Without any exaggerations, these times are the darkest for the aviation for years. Since the crisis has emerged, we are witnessing the terrifying headings in media almost every single day: states close their borders, flights are cancelled, airports are empty, cutting stuff, millions of losses, carriers are nearly in bankruptcy, airlines stand for financial aid, the regulation will be changed, etc. Not to mention that all related spheres habitually being like ‘fuel’ for aviation (tourism and cross-border activity) are also walking dead.
There are numerous forecasts for the aviation industry, from pessimistic to moderate sanguine. I heard from one of the famous businessmen the concept of ‘revenge spending’ the core of which is that after a long time being under pressure and without a holiday, many people will strive to get such long-awaited relief with paying not so much attention to money. Alternatively, people have become poore and the purchasing power has been drastically decreased, and worldwide economics slowly but surely enters the recession. But let us wait and see what opinion would survive.
Anyway, desperate times call for desperate measures, and companies are struggling to survive in all possible ways, and the government bailout is usually deemed to be such a way. Now we have two types of aid distribution – loans or shareholders loans, and acquisition of the share of a company with the monetary contribution.
The very recent Lufthansa case depicts several crucial and fairly sensitive points. First and foremost – competition matter. Notwithstanding such bailout granted by federal government is subject to approval by European Competition Authority, Ryanair with its CEO, Michael O’Leary is standing against such measures because it puts all players suffering losses in unequal position. Aiming to avoid
the situation where Lufthansa gains the massive advantage of almost EUR 10 billion injection, EU authority reportedly expects to decrease the Lufthansa fleet based in Germany and to surrender slots in Frankfurt and Munich. Obviously, this is highly risky for the German airlines. Secondly, the corporate affairs of the company could change due to financial aid. Of course, the presence of governmental influence in the board it could potentially cause some troubles in terms of operational management, especially political. At least, it will take some time for adjusting and polishing business processes while during the crisis the split-second solutions are preferable.
On the other hand, Ukrainian International Airlines, for example, as the systemic Ukrainian carrier seem to be face-to-face with the crisis. The CEO of FlyUIA Eugeny Dykhne has announced cutting long-haul routes (New-York, Toronto, Delhi), which could be returned in the further stages of crisis recovery. The reduction of flight net is the common problem of airlines and necessary measure. The route map is optimizing as a cost efficiency means, for instance, the French government instructs Air France for the reduction of its domestic network on the basis of the ability of passengers to use an alternative trip by train.
Another cornerstone is employment in aviation, dozens of cases of cutting jobs sounds menacing. I think, that the best possible solution is to save jobs at any price by seeking an optimal scheme of work and trying to find a flexible approach. Good move made by Austrian Airlines by reaching the agreement with personnel on salary reduction. Such effort reportedly saves not only around EUR 80
million annually for the airline, but also jobs and, who knows, maybe lives and families.
For aircraft manufacturers and lessors, it will definitely be tough times, the latter now is forced to revise lease terms and conditions and consider what to do with extra aircraft collected on their hangars.
The crisis will touch the airport infrastructure because there are a lot of new processes that are expected to be implemented regarding health protection. By chain, it may cause another greater challenge for people like an obligation to have an immunity passport, not just right now, but there are intense talks over the necessity of such documents so that is not purely food for thoughts but maybe
foreseeable future. If so, it would be vital to ensure personal data protection.
At the same time, put it differently, the more time people spend in the airport the more could be sold to them. Another issue is a marketing strategy, airlines need to review it and try to do their best to find a room for improvement. I expect the raising number of auxiliary goods to be offered and the tiniest extra services will be charged for.
Conclusively, it is not a great idea to consider the crisis solely as a drawback or disaster but let us never forget that this is always a chance for rethinking and further development. Now it is very important for carriers to somehow catch the rest of the summer navigation period. Undoubtedly, cost reduction and cost-efficiency would be mottos of the majority of airlines, the number of code-sharing could rise. As far as we already see a lot of legal and economic challenges are yet to come and this is the time for actions. Just fasten your seatbelts and prepare for take-off.
Source – Promote Ukraine
