Insights

Quarterly industry reports from AviaPro Consulting

June 2020; Edition #1

Airports are The Direct Operating Cost of an aircraft

opening up, and
airlines are getting
ready for takeoff
by AviaPro’s Head of Industrial Services,
Jorge Abando
Across the globe, airlines are
implementing procedures to bring a new
level of safety into the cabin that ensures
their passengers feel protected from each
other! Who would have ever contemplated
this scenario six months ago?
Operators initially involved in repatriating
passengers on chartered flights have
ensured their cabin crew’s safety by
outfitting them with PPEs from head to
toe. In many cases passengers were also
asked to wear masks and gloves for the
duration of their flight. But will this be the
new norm?
flying from point A to point B will break
even when just enough passengers are
paying just enough of a fare each. With
low average fares, the flight needs to be
practically sold out. Flight costs will likely
increase given additional costs of the
new COVID-19 measures being taken,
which are likely to be passed on to the
consumer. Airlines are faced with the
challenging task of having fewer seats to
sell in the case of a blocked middle seat,
while trying to keep fares affordable.
Rethink pricing, and rethink
revenue
The perceived value of a ticket will be
different to every passenger, given their
individual needs, wants, and desires for
air travel. Indeed, these are the basic
tenets that drive the practice of Revenue
Management (RM) systems.
conditions imposed on the inventory of
seats available. What can entice the sale
of a higher fare are the perks granted. A
new operating environment brought on by
COVID-19 suggests a new set of imposed
conditions and a new set of perks on the
inventory to influence buyer behaviour.
Competitive positioning is still the key
element. While customers prefer lower
prices, price is more often a secondary
consideration in most purchase decisions,
and as travel restrictions are lifted there
will be seat inventory challenges. An
airline’s reputation for quality, service
and availability are always key decision
factors. AviaPro’s expert consultants
are available to help airlines adjust their
Revenue Management strategies in the
post-COVID-19 landscape.
Staff monitoring passengers’ body
temperature on board of a plane in Boryspil
International Airport, Kiev (Image: Vasyatka1)

Many measures have been imposed

on passengers by airlines, such
as mandatory hand sanitization,
temperature checks before departure,
and mandatory use of face protection for
the duration of the flight.

Who will absorb the cost of the

changes?

In the cabins, procedures for more routine

sanitization efforts and pre-packaged
meals are in effect, and there has been
much debate whether the infamous
middle seat should be sold at all.

In the past, passengers seemed all

too willing to accept newly imposed
conditions to achieve their desired travel
goals, such as when restrictions were
placed on carry-on liquids, and when
increased security checks at airports
meant longer queues and more delays.
The question now is, in addition to these
newly imposed conditions, how much
more is the passenger willing to pay in
ticket price, in the face of an industry
fighting for survival?
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one seat, which can be imagined as a
price-demand curve, with demand on
the X-axis. The area under the curve
represents the airline’s total potential
revenue, presuming it can offer an
infinite number of ticket prices so that
each and every willing traveller can be
Get in touch
tempted to buy a ticket. What stops many +1 (647) 255-8887
passengers from gaining the advantage info@aviaproconsulting.ca
of the lowest fare on the curve is a set of aviaproconsulting.ca
Are air cargo supply chain
members ready for the
post-COVID-19 era ?
by AviaPro’s Air Cargo Specialist,
Sam Okpro
“Air Cargo Makes it Happen” is an IATA
slogan that has now been given credence
by COVID-19 as the Air Cargo industry has
for the first time in history overshadowed
the passenger business. During this
pandemic period, we have stopped being
the poor second cousins of the passenger
business. Yeah! Whilst this may only last
as long as the passenger aircraft are
grounded, we now have to start looking at
the post-COVID-19 period.
The survival of the Air Cargo industry post
-COVID-19 will depend on the successful
resurrection of passenger aircraft that
are parked in various locations around
the world taking up to the air in the future.
The big question is, are you as a member
of the Air Cargo Supply Chain making
adequate preparations for the post-
COVID-19 era? In other words, what steps
are you considering to take advantage
of some of the benefits of the lock-down
COVID-19 period?
To look at some of the necessary key
steps that should be considered, we will
look at some underlying factors that
should be part of the equation when post-
COVID-19 plans are being developed.
The upcoming recession
It is highly expected that the worldwide
lock down and business closures will
eventually lead to one of the most severe
recessions in modern times and we hope,
not a depression. Traditionally, air cargo
is an indicator of an upcoming recession
way before it hits economies around the
world.
Given the fact that air cargo is playing a
lifeline connector role to much needed
medical equipment and PPE’s during this
pandemic, it will not play the traditional
role of a recession indicator.
Image: Lufthansa Cargo
However, the general expectation is that
it could take until 2023 for passenger
demand to return to pre-COVID-19 levels
and since circa 80% of global cargo
is transported in the bellies of joint
production (passenger) flights, this spells
trouble for available cargo capacity prior
to 2023.
With a lot of airlines converting their
wide and narrowbody joint production
aircraft to carry cargo in the passenger
cabins (referred to as Cargo-in-Cabin),
or CIC either between seats or with
seats removed, there will be more of this
capacity made available to accommodate
e-Commerce and non-Medical equipment
traffic between now and when adequate
passenger aircraft are back in the air.
Cargo Facts estimated that as of May 21,
more than 1,450 passenger aircraft are
operating CIC services. This number is
bound to increase during the passenger
aircraft lockdown period.
Embracing digital transformation
Aviation is a major engine for the world
economy, supporting the livelihood of
some 65 million people around the globe
and the Air Cargo Supply Chain is a proud
family member. However, compared to
other industries like automobile, banking
and passenger travel, air cargo supply
chain members lag behind in terms of
embracing digitalization, despite the
impact of integrators and the increase of
e-Commerce.
We feel however that COVID-19 could
act as a digitization accelerator in the air
cargo supply chain and should be one
of the post-COVID-19 era items that will
need to be addressed by supply chain
members.
Easy and transparent access to capacity
and rates will be a major post-COVID-19
requirement and challenge. Work
from home has encouraged a lot of
transformation such as increased needs
for visibility, e-Booking, Track & Trace
and other functions. Digitalization and
enhanced rates transparency will be
major post-COVID-19 requirements for
eventual survival that supply chain
Passenger aircraft cabins converted
to freighters have played a vital role in
capacity supply during the COVID-19 period
(Image: China Eastern)
members must be ready to tackle and
embrace.
Multiple digitization items need to be
effectively embraced to allow our industry
to start catching up to the requirements
of today’s shippers.
These include effective and transparent
e-Booking, Track & Trace, digital customs
filing, and digital quotation solutions,
as well as eAWB, e-freight, electronic
invoicing and cash collection, mobile
applications, highly automated digital
warehouses, chatbots for customer
services, etc.
Effectively embracing digitization will also
assist in improving the traditional average
airport-to-airport 6 - 10 days transit
time (depending on demand & supply
situations) that needs to be reduced
to meet e-Commerce requirements
and the demands of the“screenager”
generation. It will also help our industry
to prevent traffic loss to the rail mode on
the China or Europe route that may have
a 14 – 17 transit times at significantly
lower rates. The option for sea transport
could also be a challenging competitive
factor given the transit times progress
made by this mode. Our industry must
effectively embrace digitization to prevent
e-Tailers, Virtual Forwarders and other
new competitors from turning us into the
Kodak, Texaco or Blockbusters of our
industry.
Need expertise for mapping
out your post-pandemic
strategies?
AviaPro Consulting is available
to assist you in getting ready
to meet these and other post-
COVID-19 challenges. We are
in this together, and together
we will come out ahead.
Unprecedented Times, Incentivizing customers to buy current services, to offer a more physically
tickets when they can’t travel distanced environment. Its 120-seat A319s
Unprecedented Solutions therefore are being limited to 84 seats for
At a time when many countries have sale.
by AviaPro’s Head of Consulting,
closed their borders to international
Kevin Clarke
travel, and people are fearful to share a Air Canada Jetz A319 (Image: Shutterstock)
cabin with other travellers who might be
During these unprecedented times, some
infected, airlines are facing eye-watering
airlines and governments are coming up
declines in revenue. After all, who would
with out-of-the-box ideas on how to deal
buy a flight ticket at a time like this?
with the impact of COVID-19 on the air
travel industry.

Airline employees are being laid off as

planes are withdrawn from service.
Slumping travel demand means
significantly reduced airline revenues.
Airlines worldwide are wrestling with
how to socially distance passengers in
the cabin. Not to mention the economic
impact of the dramatic decline in tourism
worldwide.
Finding jobs for laid-off workers
In Australia, Qantas announced in March
that it was grounding 150 aircraft and
suspending two-thirds of its workforce for
at least six months.
According to Qantas CEO Alan Joyce,
most staff were able to take paid leave to
cover much of that time. For those facing
the prospect of leave without pay, the
airline worked with national supermarket
chain Woolworths to secure up to 5,000
short-term roles in their food stores and
distribution centres. In doing so, Qantas
secured them enough income to get by
until their jobs are reinstated post-crisis.
Qantas jets parked at Sydney due to
COVID-19 flight cuts (Image: Shutterstock)
Image: Shutterstock
To address this issue, South America’s
LATAM has come up with an interesting
concept. They are offering their
customers a $500 voucher which, if
purchased today, can be redeemed for
$650 once the crisis subsides and travel
resumes. In other words, buy now, and
redeem later for 30% more.
For those who know they will need to
travel post-COVID, this offer is essentially
a guaranteed 30% return on investment.
And for the airline, this scheme generates
revenue at a time when revenues are near
nil and expenses continue to mount. A
novel idea to be sure. Let’s see if it proves
successful.
Deploying all-business-class
aircraft to reduce seating density
By comparison, the all-business class
version has only 54 seats, offering
passengers more personal space. Since
they are larger, more comfortable seats
with increased spacing between rows, Air
Canada can charge a significant premium
while providing a more socially distanced
cabin option for its customers on these
routes. Further – since the demand for
sports team charters has dried up, these
Jetz aircraft would otherwise be sitting
idle, hence this operation is performed at
marginal cost.
Paying tourists to visit
While most countries are feeling the
economic hit of decreased tourist arrivals,
some are choosing to do something
creative about it. The Italian island of
Sicily announced it will pay a portion of
tourists’ trip costs to visit later this year.
Specifically, they are offering to cover 50%
of airfare costs and one of every three
hotel night stays for their visitors. Not a
bad deal!

Airlines worldwide are grappling with

the question: how can social distancing
principles be applied on an airplane? After
all, increasing the number of seats on
aircraft to boost profit has been the name
of the game for years. In Australia, Qantas
CEO Alan Joyce has said that fully applying
social distancing rules on its B737-800s
would result in a maximum number of 22
View over Taormina, Sicily
passengers on-board – this on an aircraft
(Image: Shutterstock)
with 174 seats. Not a sustainable option
for any airline.
Similarly, Japan has created a plan to
attract tourists back to their country, by
On the other side of the world, Air
offering to pay half their travel costs. The
Canada is trying something different. It
scheme is projected to cost Japan $12.5
is deploying the three all-business class
billion and could be in place as soon as July
Airbus A319s from its Jetz division –
2020. This incentive will no doubt have
usually used for sports team charters
appeal, especially to those whose incomes
– to its busiest business class routes:
have been affected by the COVID crisis and
Toronto – Ottawa and Toronto – Montreal.
who have a diminished travel budget.
This makes sense because Air Canada is
blocking the middle economy seat on its
One thing is sure: more solutions lie ahead.

Keep up with our blog for useful insights on the aviation sector.
Every week, AviaPro’s team of consultants offer up key insights to help aviation industry professionals
navigate the crisis brought on by the COVID-19 pandemic.
About us
AviaPro Consulting was
founded in 2014 to deal
in every aspect of the
aviation market, operating
in Commercial Aircraft and
Business Aircraft worldwide.

We do everything from
brokerage services, to network
planning, to starting up airlines,
to implementing the software
solutions that are right for you.
Working with AviaPro also
means you’re working with
a global network of aviation
professionals. Our consultants
are based across the world and
truly understand the ins and
outs of all aspects of aviation.
We’re industry veterans with
decades worth of business
know-how, and also pilots,
engineers, and frequent flyers.
The aviation sector is at a
crucial and transfomative place
in its history, and we’re here to
help you navigate it.
To get in touch, click here.
Our news
Introducing our new partner,
Predictive Mobility
AviaPro is excited to partner with Predictive Mobility, developers of
the brilliant AIR.PM platform.
Here’s to a bright future together delivering big data, market intel-
ligence and agile marketing solutions to the aviation sector.
Find out more about our new partnership here.
A very warm welcome to our new cargo expert
AviaPro would like to welcome Sam Okpro to
our roster of specialist consultants.
Sam is an air cargo industry expert dedicated
to assisting small & medium sized airlines and
forwarders meet the pending COVID-19 and
recession upheaval, in addition to meeting
challenges such as digitization and changing
requirements.
With our industry in the midst of a transforma-
tion, his addition to the team couldn’t come at
a more opportune time.