Reconfigured fleets, improved demand forecasting and increased operational flexibility will all be key in driving the world’s post-Covid-19 commercial aviation industry, says Cirium CEO Jeremy Bowen.
The worst year in aviation history might be behind us, but government-enforced lockdowns and border closures continue to restrict movement and reduce demand for commercial aviation worldwide.
Earlier this year, Cirium’s Airline Insights Review revealed the pandemic had rewound global passenger airline traffic to levels last seen in 1999. A staggering 21 years of aviation growth was wiped out in a matter of months.
This led to more than 40 commercial airlines ceasing or suspending operations in 2020 around the world, while we witnessed the profound impact of the well-oiled flight scheduling system thrown into chaos. The year closed with two thirds of the world’s passenger fleet still grounded – some of which will never take off again – and those aircraft in service are flying significantly fewer hours.
However, there are some silver linings. Carriers welcomed the opportunity to return newer aircraft to the skies, particularly those which have an excellent range such as the Airbus A320neo aircraft and the recently reapproved Boeing 737 Max. In fact, at the end of 2020, only 10 per cent of A320neo aircraft were in storage.
So, what about the future? At the IATA 2020 annual general meeting held online in November 2020, it was predicted that the number of flying passengers would not return to 2019 levels until 2024. That is one of the more optimistic scenarios.
Until Covid-19 vaccines are rolled out more widely, the airlines will be impacted for some time – particularly as the pandemic continues to halt international travel. Airlines are already finding new ways to try and re-grow air travel through building traveller confidence with safety measures and communications and offering testing strategies.
What the pandemic does enable is the opportunity for the carriers, especially the major ones, to try new things without upsetting the boat too much. For example, retiring and reconfiguring aircraft, uncovering new ways to forecast travel demand and adopting more flexible flight scheduling methods.
Retirement and reconfiguration
First, the sudden demise of certain aircraft types in 2020 is one of the most visible effects of the pandemic on aviation – and the trend is set to continue.
For the A380, in particular, the outlook in 2021 remains bleak. Many airlines have already declared the aircraft too large for their current needs, while Airbus has announced it will cease production completely. Only Emirates remains committed to the A380, announcing new aircraft deliveries.
Operators struggle to fill larger aircraft as demand for long-haul travel continues to stand at a halt, while such aircraft are generally less efficient per seat than next-generation twin-engine rivals such as the Airbus A350 and the Boeing 787 Dreamliner.
However, some aircraft types in storage will be converted to freighters. At least 70 aircraft conversions happened in 2020 and this is expected to increase in 2021 to approximately 90. The trend is largely driven by the strong growth in e-commerce, helped by customers making their purchases online.
In addition, more than 150 commercial jets were used for cargo in 2020, albeit the aircraft did not undergo a physical conversion. Many of these aircraft are being used in cargo networks to replace the temporary loss of cargo capacity until long-haul passenger networks recover.
Improved demand forecasting
Before the pandemic, airlines relied on historical bookings data to forecast travel demand, although this saw carriers operating flights with empty seats. The impact of Covid-19 exacerbated this inefficiency as historical bookings were no longer comparable.
In Q4 2020 alone, bookings were down 78 per cent compared to the same period in 2019. Adding to the unpredictability, the summer period saw 40 per cent of bookings being made at the last minute – as little as one to three days before travel.
New indicators are needed instead, such as travellers’ online interactions, social media activity and their sentiment – these can be monitored around global real-world events and trending activity. Signals using artificial intelligence (AI) can automate the information for airlines to understand where flight activity may increase.
Such indicators were used by airlines as a secondary source previously but are now becoming primary indicators to predict future travel demand and develop pricing strategies.
Airline operational flexibility
In a pre-Covid world, most travellers would book flights between six and 12 months ahead. This long-range booking window has fallen to just six to eight weeks, so airlines must be able to react much more quickly when it comes to demand pricing and equipment use.
The increased volatility of flight scheduling and booking numbers must also be met with dynamic approaches to aircraft and crew rostering and there is a clear need for closer cooperation between network planning departments and scheduling.
The transition might prove challenging but dynamic flight scheduling will help break down the legacy silos which continue to exist between commercial planning network teams and revenue management. In the months ahead, airlines will thrive on operational resilience and seamless collaboration.
Other trends Cirium has identified include greater consolidation of airlines, particularly in the Asia-Pacific, where more domestic competitors will merge or be acquired. Merging airlines usually leads to a stronger single entity and, against the backdrop of the pandemic, this increased level of resilience might just prove to be an important asset.
Meanwhile, the implementation of AI technology will accelerate and automate the traveller experience. Real-time proactive information for travellers, including notifications and alerts, will become more critical than ever.
With so much uncertainty for passengers around flying during Covid-19, the onus is on airlines to communicate more effectively about the status of flights automatically and improve the customer experience.
But AI is not just about alerts and notifications. It has huge potential to streamline the entire travel experience, from the minute the passenger leaves their front door.
In the post-Covid world, we should expect to see more emphasis on a touchless airport and in-flight experience – and so we’re likely to see new technologies come into use as airlines seek to improve the experience of flying.
Lastly, the leasing sector is likely to take on an even greater role as the financial struggle for airlines prevails. In 2020, leasing companies pushed past the 50 per cent ownership share of the global fleet for the first time and the trend is set to continue.
Sale-and-leasebacks in particular are an immediate source of cash – something airlines desperately need in these challenging times.
One thing we know for sure, is that aviation has a proven record of resilience. At Cirium, we are confident the industry will weather this difficult period and emerge in better shape – with younger, more fuel-efficient aircraft – gradually navigating its way to recovery in the years ahead.