Flying beyond COVID-19 — ITC Infotech

6 min readJun 4, 2020

Aviation was amongst the first-and the worst-hit industries by the COVID-19 pandemic. As early as mid-January this year travel demand in APAC felt the tremors. By March, 48,200 flights (equivalent of 10.2 million seats) in the EU were cancelled. In the US, according to the Transportation Security Administration (TSA), travel throughput was 190,863 passengers on 7 May compared to 2,555,342 a year ago in the same week. People were afraid to fly, as air travel is not designed to provide the health safety required by COVID-19. The Official Aviation Guide said that worldwide, by the second week of May, air travel had shrunk by 70%. The contraction in demand has unprecedented consequences. At least one aviation consultant believes that by end-May most airlines would go bust, even though several are now flying passenger aircraft as freighters (for a detailed look at the impact on international passenger traffic and revenue by region for 2020 see Figure 1).

Source : ICAO estimates ( https://www.icao.int/sustainability/Documents/COVID-19/ICAO_Coronavirus_Econ_Impact.pdf )

Figure1: Estimated impact on international passenger traffic and revenue by region for 2020

There are two broad categories where we see a major impact:

Direct and immediate: The drastic reduction in demand has eliminated incoming revenues. Booking cancellations and running opex have forced most global airlines to ground the entire commercial passenger fleet and some have filed for bankruptcy. Air Mauritius and Virgin Australia are just two such examples. Typically, even with a grounded fleet, airlines have to still bear 40% of operational costs in MRO activities. Aircraft have not been designed to be grounded for such long durations-a 70 to 90 ton structure standing still in a hanger or on the tarmac for weeks on end undergoes structural stress. The maintenance and assurance it would take to make these aircraft air worthy again for an average fleet size of 100+ would be staggering.
Cascaded long term: Travel is an essential part of life and business. While virtual communication is a necessity at the moment, humans cannot keep their desire to travel, and for personal interactions, in check for long. The question is, how comfortable are we going to be sitting a few inches away from an unknown person in a closed air-locked aircraft for long hours?

The single ray of hope lies in the fact that many global efforts to test a vaccine against the coronavirus are in fast forward mode. As of 23 April, there were six vaccines in clinical evaluation, and 77 in pre-clinical evaluation. Bill Gates who is taking a major interest in vaccine development (the Bill and Melinda Gates Foundation has a COVID-19 therapeutics accelerator) says that one could be in commercial production in the next 18 months.

The aviation industry cannot afford to wait and watch the situation. It must be pro-active. This is the crisis when leaders, despite the odds, can reset and re-shape the future. Our analysis suggests there should be two sets of parallel teams who should be addressing the crisis:

Team 1 should be working relentlessly to reduce costs and cut losses
Team 2 should be working on a plan for revival the moment the COVID-19 curve is flattened or a vaccine becomes commercially available

Expecting a 100% normal world in the next few months is absurd. But there appear to be signs that recovery can be quicker than expected, at least in pockets around the world. Bloomberg Economics recently estimated that 85% of activity had returned to China, excluding Hubei province. China is also putting in place processes that enable workers to return to factories and offices. These processes are shaping new habits and social dynamics (some very interesting insights to be gained here). If they work, these processes may be replicated in other parts of the world. This will be the new normal and will take us months and even years to get accustomed to.

Meanwhile, some things that have drawn our attention when exchanging views with friends in the industry or reading aviation-related research:

Airlines are investing in customer communication related to new destinations and the new processes they are putting in place to engage customers and retain them in a post-COVID-19 world. Some ideas distilled from our interactions with the airline and hospitality industry include:
Create and publicise new no-touch processes, especially in areas such as automated baggage handling, biometric based check ins, remote processes for employees to minimize physical presence and interaction
Work with airports to create touchless, biometrics-based boarding gates manned by robots
Showcase new mobile and interaction tools such as voice-based in-room assistants used to service customers
Create examples around usage of robots and automation for guest/ customer safety and comfort (for example, in-flight videos on how cabins are sanitized, adherence to hygiene standards in the preparation and handling of in-flight meals, etc.)
Provide engagement opportunities to guests/ customers by webcasting cocktail and cooking classes, yoga that can be practices mid-flight for healthier air travel, etc.
Leverage VR to send guests on “holidays” to hotel properties or airline destinations
Determine the optimal size and dimension of networks and fleet within the next few weeks
Consider M&A and consolidation opportunities; we hear many businesses are considering joining hands while operating certain sectors or market geographies
Make a stringent checklist for sanitization and hygiene factors and an aircraft certification process for every flight operation to win back customer confidence
Design new business processes and invest in smart technologies, including IOT, for a contactless flying experience
Re-look at financial settlements with partnering channels and participating vendors to cut credit time — and better still, to make all settlements almost real-time

Over the last decade, many airlines have become a set of smaller organizations, with regional operations, low cost brands, specialized cargo businesses, etc. It is time to centralize the data across these organizations and use real-time analytics to create synergies, cost saving opportunities and improved efficiencies.

We created a Data centric framework aiming on 4 strategic objective themes:

Each strategic theme will aim to achieve business outcomes that will help airlines realize both its short- and long-term goals in becoming a true digitally transformed airline.

Many of our industry friends are utilizing this time to conceptualize a Lean-IT organization, including offshoring much of their application portfolio and to strengthen their contact centre experience by leveraging cloud, while many are considering ways to use automation to improve operational processes and reduce costs. Finally, some airlines are using sophisticated analytics to back their demand stimulation programs-packages, discounts, loyalty programs, etc., that can be applied to sectors that begin to show lift. And the lift will come, because if anything is inventive and resilient, it is us humans.

Author:
Peeyush Goel
Associate Partner (Consulting Services — Travel & Hospitality)

Originally published at https://www.itcinfotech.com on June 4, 2020.

Flying beyond COVID-19 — ITC Infotech

Written by ITC Infotech