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In the macro environment, aviation continues to be a high growth industry with passenger numbers expected to increase by over 5% per annum up to 2037, with over 8 billion travellers per annum. The world's middle class continues to grow and 2019 marked the tenth year of profitable growth. This mission-critical sector for the global economy has been rocked by recent events. We explore the near, medium and long term as the industry comes back online.
Aon’s David Barrett hosts this discussion alongside Peter Bellew, chief operations officer at easyJet, Joan Vincenz, managing director of corporate safety at United Airlines and Paul Hagy, SVP, global corporate treasurer at Aon Corporation.
Our panel of aviation experts share their thoughts and insights into some of the most pressing challenges facing the aviation sector at this time.
Cost Containment has been at the Core
Government support for the aviation industry has differed between airline and country. Cost containment became the initial focus. A number of businesses attracted capital quickly after going to the market early on, leading to greater solvency to weather the storm. Others have undertaken major restructuring programs - and these are likely to continue. The panel members agree that there will be further disruption ahead.
Reaction Speed and Emergency Response Played an Important Part in Preparedness
The panel discusses how those businesses that went to the market early and those who responded early are the ones in a far better shape. Airlines have always been strong when it comes to emergency response and business continuity planning. This has meant that they could wind operations down quickly and start them up again when needed. This also means that revenue can be generated as soon as it is possible to fly.
The pandemic has brought new challenges: where to park aircraft for the long term; how to manage flying into different countries with different regulations for each city in each country; and how to support employees’ health and well-being concerns.
Managing Fixed Embedded Costs
With large fixed costs, airlines have taken an innovative look at how to manage these. Staff pay and benefits have been cut, or staff have been furloughed or made redundant. The challenge has been that, to survive, you need to take action. However, there is always one eye on the medium-term requirement to ramp up staffing levels once the sector returns to normal. Those with strong balance sheets and who perhaps made decisions and choices earlier are in a better place. They are in a good position to recover and reemploy staff.
Will Customer Demand Change?
The panel sees continued opportunities for aviation. There may be an increase in flight travel for commuting. Should working from home become ‘the norm’, people can choose where that base could be. This would open up the possibility of commuting for one week each month in the office via a plane. There is currently a pent-up demand for leisure and airlines will want to take advantage of this over the coming months.
Safety is the Central Customer Concern
As air travel starts up, more customers have a new focus. No longer concerned with menu and travel kits, the latest questions to call centers focus on health and safety practices. The panel members comment that passengers will now look to one of the more trusted brands for travel; one with an emphasis on safety. Customers are looking for clear demonstration of cleanliness standards, healthy employees, social distancing and mask and hand sanitizer use.
Time to Invest in Staff
The panel agrees that this is not the time to overlook employee culture - but a time to invest in your people and their health and well-being. While new employment models have had to be considered, communication and engagement with the workforce is essential for coming through the clouds successfully.
Growth in Agile Working
As many roles within the industry can clearly never be home-based, remote working was on a slow journey. And yet, the crisis forced a rapid acceleration and an evolution of technology and digitization to enable remote working.
Initially, productivity increased; people were busy and the novelty factor meant that everyone was keen to make this work. However, virtual working has its downsides - the lack of personal interaction has meant people are keen to get back to the office.
What About the Future?
The panel concludes by looking forward to the recovery. Panel members agree that tough times do lie ahead. However, those who have taken financial action are best placed to take advantage of a global desire to return to travel, be it for leisure or business.
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