How airlines can prepare for the post pandemic world
As many airlines are grounded and passenger operations halted, the short-term outlook and timelines for the global recovery of the aviation sector remain uncertain. However, once the pandemic becomes controllable and the travel restrictions are relaxed, there will be an influx of cultural and commercial changes across the world that will continue to have a significant impact on airline operations.
Economic effects
In its May 2020 report, the International Air Transport Association (IATA) forecasted total revenue losses of US$314 billion for the airline industry, as a result of the COVID-19 pandemic.
Source: IATA https://www.iata.org/en/iata-repository/publications/economic-reports/covid-fourth-impact-assessment/
Without any operational revenue, airlines' cash reserves will drain quickly. Around 50% of operating costs are variable costs, though there will be some reduction in them as the aircraft are grounded. It is estimated that airlines will have around US$35 billion worth tickets due for refund in Q1, FY21. The global financial market's reaction to the pandemic was unprecedented. Ultimately, the economic impact of the pandemic is expected to be worse than its medical impact.
Cultural changes
COVID-19 will influence the work and travel culture across the world. Everything from work and study to leisure activities, will be different for a few years to come, as people will be reluctant to let go of social distancing norms for fear of contracting illness. With companies seeing the benefits of the work from home model, people will consider only essential travel for medical and family emergencies, and most will still be unwilling to book a leisure trip to another country. Social distancing will be required throughout every journey. Besides increasing the wait time at airports, this will also cause a hike in ticket fares if airlines are required to leave the middle seats empty and operate with a reduced load capacity. This will significantly affect the air travel and hospitality sectors.
How can airlines survive this period of uncertainty?
Collaborations
In a post pandemic world, where only the fittest businesses will survive, collaboration can ease a lot of pressure – be it in data sharing or brand alliances. There will be scope for additional codeshare agreements and collaborations through distributed platforms. Although technology will be the enabler, airlines will need to understand the possible scenarios and the ways in which collaboration will benefit from an extended ecosystem. Privacy will be critical, but applications that manage health records and history will be helpful in ensuring passenger safety, especially when connecting government information with the airlines.
Preparing and prioritising
During the recovery phase, airlines will need to adapt their strategy on scenario-based planning to survive. Employees, customers, and the travel ecosystem may still be in disarray and careful prioritisation will be required to restore normalcy. Things may not be the same and there will be a phased approach to the recovery timeline. These prioritisations should be aligned with a revenue resilience plan. Airlines will need to invest in safe environments for passengers and crew, both within the aircraft and at airports. Networks and routes may need restructuring and optimisation, and more real-time demand analysis may be needed. Cost optimisation strategies will be required in all operational units and functions—from crew allocations to technology infrastructure.
Customer loyalty and service
Most airlines show generosity to loyalty customers by increasing the membership validity and reducing the threshold levels for membership tiers. Airlines try to retain customers and drive sustainability by giving loyalty points in place of monetary refunds and cancellations, thus supporting their recovery and marketing strategies. Existing customers may not return to the same airline, but may instead choose one that has better adherence to health and safety protocols. For example, an airline may give additional offers or discounts for "green passengers" (certified healthy persons) and for those who share additional health and travel information with the airline. Customer care services must be strengthened through workflow automation and internal trainings on customer management.
Cultural shift and innovation
Airlines need to look outside the box for options to survive. As customers will be concerned about their safety and social distancing norms, self-service options and transparent safety measures will be the key to holding their trust. As the primary revenue will be reduced, airlines should think about strategic retailing partnerships with hotels and car rentals to upgrade themselves to a complete travel commerce system. The technical ecosystem may need some quick and major overhaul to support the cultural shift, with more next-generation technologies and automation appearing on the frontline.
Personalisation and dynamic offerings
Ancillaries can strengthen the revenue streams through personalisation of offers. The need vs want saga will continue to focus on product offerings, and airlines will need to converge more on the personalisation perspectives to push revenue streams forward. The advantage that some airlines may have had over others could vanish in a post pandemic phase with ancillaries and dynamic offers being the key influencers. Passengers may be allowed to add an extra seat as an ancillary to avoid potential contact with others. Being equipped to provide the right kind of offers to the right customers will be a key differentiator in the customer journey. This personalisation and dynamicity can be extended to loyalty and retail offerings.
Emerging technologies and artificial intelligence (AI)
In the post pandemic world, airlines will have to embrace digital technologies more than ever before to stay competitive. Insights and intelligence drawn out of 'data' will empower the fightback and recovery phases. The way airlines use AI and machine learning (ML) will evolve, as the current algorithms are based mostly on historical data and acquired intelligence. Airlines will be on the lookout for real-time analysis and predictions based on current patterns. With this, the relevance of the historical data may fade and the need for advanced algorithms with reinforced and self-learning capability will emerge. ML capabilities will drive dynamic pricing and packaging. More conversational intelligence will be required in the field of customer service and assistance. Bots and voice-enabled virtual assistants will help implement automation in customer service workflows. AR/VR demonstration of retail product offerings will be another option.
Developing a stronger relationship with customers will be key to the survival of airlines post COVID-19, which they can achieve through proper coordination and collaboration. The pandemic is a testing ground in more ways than one, and let us all hope that this too shall pass.About the author:
Vineesh Vijayan, is a TOGAF 9-certified solution architect and an expert in the areas of machine learning and artificial intelligence. In his current role as Senior Solution Architect in IBS' Digital Innovation & Consulting team, he provides expert advice to airlines in solution design, architecture, and proofs of concept using emerging technologies. A tech evangelist skilled in data science, research, and analysis, Vineesh focusses on the digital transformation initiatives of major airlines. He is an active blogger and has published articles in several industry journals. Vineesh is a computer science graduate from Cochin University of Science and Technology, and is based out of Kochi, India.
References:
https://www.iata.org/en/iata-repository/publications/economic-reports/covid-fourth-impact-assessment/
https://www.iata.org/en/pressroom/speeches/2020-03-31-01/
https://www.iata.org/en/iata-repository/publications/economic-reports/covid-19-cost-of-air-travel-once-restrictions-start-to-lift/
https://hbr.org/2020/03/what-the-shift-to-virtual-learning-could-mean-for-the-future-of-higher-ed
https://www.bbc.com/future/article/20200401-covid-19-how-fear-of-coronavirus-is-changing-our-psychology
https://www.iata.org/addws#tab-3
https://www.iata.org/contentassets/8d3df7de4434482e9e831b5de5fcd1db/addws-s1e3-master-deck.pdf