Organisations which adopt a data-driven decision-making approach will deliver better performance and emerge secured
By Usha Padhee & Manoj Dora
Following three stringent lockdowns and air travel suspension in India, the aviation sector is preparing for a gradual restart. However, there are many uncertainties regarding the extent of travel restrictions by various governments in the restart period. The pandemic has heavily impacted the aviation ecosystem, therefore, a coordinated recovery programme is essential to ensure the survival of the sector. To recover and flourish sustainably in a post-Covid-19 world, new fundamentals that embrace heightened levels of the alliance will be imperative. Passenger safety has taken on a new meaning, and the only way to recover is to reinstate confidence among the passengers, which is rock bottom, for travelling.
India is implementing a series of public health measures to ensure the safety of passengers and staff. For this purpose, a comprehensive strategy from origin to destination has been put in place. The safety measures, which reflect India’s national Covid-19 guidelines, include wearing of masks, verification of safe status in the national Covid-19 tracking application (Aarogya Setu) and disinfection of every possible contact surface at the airport. These additional steps are further resource-intensive and impact operations and bottom-line.
These are the short-term measures to regain passenger confidence, but recognising the fact that the virus is here to stay till the time a vaccine is developed, the long-term measures would require a health visa or a Covid-19 free certificate to fly, so that the virus and air transportation can coexist as safely as possible. A significant investment towards technology to deliver a contactless medical screening process will be imperative.
These are challenging times, yet the resilience of the sector so far has been nothing short of remarkable. The domestic civil aviation operations resumed in India on May 25, with 428 departing flights ferrying 30,550 passengers, and as operations continue, the revised set of figures are encouraging. With a 29% month over month (MoM) growth in August over the previous month, these figures, which are now cruising at 1,044 departing flights (+144%) and 1,12,630 passengers (269%), are expected to shoot up as the sector regains consumer confidence. Although there has been a steep decline in profitability, the future looks promising as IATA’s July 2020 survey reveals that the Asia Pacific region, accounting for 34.6% of the global aviation market, is expected to return to the 2019 levels at the swiftest pace, followed by Europe and the Middle East. The International Civil Aviation Organization (ICAO) in its long term recovery report is expecting a reduction of just about 18% in the March 2021 global passenger traffic as compared to normal situations, which is quite motivating.
A recent survey carried out from a database of over 1.5 lakh prospective travellers reveals signs of green shoots as 90% of the travellers who responded to the survey, felt air travel is much more secure compared to the other modes.
The survey shows a quicker rebound for business travellers as they try to resume businesses. The global business confidence has rebounded sharply following the April low, as countries loosened travel restrictions. However, with more meetings taking place electronically, corporate travel demand is anticipated to remain sluggish until the time there is a medical solution to the pandemic. That being said, we cannot escape the fact that the conventional face to face meetings remain critical in business dealings and that videoconferencing can never be a substitute for physical meetings; the fall in demand will, therefore, come in from some businesses, not all.
Leisure demand is expected to bounce back sharply in phases. It is expected that after being housebound for months, passengers would want to get away on short-haul trips once they are reassured that air travel is safe, but demand for long haul trips will have to wait.
The change in passenger booking behaviour creates additional uncertainty. During the recovery phase, more passengers are booking their domestic travel within three days prior to departure (61% of existing bookings), compared with 46% a year ago. The recent shift in passenger booking patterns could be triggered by events including monitoring of Covid-19 situation and quarantine requirements at the destination.
Whilst the data is necessarily limited, and the prospects for the second wave of Covid-19 is unclear, making forecasts subject to wider error margins than normal, a pattern is beginning to emerge. For now, the prospective scenario, which seems likely to occur, is a prolonged U-shaped recovery, and the sector must keep track of the indicators compulsory for this scenario to become a reality.
This is a vital period to adopt strategies addressing altered passengers’ perception in order to explore new opportunities and foster trust. The government will funnel in relief incentives like a waiver of excise duty and other charges, bringing in aviation turbine fuel under the ambit of GST, the rates of which have been flat since July 2020, and differing the credit payments to provide immediate interim relief to the airlines. Statistics from previous crises, such as the SARS epidemic and the occurrences following 9/11, show how consequential alterations and investments were needed to rebuild consumer confidence. While Covid-19’s impact on demand is far greater than that experienced after 9/11, recovery will once again require understanding customers’ changing expectations and demands before making new investments. The added challenge is that when 9/11 happened, the world saw security as a complication on the aircraft, but this time, the issue is wider. If places like Taj Mahal or The Disney World in the US are shut for visitors, then leisure travellers are not going there. The issue now is way beyond the concerns around an aircraft. In order to restore confidence in the safety of flying, passenger safety should remain a core priority for the aviation sector. As far as aircraft cabins are concerned, an analysis of the evidence shows that given the speed at which modern aircraft re-circulate cabin air with outside air through the HEPA filters, the aircraft cabins are safe.
The July 2020 survey by IATA shows only 55% passengers (down from 70%) wish to fly within one or two months. Therefore, restarting operations with 45% of the normal capacity seems prudent, while airlines try to get a pulse of demand and are able to optimise load factors, RPKs and rebuild profitability. Adding capacity too quickly and mismatching forward-looking demand could be as risky for airlines as it was to ground their fleet, especially when airlines today are in a precarious financial position. Cash preservation and cash flow are as important as reducing cost and rightsizing. Carefully matching capacity with demand has perhaps never been more strategic than today in this delicate economic environment when airlines are aiming to rebuild profitability.
The IATA survey reveals passengers desire to avoid dwell times at the airport terminals when flying through a hub. This suggests that the Covid-19 crisis has provided the foundations for a range of opportunities to existing and upcoming ultra-long-haul operators to recreate international travel demand. If an expected increase in demand for direct services takes place due to the unique health advantage of being able to avoid connecting through a hub airport, airlines could introduce point-to-point ultra-long-haul services supported by efficient and long-range aircraft, which could generate higher load factors and yields.
These strategies will not only introduce a new angle to product differentiation but will also enhance consumer confidence. The only certainty during these uncertain times is that recovery will be gradual, and the organisations which adopt a data-driven decision-making approach will deliver better performance and emerge secured.
Co-authored with Aditya Tiwari, aviation analyst, Brunel University London
Padhee is joint secretary, ministry of civil aviation and Dora is reader (Operations & Supply Chain Management), Brunel University London
Views are personal