Adapting to Post-Covid Fear-of-Flying
By Brock Friesen and Horst Findeisen
In the pre-Covid-19 world, economic success in the airline business was largely driven by superior network planning and revenue management – schedule and price. In the post-Covid-19 world, schedule and price will become even more important to airline survival and success. The biggest new challenge will be that markets now behave very differently. Predictive models based on historical commercial data are therefore useless. They must be adapted to the new normal.
Post-pandemic travel market unclear
The new growth trends among market segments have not emerged yet. It may take years before reliable patterns can be identified and used to recalibrate forecasting models. Many questions are still unanswered. What will be the long-term impact of “Zoom” and “Teams” on business travel? Bill Gates, for one, just predicted that 50% of business travel will never return. How many former airline customers will now feel safer travelling in their automobiles. How long will leisure travellers continue foregoing early booking discounts in favor of buying tickets late for fear of last minute health risks? No doubt there is pent up demand, but the characteristics of that demand are quite uncertain.
Fear of flying will remain
Perhaps this uncertainty is best summed up as an underlying fear of flying. Our airline clients are reporting that nowadays the forward booking horizon is extremely compressed. Why? Passengers desire the flexibility to commit, cancel or rebook on short notice, all to reduce Covid-19 uncertainty. Even when Covid-19 subsides, residual fear of future viral threats will remain.
Airlines need to adapt their pricing strategies
We argue that the price sensitive market segments leisure and VFR (visiting friends and relatives) will be the mainstay of the market going forward. With fewer of the high margin business travellers, high load factors and yields will be even more important to the viability of flights than previously. Revenue managers need to find meaningful new input data on travel purchasing behaviours and sophisticated data analytics tuned to the new reality. Reinventing their models to reflect a higher mix of non-business travellers and changing trends in leisure travel will take time. At the same time, they will need to find more revenue to pay for the higher costs associated with smaller aircraft and fewer hub connections.
New challenges for planners
To further alleviate the fear of flying, hub and spoke carriers will need to reorient their networks favoring point to point services over hub connections. Covid-conscious travellers will want to minimize queues and congestion in airports. Airline planners will need to build different networks and schedules. If this is what passengers prefer, and are willing to pay for, even die-hard hub advocates will have to reconsider.
Impact on fleets and airports
Point to point networks will impact fleet planning, as such routes will dictate smaller, longer range aircraft, such as the A220, A321LR and 787. For most airlines this will mean recalibrating their tried and tested network planning models.
Already we are seeing an attack of carriers on formerly unassailable fortress hubs, making use of abandoned landing slots, whereas the incumbent hub airlines want the slot use-it-or-lose-it rule to be waived. Examples are Jetblue at London, Westjet at Toronto and United at New York JFK.
Guerrilla Network Planning. Unconventional thinking for unconventional times
Perhaps 2021 will be the year of “Guerrilla network planning” with softer approaches and trial and error. It assumes that airlines make multiple successive schedule changes during the course of a season. Guerrilla network planning recognizes that airline managers may not have enough sophisticated data analytics to make mid-season schedule changes.
Success will depend on all departments coming together to identify early indications of travel demand, leading to judgement-based schedule decisions until more reliable data are available. Now is the time to chase demand wherever you can find it, take a risk, and fail fast if unsustainable, to redeploy the asset somewhere else. Several major international carriers have pointed to this approach as the way forward, although they have not branded it Guerrilla.
UNEX partners have been there, have managed airlines through turbulent, unpredictable circumstances. Bringing together diverse teams, tearing down silo walls to accelerate info transfer and to stimulate creativity, is a much-needed strength now. This ability and a well-developed gut feel are hard to measure metrics, but our track records speak volumes.