With the world going into lockdown, the COVID-19 pandemic is bringing all travel to a grinding halt. With several nations and corporates rapidly imposing strict bans on flights, the airline industry is badly hit. The World Economic Forum says that restrictions on international flights will cost the industry an alarming $880 billion. Aviation experts admit that this black swan event will impact the industry more than 9/11 which saw several airlines going bankrupt, financial packages propping up others and a complete change in aviation’s approach to security. COVID-19 is going to have longer-term repercussions and create a bigger hole than what 9/11 did. It is imperative that airlines act quickly to reduce the impact on their customers, employees, stakeholders, operations and bottom lines.
How have airlines responded to the sudden shock
Airlines have already responded with alacrity. Most have reduced capacity by 70-90% on long haul or transatlantic flights and 20-25% on domestic flights; all new capex investments have been frozen; even opex is being brought down by deferring payments and reducing maintenance and partner costs; From the headcount perspective, airlines are enforcing voluntary time outs, freezing hiring and have withdrawn paid leaves. A second line of action involves staunching the bleeding by some liquidity infusion measure like discontinuing pension fund contributions, deferring any share buybacks, selling mileage points to card providers in a forward sale and requesting airports for slot waivers. Some airlines were even running almost-empty flights in a desperate bid to retain their takeoff and landing spots – if they don’t use the spots, they could be lost to competition. This is the extreme response expected in times of war – and airlines are recognizing that COVID-19 presents a situation grimmer than war. Despite all these severe measures, some airlines will not make it. Finally, the writing is clear on the wall – Airline industry may not survive without government aid.
But even as airline stocks continue to falter (by 16 to 20%) and travel ecosystem companies like Amadeus and Sabre frantically try to cut costs-- airlines need to go beyond conventional thinking and use technology to dig in for the long haul.
Preparing for the post COVID-19 era with 3 technology strategies
Clearly, in the immediate future, the industry needs to maintain a laser focus on cutting costs. Simultaneously, it must keep in mind the action it needs to take when fears around COVID-19 recede and normalcy starts to return.
There are three areas that airlines must be ready with for the post COVID-19 era: They can deploy analytics to deliver good real time information for decision making, bring focus to demand stimulation and drive down costs for their customer care processes without compromising customer satisfaction or convenience.
1.Analytics for reliable and useful real-time information: The most urgent need is to analyze the frequencies of flights that would operate on cash loss in the next quarter and beyond. This means acquiring data on the spread of COVID-19, flight restrictions being imposed, customer sentiment, etc., and using predictive analytics to forecast losses accurately. Doing this allows airlines to see if they have cash reserves large enough to sustain the flights ahead of time as well as take realistic measures to bring down losses on these routes.
Analytics can also prove effective to predict and prepare for the outcomes of bookings and cancellations in real time (Net bookings, Gross bookings, Net new) by markets. Combined with the airline’s experience, data-backed analytics will provide insights to pinpoint geo-specific interventions for maximum ROI. This can include scenario planning for various options like what-if analysis for future demand by travelers across categories (business, leisure, family, solo, etc.).
Perhaps the most urgent area where analytics can be applied is to gauge the pulse of customers through an external consumer confidence index. By examining leading indicators inside and outside the industry, airlines can measure the comfort level of customers to start traveling again and the precise levers that will influence them to start early rebooking. Indicators that could suggest resumption of travel activity could be credit card activity picking up, retail spending going up (online) and number of new cases/new clusters of this virus coming to an end. Weather can be another indicator.
2.Demand stimulation and preparing for the future: Airlines would do well to be ready when demand returns. They must be ready with attractive offers to stimulate demand. Packages, promotions and deep discount plans must be prepared in advance for leisure and business travelers. For instance some airlines are offering deep discounts right now in US for flights to Hawaii and that sector is observing a lift in bookings. How much should yields be relaxed to stimulate demand? What kind of offers will work for specific destination and categories of travelers? This can be done using revenue management controls. Airlines could reach all travelers who made future booking cancellations with personalized offers based on the revenue management systems’ adjustments.
Most important of all will be the ability of the airline to push new booking sales to the back end, once demand returns. One of the most powerful tools currently available to manage demand, digital assets and content is the Adobe Experience Manager (AEM) suite. Airlines that use these types of tools will be able to draw travelers with the exceptional experience they offer. COVID-19 is likely to reset the industry and customers will not necessarily return to the airlines they have been loyal to. Instead, they will opt for airlines that focus on keeping their passengers healthy, safe and engaged with great experience from booking to refund (where necessary!).
3.Customer care initiatives to ease call centre pressure: One of the critical learnings from this unfortunate episode is to ensure that airlines have simple and re-assuring self-service capabilities that allow customers to cancel, refund or re-schedule their tickets without having to call travel agents or a call center. This will help ease call center volumes, lower costs and ensure that customers are always in control. In addition to this, airlines would do well to use online, kiosk and in-flight videos that show aircraft cleaning and sanitization procedures to rebuild customer confidence. These videos could extend to an emergency process meant to safeguard the wellness of customers and crew, the care and regulatory adherence that goes into preparation of in-flight meals, etc.
Finally, it has become essential to educate and train internal employees in how to handle customers during health-related emergencies such as the COVID-19 pandemic. This itself demands a dedicated information and training platform that can be quickly updated, and the content redistributed to employees across the world.
Additional measures for the wellbeing of passengers
There are additional long-term measures that airlines must not lose sight of to safeguard the health and wellbeing of their passengers:
- Create self-service facilities like automated baggage handling and biometric-based kiosk check-ins
- Bring in thermal scanners that feed into a central operational control center to create overall health intelligence of passengers and alerts for the airport administration
- Use permanent installations of infrared cleaning tools for aircraft interiors and employ VR to verify and certify each aircraft as “ready to board”
- Accelerate remote working infrastructure for non-customer facing staff (like contact centers, IT teams, corporate group). This can be done using virtualization, cloud and collaboration tools that also bring down the cost of operations.
- Accelerate Cloud migration which involves taking the data center applications to the cloud thereby saving on IT costs of infrastructure and operations (by using AI/automation). This was anyway ongoing at a lot of prominent airlines. However, the speed of such migrations is even more critical now to show significant cost benefit.
These are uncertain and demanding times for every industry. However, the airline industry is uniquely impacted. Post COVID-19 we will find new leaders emerge because they took precautionary steps ahead of the rest; the consequences of retrenching will be felt later when new employees will have to be on-boarded and trained; airlines will have to find ways to bridge the gap left behind by scores of small and medium businesses that currently support the industry but will not be able to survive the economic impact of the virus; and new travel hubs will emerge as economic and political vectors reorient themselves.
It is folly to try and accurately forecast the future. But in this instance, it is safe to assume that technology will play a larger role in securing the health of airlines in uncertain times. To emerge stronger from the COVID-19 downturn, Mindtree can implement these technology strategies for your travel brand. Click here to learn more.