Op-Ed: For airlines, the shock has just begun

The airline industry is reeling from the shock the coronavirus has dealt it. At a personal level it feels emotional and upsetting.

Never before have we witnessed the industry brought to its knees, globally, in this way. There have been wars, terror attacks and ash clouds that wrought massive impact, but always, to a greater or lesser extent, on a localized basis. It appeared initially that COVID-19 might be similar, with the damage confined to carriers operating to or based in Asia. That itself would have been a big hit, but shockingly its reach has spread worldwide.

It has been breathtaking to see the speed with which the perfect storm has developed—bookings melting away, existing travel being canceled, borders closing and aircraft groundings on a mass scale, with many airlines suspending up to 100% of their schedules.

This is not going to be a short-run recovery extending to just a few months, but more likely a long-term seismic shift in the industry for a duration that is, as yet, unknown.

Airlines and airports are both affected and many—smaller ones, in particular—will not return in the aftermath.

There are just so many variables and permutations at play that will influence the outcome, and no one can yet realistically predict what those might be.

At the macro-economic level, recession/depression will hit returning demand levels dramatically for both leisure and business travel. Beyond that, there is the psychological effect on willingness to travel, also hard to predict. Some may be desperate to get moving again, others more cautious, others simply without the financial means. My own view is that volumes are going to be significantly lower for a long time ahead. I also believe price is going to be a key driver for both leisure and business travel, first to jump-start the market but more structurally too, because of the weak economic backdrop. Airlines will need to do some significant thinking about their pricing, but also product offerings, especially across cabins on long-haul services. Innovation and creativity are going to be essential with a degree of trial and error as airlines test the waters for what customers are prepared to pay for and in what numbers.

Not only are we going to have fewer airlines around, but those that survive are likely to make radical changes to their fleet compositions and network structures. I’d expect older and larger aircraft, like the venerable Boeing 747, to retire earlier than expected among those companies still operating them. Some routes could disappear as no longer viable, with others seeing capacity levels modified. The strongest elements of different airline business models are likely to be placed into the melting pot and fused in ways not yet defined or even imaginable. The demand profile for new aircraft types is likely to shift and, because of failures and order cancellations, we may see more fluidity in orders shifting between Airbus and Boeing, in a way that wasn’t previously feasible due to orderbook backlogs.

Broader technological developments—be they in sales and distribution, customer service or in airline and airport operational processes—are likely to come increasingly to the fore, dictated by an urgent requirement for cost reduction and efficiency.

It’s a truly anxious time and there is going to be considerable pain, affecting the livelihoods of many in the industry. However, looking ahead, I remain hopeful that out of all this confusion there will be a rebuilding and a real renaissance for this industry, in which it will once again be a force for the good of humanity, as it continues to be in its air cargo operations.

John Strickland is director of JLS Consulting in the UK.