As the coronavirus pandemic continues, India’s airlines will be badly affected. Planning departments are on overdrive. Fleet reductions, forced leave without pay, restructuring, renegotiation of contracts, delayed deliveries — all are on the table. Yet, for the majority of the airlines, the outcomes are binary: sale or shutdown. The pre-Covid model that enabled 207 million air-trips in FY20 is at odds with post-pandemic realities. Historical data no longer informs the future. The only option is to start from scratch and zero-base the airline model.
The pandemic notwithstanding, airline business models have seen little innovation in the past 50 years. The airline product, namely transporting passengers from Point A to Point B, has become slower, more cumbersome and more suspect. Aircraft sizes have decreased, commodification of the experience has increased and the customer experience has gone from bad to worse. Low-cost carriers leveraged this aspect and offered a bare-bones product while promising lowest fares. Effectively, they reasoned that revenues were not to be had so the success depended on costs. And, accordingly, costs were addressed via financial, operational and strategic measures. Quick turnarounds on the ground, leased assets, high aircraft utilisation, crew efficiency and ancillary revenue grew.
At the same time, customer experience did not become better; rather, the customer adapted to the new reality. And the levels of discomfort customers would go through for a low fare kept setting new standards. Accordingly, innovation has been non-existent. In fact, convenience was often cloaked as innovation and this included a slimmer seat, charging points on seats and the ability to check-in at kiosk. But the pandemic has changed all of this. While much uncertainty remains, health is a key area airlines now have to address.
Increased costs
Health risks are mostly being addressed via sanitisation, security procedures, social distancing and communication. This necessarily increases the time an aircraft sits on the ground, driving up costs. For airlines, this means that their most expensive and core asset — the aircraft — is utilised less. Add to that the increase in ground times, which has a direct impact on labour efficiency and amortisation of costs. With the asset now producing lesser revenue over the same time period, this revenue loss has to be made up by higher prices. And higher prices act as a deterrent to demand, which is already depressed and not expected to recover any time soon.
If that weren’t bad enough, airlines also face the fact that the broader travel experience will be more cumbersome. Travel is driven by convention, cost and convenience. And for the most part, low costs justified overlooking comfort. The inconvenience of airport security — which has been the most stressful part of the travelling experience since 2001 — was overlooked because of the sheer amount of time saved compared to other options; the discomfort of being packed into smaller seats was overlooked because of the price; and the non-existent service standards were overlooked because of the joy of experiences and exploration post arrival. Sadly, the entire travel experience, especially airport security, is likely to get even more cumbersome.
Change in travel experience
For the first time in the recent past, the customer sentiment involves an element of fear. While measures are still being debated — it can be safely assumed that the increased health security procedures and the requirements to get to the airport early are here to stay. Further, while on board, a cough may be greeted with the same suspicion as using the lavatory nearest to the cockpit. The mini chips, peanuts and can of Coke, priced at five times the retail value, may not be available in the future.
The ease of travel experience has been wanting, and for decades. We need true innovation, not just one that drives convenience by taking away the human element — such as booking tickets online, checking in via kiosks and buy-on-board meal options — but one that goes to the heart of air travel with seamless security, faster and more comfortable aircraft, and a return to rational and sustainable pricing methodologies driven by technology and transparency.
Going forward, in all elements of airline travel, touch-free interaction will be essential. Facial recognition, RFID and computer vision can be leveraged at the airport. Manufacturers like Airbus and Boeing may have to rethink airplane designs, from seating to air circulation, and perhaps a focus on speed over size will find its way back to the forefront.
As it stands, airlines are staring at a steep descent and efforts are underway to recover and stabilise. The India market may likely see the shutdown of one more airlines in addition to the sale of Air India. For those that survive, their airline model must be transformed. Zero-basing the airline model is the only way forward.
The writer is the former head of strategy at GoAir. He was previously with CAPA-Centre for Aviation