Airlines face a future where they are smaller and operating at a lower cost but must find ways to work flexibly and still provide a good level of service to customers.
The combination of these four elements will help carriers navigate whatever happens next, according to Accenture, which outlines possible scenarios the market must face going forward in its Future In Flux report.
Jonathan Keane, managing director and global head of aviation at Accenture, says airlines have to do all four things in tandem to be able to confront the possible scenarios.
The scenarios laid out in the report are:
- Remarkable recovery - where airlines need to be able to respond to pent-up demand with recovery to levels similar to 2019 seen in 2022.
- Collective coexistence - the world coexists with the virus with ongoing discipline and containment measures and the industry has to cope with demand levels well below those of 2019.
- Market mayhem - a situation with permanent volatility, an uncertain timeline for a vaccine with some markets and governments losing control of the virus. In this scenario, to survive, airlines would need to shrink and focus on any remaining areas of demand.
- Darkest days - the virus rages uncontrolled and companies must rethink business models amid mass failures.
Keane says the first is more of a “hopeful” scenario than anything else, with the breakthrough of a vaccine that works and can be rolled out at scale.
Collective coexistence, he argues, is the situation that most carriers are modelling themselves to.
“The question becomes are they really modelling it effectively. We’re kind of in that world now where local lockdowns will become more prominent across the world. What we have learned is how, with effective containment and discipline, we could operate in that world.
“The question is how long do we exist in that collective coexistence, get to a place where behaviors become more institutionalised and it’s harder to get people back to travel.”
Accenture research shows that 43% of consumers are reticent about reentering society and 58% are uncomfortable with taking a flight.
With the aviation industry already predicting it won’t recover until 2024, there are questions about whether many airlines can survive that long.
Keane says that’s why airlines must look at their current structure with a “flexible cost structure” going forward.
“If we look at the amount of debt the industry has taken on in six months, essentially we have created a generation debt. It has never been a highly profitable industry and it’s going to take a long time to pay back. If this goes on longer and thinner, if it goes on to Darkest days, airlines are going to have to think about really invasive cost reduction.”
This also raises questions about whether airlines could continue to operate within the same safety regulations they have up to now.
Keane says: “For an industry that has been so good about safety and security, there will come a point where people say I cannot guarantee those safety and security levels and they wouldn’t be able to operate any more.”
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Speaking to PhocusWire ahead of a presentation of the Future In Flux report at the World Aviation Festival this week, Keane says that it has discussed the scenarios with airlines to get them thinking about what they can do to prepare.
“It feels a bit like a marathon for them but they haven’t quite got to the start line. It has been going for six months and they are shattered.”
He adds that the industry has done a good job in the past six months in terms of responding to the crisis and only now has time to "catch breath."
Underlying the need for addressing the current structure is a greater need for collaboration than ever before.
“It’s just about collaboration within the industry, the key is how we work with governments. We have to get to the point where we don’t just talk about collaboration, we act.”