The COVID-19 pandemic has brought all travel to a grinding halt. With several nations and governments rapidly imposing strict bans on flights, the airline industry has been greatly impacted by this black swan event. The World Economic Forum predicts that restrictions on international flights alone will cost the industry an alarming $880 billion. Moreover, aviation experts expect that COVID-19 will have greater impact on the industry than 9/11 which saw several airlines file for bankruptcy, financial bailouts and a complete change in aviation’s approach to security, as well as longer-term repercussions. It is imperative that airlines act quickly today to plan for the future to reduce the impact on customers, employees, stakeholders, operations and bottom lines.
How have airlines responded to the sudden shock
Airlines responded to the current situation with alacrity. For instance, most reduced capacity by 70-90 percent on long haul or transatlantic flights and 20-25 percent on domestic flights, halted new capital expenditures on investments and even reduced operating expenses through deferred payments and decreased maintenance and partner costs. From a headcount perspective, airlines enforced voluntary ‘time outs’, froze hiring and withdrew paid leaves. A second line of action to further curb the bleeding involved liquidity infusion measures such as discontinued pension fund contributions, deferred share buybacks, selling mileage points to card providers in a forward sale and requesting airports for slot waivers. Furthermore, airlines continue to run almost-empty flights in a desperate bid to retain their takeoff and landing spots – if they don’t use the spots, they could be lost to competition.
This is the extreme response that is both expected and necessary in times of uncertainty as airlines recognize that COVID-19 presents a situation grimmer than anything they have experienced before. Despite these severe measures and the great efforts being made across the travel industry, there will ultimately be airlines that do not make it. However, as airline stocks continue to falter and the travel ecosystem frantically tries to cut costs, it is imperative that airlines go beyond conventional thinking and use technology to dig in for the long haul.
Preparing for the post COVID-19 era with three technology strategies
In the immediate future, the industry needs to maintain a laser focus on cutting costs. Simultaneously, it must keep in mind the action it needs to take when fears around COVID-19 recede and normalcy starts to return. There are three areas that airlines must be ready with and prepare for to put themselves in a position to succeed in the post COVID-19 era.
Analytics for reliable, real-time information
The most urgent need is to analyze the frequencies of flights that would operate on cash loss in the next quarter and beyond. This means acquiring data on the spread of COVID-19, imposing flight restrictions, evaluating customer sentiment etc., and using predictive analytics to forecast losses accurately. Doing this allows airlines to see if they have cash reserves large enough to sustain flights ahead of time as well as take realistic measures to bring down losses on these routes.
Analytics can also prove effective to predict and prepare for the outcomes of bookings and cancellations in real time – net bookings, gross bookings, net new – by markets. Combined with the airline’s experience, data-backed analytics will provide insights to pinpoint geo-specific interventions for maximum ROI. This can include scenario planning for various options like what-if analysis for future demand across business, leisure, family and individual traveler segment categories.
Perhaps the most urgent area where analytics can be applied is to gauge the pulse of customers through an external consumer confidence index. Examining leading indicators inside and outside the airline industry can help airlines measure the comfort level of customers to start traveling again and the precise levers that will influence them to start early rebooking. Indicators that could suggest resumption of travel activity could be credit card activity, increased online retail spending and decreased COVID-19 cases and outbreaks. Weather could also be another important indicator to evaluate.
Demand stimulation and preparation
Airlines would do well to prepare themselves appropriately for when customer demand returns. Foremost, they must be ready with attractive offers to stimulate demand such as packages, promotions and deep discount plans to entice both leisure and business travelers.
How much should yields be relaxed to stimulate demand? What kind of offers will work for specific destination and categories of travelers? These questions can be answered using revenue management controls. Airlines should reach all travelers who cancelled upcoming travel plans with personalized offers based on the revenue management systems’ adjustments. Most importantly is the ability of the airline to push new booking sales to the back end, once demand returns. One of the most powerful tools currently available to manage demand, digital assets and content is the Adobe Experience Manager (AEM) suite.
Airlines that use these types of tools will be able to draw travelers with the exceptional experience they offer. COVID-19 is likely to reset the industry and customers will not necessarily return to the airlines they were historically loyal to. Instead, they will opt for airlines that focus on keeping their passengers healthy, safe and engaged with a great end-to-end experience from booking to refund (where necessary!).
Customer care initiatives
One of the critical learnings from this unfortunate episode is to ensure in the future that airlines have simple and reassuring self-service capabilities that allow customers to cancel, refund or reschedule their tickets without having to call travel agents or a call center. This will help ease call center volumes, lower costs and ensure that customers are always in control.
In addition to this, airlines would do well to use online, kiosk and in-flight videos that demonstrate aircraft cleaning and sanitization procedures to rebuild customer confidence. These videos could extend to an emergency process meant to safeguard the wellness of customers and crew, the care and regulatory adherence that goes into preparation of in-flight meals, etc.
Finally, it has become essential for airlines to educate and train their employees about how to handle customers during health-related emergencies, such as the COVID-19 pandemic. This itself demands a dedicated information and training platform that can be quickly updated, and the content quickly redistributed to employees across the world.
Additional measures for the well-being of passengers and staff preparedness
There are additional long-term measures that airlines must not lose sight of to proactively safeguard the health and wellbeing of their passengers:
· Create self-service facilities such as automated baggage handling and biometric-based kiosk check-ins
· Bring in thermal scanners that feed into a central operational control center to create overall health intelligence of passengers and alerts for airport administration
· Use permanent installations of infrared cleaning tools for aircraft interiors and employ VR to verify and certify each aircraft as “ready to board”
· Accelerate remote working infrastructure for non-customer facing staff such as contact centers, IT teams and corporate business units. This can be done using virtualization, cloud and collaboration tools that also bring down the cost of operations.
· Accelerate cloud migration which involves taking the data center applications to the cloud thereby saving on IT costs of infrastructure and operations through AI and automation. This was already ongoing across prominent airlines; however, the speed of such migrations is more critical now to show significant cost benefit.
These are uncertain and demanding times for every industry, but the airline industry is uniquely impacted. Post COVID-19 new leaders will emerge because they took precautionary, proactive steps ahead of their competitors. It is folly to try and accurately forecast the future, but in this instance, it is safe to assume that technology will play a quintessential role in securing the health of airlines both now during unchartered times and in the future.
Adnan Saulat possesses two decades of IT Industry experience primarily in the Business consulting and analysis roles. Currently he heads ‘Solutions & Consulting Group’ within ‘Travel, Transportation and Hospitality’ vertical of Mindtree to create innovative solutions for Airlines, Hotels, Transportation, Logistics and Travel service providers.
Adnan possesses extensive experience in Travel & Transportation application development/management practices and product development. He is well versed in consulting, solution architecture and sales support activities delivering successful outcomes for clients across geos. His specialties encompass Airports, Airlines, Hospitality, Logistics, Car Rental, Global Delivery, Business Analysis, Mobility, Application Development / Management and Agile/SCRUM/SaFe methodologies.