What is currently happening to the global aviation industry is unprecedented in every matter. And so are the measures we are seeing.
Lufthansa has already grounded about 700 of its 763 aircraft and AirFranceKLM prepares to reduce their available seat kilometers by up to 90%. Meanwhile, Austrian Airlines and Ryanair have announced a complete cease of scheduled passenger operations for up to two months. While Europe is currently the epicenter of the COVID-19 crisis and, consequently, European carriers are mostly impacted, the development in the Americas has yet to worsen. Amid these developments, IATA has recently updated its 2020 forecast, expecting passenger revenues to drop by $252 billon – or 44% compared to 2019.
What Does This Mean for an Airline or Airport?
With the closure of borders all around the world, the drop of demand close to zero, and huge uncertainty as to when we’ll see a silver lining on the horizon, airlines and airports are basically being forced to cease operations.
In complex organizations such as airlines or airports, such cuts cannot be executed easily and require an immense amount of planning (just to name a few):
- Schedules are reduced to an absolute minimum while costs need to be minimized
- Airlines need to find storing solutions for their fleets; maintenance programs need to be adapted
- And – most importantly – staffing levels constantly need to be adapted. The demand for crews, ground and admin staff drops significantly, but the costs remain as an evident risk for airlines. Solving this complex and unprecedented situation requires innovative and solidary approaches.
In such situations it is right and somehow soothing (if something like soothing at all exists these days) that governments are preparing never-seen-before security umbrellas to help struggling companies.
And while it is only right and understandable to focus on ensuring liquidity and costs at this point, this should only be one part of the equation. Internal airlines measures will be needed.
What to Start Considering With Regards to Workforce at This Point?
1. Do the Decisions Taken Over the Last Weeks Still Show the Desired Effect and are Measures Still Up to Date?
As the crisis evolves and nobody at this point really seems to know how long it will last, short term measures might need to stay in place for a longer period of time. The constant evaluation of needed staffing levels for crews and ground workforce is essential to reduce costs on the one hand but to allow “hibernation mode” operations on the other hand. Have all possibilities been exploited to allow a flexible management of the workforce? \n
- What incentive models have been set up to allow additional unpaid leave? Successful models that are used to balance out seasonality might also make sense during this crisis. \n
- Are unions on board to an extent that will ensure that agreements will not be in place in the short-run of the crisis but also during the upcoming weeks and months? \n
- What measures are taken to prevent a drain of highly skilled professionals and how can these be extended in case the crisis persists?
Even though most traffic might be stopped, there might still be activities worth considering. These may include heavy maintenance activities or a relocation of resources to temporarily focus parts of business on non-aviation activities.
2. What is to Come After We’ve Reached Rock-bottom?
Even though its magnitude is way beyond anything we have seen over the last 75 years, this crisis will at some point come to an end. Investors are already seeking opportunities to re-enter the stock markets and business in Asia Pacific is showing gentle signs of recovery. The COVID-19 crisis will shuffle the cards in the aviation industry for sure. Financially weak companies are likely to go out of business, the massive decrease of the major carriers’ market capitalization might make them vulnerable for any sort of hostile take-over.
For those that master this crisis successfully, this should define the agenda:
- How can airlines ensure a quick but timely ramp up of operations once demand starts to kick-in again, seizing opportunities that will open up and ensuring quick momentum again? As nobody at this point is able to predict this point, this will require an extensive amount of integrated scenario and risk analysis.
- What are the right lead times for aircraft and crew reactivation to allow a dynamic match with the development of sales?
- How can airlines ensure proper alignment with unions and other major stakeholders? After all, the crisis might even open opportunities to seemingly closed doors of negotiation.
Undoubtedly, the challenges ahead are immense and frightening. But if this crisis teaches us one thing, it’s that being able to quickly react to ultra-dynamic developments is of paramount importance. Let’s start preparing today!
