of COVID19 crisis in Asia, the Flighthub group, a booking website provider, assembled a team of developers to automate a special hotline quickly responding to cancellation, rescheduling and refund requests. 8o% of flight refund requests were handled automatically over the phone, without involving a customer service agent. The human agents handled the most difficult cases.
During the early weeks of the outbreak of COVID-19 in North America, WestJet faced an increase of claims volume of 1 671% on Facebook Messenger and WhatsApp. Nethertheless the airline kept response time low as its virtual agent Juliet fully resolved 87% of requests.
On the economic/business perspective, the first priority for airlines as travel demand collapsed was to search for immediate economy and cut cost.
In that perspective, at the very beginning of April, René Armas Maes published a farsighted list of actions airlines can execute to cut their costs impacting many areas: sales of assets, government aid, cash flow management, contracts, workforce, etc.
Our interviewees confirmed that negotiations with their main IT providers - PSS, eCommerce or Revenue management - had been immediately initiated.
On HR side, as any other company, airlines had to manage the lockdown for their employees. Nevertheless, the impact is huge in this sector as very few staff are eligible to work from home.
This is why, some airlines had to take the decision of part-time work (Air France, KLM, LH) or important salary cut to survive (Etihad, Delta or Turkish) and even to proceed to layoff voluntary (Delta) or involuntary (Ryanair).
An article from Forbes, published in May, illustrates perfectly this “cut-killer mindset”, outlining the set of actions taken by British Airways : British Airways At the forefront of change for a post-COVID-19 Airline World.
Recovery phase : after the rush, the topics to be prioritized
This period is to l last, especially for long-haul travel. As of today, some countries are still in lockdown, some countries impose quarantine upon the departure country or nationality, others do not (see the summary of restrictions in Europe country-by-country as of June 1st in this article published by the Guardian). Traveler rules and restrictions keep changing and are decided at individual country level without any (or so few) international coordination. This lack of synchronization complexifies and lengthens the recovery. However, domestic and intra-european traffic is expected to restart faster based on what we see in China.
End of April, Eurocontrol presented its recovery forecast for Europe, arguing for coordinated measures to accelerate the process. “A coordinated approach foresees a broad implementation in mid-June, picking up in July. If this is delayed then the forecast simply moves June to July and rolls on.”
The second factor contributing to the slowness of recovery will be the travelers themselves. Upon an IATA survey conducted in April 2020, 58% of recent air travelers are somewhat or very likely to restrict their initial travel to domestic journeys. This reluctance to travel may last for a while because of the climate of uncertainty and fears left by the crisis as confirms the BCG survey led in mid-May about COVID-19 Consumer Sentiment Snapshot #10: The Trip Back.
Consequently, airlines will have to put on the top of stack specific topics such as :
- Relaunch the demand: restore the trust and keep the contact with the travelers
- Continue to comply and adapt to the new sanitary rules , a brand-new topic.
- Develop the use of Data and Analytics, an important support to pilot closely the activities
- Accelerate the digitalization to pursue cost-savings
Read the PART 2.