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Over 30 airlines went bust in 2020. What needs to change?

February 26, 2021
Michael RaaschMichael RaaschCEO, Omnevo

2020 was devastating for aviation and travel. 32 airlines died - in some way or another. 2021 is going to herald a very different 'new normal'. The question is: are you ready?

The 'new normal' or 'next normal' is going to see hyper-competition and hyper-sensitivity across all service and commercial domains. Cost will become an even bigger concern. But it's revenues that will hold the key to ensuring survival. The aviation industry’s ability to tap into available and ancillary revenues at little or no cost will require a complete change of mindset and the evolution of – or end to – some structures and practices which have been considered standard to too long.

Airlines today are hampered by digital and commercial structures which restrict their ability to engage with new and exciting opportunities. End-to-end design, planning and solution delivery is the key here and the industry, as a whole, must expand its vision from simple product placement to providing a holistic offer incorporating both vital services such as food and drink, and more crafted offers such as destination experiences. At the heart of all of this lies a deep-rooted need for better collection, integration and regulated sharing of data. A digital-first approach is the only way to identify and maximise the vast untapped opportunities facing airlines today and ensure the consumer receives the experience they not just expect, but demand.

Most of these problems do not have quick-fix solutions, and they will require a deep look at both individual practices and industry standards.

Over the coming series of blogs in the next few weeks, we will take a look at the biggest challenges facing the sector – as well as the opportunities that arise as a result.

Meanwhile, here are some of the key issues:

The Cost Issue

Many in the sector are having to cut costs to stay afloat at the moment - especially with a lack of support in some countries. But the industry must balance survival with recovery. Releasing too many staff will leave businesses ill-equipped to cope with the coming revival, and new technologies and solutions require investment - legacy IT systems need simplifications and eliminate redundancies.

Reduced funding will force the industry to prioritise its key focuses over the coming months. For example, is short haul or long haul more viable? How can the vital issue of on-board food and drink be resolved or incorporated? In this environment, the stability of destinations will also be key - with those seeming more politically volatile or at risk of exchange rate fluctuations being less reliable investments.

Safety Concerns

Making customers feel safe is the key to drawing them back into the air. The desire to travel grows with every additional day in lockdown, but potential passengers must believe it is safe to do so. This means they must be confident that airlines have control over social distancing during boarding and arrival. They must be reassured that all the touchpoints are clean and safe and they will want reassurance that air quality can be maintained to ensure a healthy and safe flight. These reassurances will require the deployment of new touchless technologies, which raises questions over cost.

A Lack of Cohesion

There is so much information available in the travel industry and there are so many services on offer. The fact that there is not more connectivity between these is criminal and it will stunt the sector’s growth capacity going forward. There is a desire to innovate, but the will to do so must also exist, and that means being willing to reimagine existing models and collaborate. Many individuals are working on innovative solutions to one problem. But if they do not work together as a single, digitally-driven customer journey, then travelers will simply not engage.

Limits Of The Current Model

The airline service and retail ecosystem needs an overhaul. To have the flexibility and cohesion needed, it will be necessary to develop platforms which offer both services and retail in a standalone form, independent of suppliers, and combined with other sources of revenue such as the provision of food and drink. Traditional inflight brochures and menus must be consigned to history and replaced with carefully crafted online marketplaces, pre-order menus and landside collaborations . These will provide a platform for travelers where suppliers can craft their own 'shop-in-shops', which will create a more streamlined service and a broader and yet more personalised  offer.

Engaging Travelers

Passenger numbers are in sharp decline, which places added impetus on those within the industry to ensure everything offers a reliable and strong financial return. Hence the reasonable increase in focus on the cargo sector during the pandemic. But, properly managed and engaged, travelers offer far greater opportunities. Existing assets such as air miles and loyalty programmes provide them a reason to engage with stakeholders in the industry. But once these consumers arrive, they require combined services in a single, seamless and easy-to-access platform with unique products and services tailored to their specific needs.

End-to-End Delivery

Digital solutions - for that is what they must be - have to be able to seamlessly deliver what they offer. Otherwise they are self-defeating. From the moment a traveler engages with the industry during their booking process, they must be carried by one service which can meet all their needs and deliver the services direct to them. Travelers do not want four apps for the various stages of their trip, and by creating a linked supply chain businesses also reduce both cost and wastage. This platform must also be adaptable ; a flexible platform which can be easily deployed – preferably as an MVP (Minimum Viable Product) so as to test, retest and retest passenger response – and then modified to meet the demands of partner businesses which  would allow the industry as a whole to capitalise on ancillary revenue opportunities.

Reducing Waste

Sustainability and environmental awareness will be vital, both in attracting customers and protecting the planet. Assimilating Food & Beverage services into the digital offer, for example, would allow only required food to be provided. This could be taken further by airlines collaborating with airport operators to help travelers order and collect their food before they fly on short haul trips and pre-order for long haul. This would save the waste of providing meals in-flight, while creating a new opportunity for more choice and land-based suppliers. 

Where To Now?

The future of this industry is digital and is dependent upon greater 'connectedness' across traditional silos than ever before. The biggest decisions are not about mere incremental improvements to services and quality. Rather, the need of the hour will be to engage directly with every customer and traveler, and the only way to do this at scale is to implement end-to-end digital platforms that enable agility in decision-making like never before.

You will have heard it all said before - airlines need to move beyond the transportation of people from A to B. Never has a more true statement been made for 2021.