What challenges face network planners in 2023 and beyond? Patrick Edmond of Dublin-based aerospace and aviation strategic consultancy Altair Advisory offers guidance
It’s a truism that planes only make money when they’re in the air. But being in the air is not enough: those planes need to be deployed efficiently and profitably, and that’s the role of the network planning team within an airline. Consistently delivering the absolute optimum is well-nigh impossible: as a wise fleet planning lecturer in Cranfield (a well-known UK aviation university) was fond of saying, “It’s not about getting it right, it’s about minimising the extent to which you get it wrong.” Network planners are operating in a high-stakes environment, juggling constantly changing demand, an evolving competitive situation, and a range of constraints – airport slots, crew availability, aircraft performance, schedule robustness against disruption – to deliver the best possible profitability, not just on one day, but day in day out through the scheduling season – and then doing it all again in the next season.
Even a hermit returning from years-long seclusion would likely be aware that the last three years saw colossal Covid-driven challenges for airlines. First, demand collapsed in the face of the rapidly spreading pandemic and the raft of disparate travel restrictions imposed by governments around the world. Airlines serving large domestic markets such as those in the US, Russia, Turkey and India fared significantly better than others while national borders were closed. Covid represented a new and uncertain future against which airlines’ standard forecasting approaches (largely based on variants of ‘what happened this time last year?’) were helpless. The crystal ball was cracked and network planners were flying blind.
Paradoxically, it was easier for airlines to shut down their networks in 2020 in the teeth of Covid than it was to restart them one or two years later. Especially for a hub carrier, a route network is an intricately dimensioned web all of whose parts are calibrated to work together in terms of capacities, frequencies and connection possibilities. Once the circuit breakers have been pulled to shut down that network, restoring it smoothly is exceptionally difficult: long-haul routes have insufficient feed until the majority of the short-haul network is back, and conversely, ongoing geographical restrictions such as China’s two-year-long pulling up of the drawbridge amputate big chunks of lucrative long-haul traffic. It’s only now, in early 2023, that we’re finally seeing China beginning to plug itself back into international travel, though the risks associated with the fast-spreading virus within that country remain very real.
Airline networks tend to evolve in what evolutionary biologists would call ‘punctuated equilibrium‘: little or no change for a while, followed by significant changes before everything settles down again. In the case of networks, those big changes happen twice a year, at the start of the northern summer scheduling season on the last Sunday of March, and the northern winter season on the last Sunday of October. Airline planners work around a set calendar for filing new slot requests, receiving new allocations and handing back the slots they won’t need. And that calendar in turn gets filled out with other events, especially the annual ‘speed dating‘ conferences such as World Routes and Connect which bring airline network planners and airport route development people together to pan for network gold together.
Flash back to late February 2022, and the Connect conference taking place in Tampere, Finland. The mood was upbeat: Covid restrictions were being lifted and strong summer demand was in prospect. But on the second morning of the conference, attendees awoke to the news that Russian tanks were rolling towards Kyiv, and a tired-looking Martin Gauss, Air Baltic CEO, described how he and his team had been working since the small hours to reroute their Ukraine-bound aircraft and evacuate staff and passengers. And once again, though trivial alongside the misery and suffering being inflicted on the people of Ukraine, the airline industry faced a new and unexpected crisis. The Connect conference venue was in Finland, and Finnair has ended up being one of the worst-affected airlines. Having brilliantly built its network around Helsinki’s favourable location for Europe-Asia connections, the airline now found its unique selling point a unique vulnerability. The closure of Russian airspace not only imposed long detours on Finnair’s Asian routes, greatly increasing its fuel costs and complicating its crewing, but the longer flight times essentially broke the airline’s hub schedule.
It’s now thought that ‘May you live in interesting times‘ is not an ancient Chinese curse after all, but the airline industry could be excused for feeling cursed by the level of interestingness it’s been experiencing. So what’s next for network planners in 2023 and beyond? We can perhaps summarise the main trends under two key headings: agility and sustainability.
Network airlines who had spent years painstakingly building up their hubs, designing schedules and networks around connecting traffic, found their plans upended by Covid and Ukraine, forcing a new kind of adaptability over and above merely grounding their fleets. Numerous carriers deployed their widebody passenger aircraft as ad-hoc freighters (bringing the unlovely term ‘preighter‘ into the English language). Other airlines rejigged their schedules to redeploy capacity in ways they might not previously have considered. Faced with a number of no-longer-economic Asian routes, Finnair moved some of its long-haul aircraft to a new base in Stockholm in 2021, before closing that base in 2022 and entering into a joint venture with fellow OneWorld member Qatar Airways to provide feed from Nordic cities to Doha. Aer Lingus opened a long-haul base in Manchester serving the US and the Caribbean. Gulf Air launched summer-only flights to Santorini and Mykonos. And so on.
The need for increased agility hasn’t gone unnoticed. Various tech start-ups have come to market with new approaches to airline forecasting, distribution, and revenue management, seeking both to go beyond the ‘versus last year’ forecasting paradigm and to facilitate a more flexible approach to schedule planning and optimisation. Smart airlines are learning lessons from their Covid experience: “We don’t have to wait for a new season to make changes. When it was necessary, we were able to change routes and schedules quickly – let’s work on making that flexibility the new normal,” they say.
It sometimes seemed as though hardly a day went by in the second half of 2022 without another announcement by an airline of a deal to purchase sustainable aviation fuel (SAF) in the coming years. In large part this was an implicit recognition that impending EU legislation, the so-called ReFuelEU Aviation scheme, will impose an obligation on airlines to uplift a rising percentage of SAF, and that SAF is a scarce commodity. ReFuelEU Aviation is part of the European Commission’s Fit For 55 package – which is not, as its name might suggest, a wellness programme for the middle-aged, but a wide-ranging initiative to reduce Europe’s 2030 net greenhouse gas emissions by 55% compared with 1990.
Especially in Europe, sustainability is going to dominate airline strategy over the coming years – and that applies to network planning too. Airline planners, as well as other stakeholders, are having to educate themselves rapidly.
Some network trends are already visible. France has received EU approval for legislation which would ban domestic point-to-point flights where there’s a rail alternative taking less than 2½ hours. Although few routes are impacted, the trend is clear. The European Commission is preparing for a review of EC1008/2008, the so-called Air Services Regulation, which will address issues of aviation sustainability, and there are already indications of how policymakers are thinking. Air routes that compete with high-speed trains will be viewed less favourably, as will the practice of selling air tickets below cost (a staple of many revenue management systems, and an approach especially favoured by low-cost carriers to stimulate demand).
Network planners will be at the centre of airlines’ response to this changing environment: as KLM CEO Marjan Rintel (a former boss of the Dutch railway operator NS) told the Financial Times in December, “If you’re serious on reaching your sustainability goals, the train is not a competitor. We need to work together.” Several of the tech providers mentioned above who offer virtual interline solutions also propose multimodal itineraries, combining air and rail travel in a single booking. Especially at slot-constrained airports with railway stations such as Amsterdam, Paris-CDG or Frankfurt, it can make sense to replace short-haul flights with train connectivity, freeing up slots for more lucrative, longer range flights. And meanwhile, LCC planners are going to have to reckon with a future of higher ticket prices (due to the higher cost of SAF as well as to carbon pricing under the EU Emissions Trading Scheme, EU-ETS) and a likely prohibition on below-cost selling. LCCs have long relied on price-driven demand stimulation to fill their planes, and that stimulation will be less effective in the future.
So where does this leave our network planners? Airlines face a new world of accelerating change and rising input costs, and network planners now need to consider route economics differently: can they make routes work at higher fares? Can they partner effectively with rail companies? Indeed, will airlines continue to grow or are they faced with managing their retrenchment to a sustainable size? IATA and the major OEMs may continue to confidently proclaim a future of sustained 4-5% global air traffic growth, because their businesses depend upon this growth, but the smart planners will be evaluating scenarios where growth is far less. Planes may only make money when they’re in the air, but for airlines to continue to make money in the future, there may need to be fewer aircraft flying.
About the author
Patrick Edmond is the founder and Managing Director of Altair Advisory, a specialist aviation strategy advisory and consulting firm with an increasing focus on sustainable aviation. Altair works with a range of industry stakeholders (operators, airports, ANSPs, OEMs, regulators) to formulate strategies for development and sustainability.
Patrick has over 20 years of aviation-industry experience across senior roles in the airline, airport, and aircraft leasing sectors, as well as a background in strategy consultancy.
He has headed up the network and strategy function for three regional airlines and is a board member of the European Regions Airline Association (ERA).
From 2013 to 2019, Patrick was Group Strategy Director for Shannon Group plc, the operator of Shannon Airport in Ireland. In this capacity he led the expansion of Shannon’s International Aviation Services Centre, a successful and growing aerospace industry cluster consisting of over 80 independent aviation and aerospace companies.
Patrick studied Computer Engineering at Trinity College Dublin and Carnegie Mellon University in the USA, and holds an MSc in Air Transport Management from Cranfield University in the UK and an MBA from Purdue University in the USA.