Navigating “Perma-crisis” and “Poly-crisis”
Transforming airlines to build stronger, resilient and more flexible carriers.
SUMMARY
1.????? ?Perma-Crisis? represents a tremendous overwhelming convergence of interconnected, interdependent challenges, risks and issues that demand urgent attention and decisive action from airlines Executives.
2.????? Flexibility, innovation, Strategic and Capacity plannings will be key elements in overcoming these challenges and ensuring the long-term success of the aviation industry.
3.????? Value Creation, Resilience and Flexibility should be placed at the core of Airlines Transformation strategies.
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INTRODUCTION?
For decades, economic downturns, natural disasters, wars, and their ripple effects have regularly erupted at the surface of our world. These events have always strongly disrupted aviation ecosystems, mostly on short periods of time, enabling long period of calm, growth, and prosperity in between these major events.
As time went by in the last fifty years, economic environment shapes have changed at the benefit of the emergence of a globalized world where interactions between regions, organizations, and value chains are much integrated and complex than ever before. At the end of the day, trading worldwide hasn’t been easier, but the flipside is that this inter-connected economic world is also the place of a generalized and wide confluence of crises that impact business with a wide range of risks and consequences.
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Airlines are no exceptions to that statement. Aviation industry always played and will continue play a central role on the growth of global economy as its core purpose is connecting people, goods, and values everywhere around the globe world, anytime. Conflicts, effects of pandemic or social changes, inflation, cyberattacks or extreme weather events seemed rare, but are now worryingly familiar. The interconnected web of economic relationships and interests of the existing world accelerate the diffusion and imbrication of crisis impacts all along value chains; an isolated event literally occuring overseas can generate immediate and significant turmoil to local organizations and communities.
As far as the globalization of our economy grew, crisis slightly became a kind of permanent state of discomfort for business, significantly disrupting value chains set for decades and sensibly impacting how airlines can deliver their commitments at a global scale. Nowadays, the global airline industry faces what can be described as a permanent crisis, or ?Perma-Crisis?, per se an almost uninterrupted timeline of events, challenges and pitfalls stemming from a diffused but significantly tangible fashion. Broadly speaking, there is no time without any troubles, airlines are constantly living within a crisis environment, whatever their magnitude and severity.
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The following article tends to explore the profound and enduring effects for the airline industry in navigating these ?Perma-Crisis? environments on, delving into how a convergence of economical, geopolitical, environmental, technological, and social factors force airline to transform and re-think their operations, strategies, commercials, and financial viability. From the fluctuating consumer confidence through the escalating pressures of geopolitics, airlines confront a complex and interconnected set of challenges that require innovative mitigations and resilient strategies to survive and thrive in the next few years.
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?THE MULTIFACETED NATURE OF CRISIS
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The more I talk with airlines Executives, the more appears the lingering feeling that crisis became in the recent years an uninterrupted state of constant and wide-ranged pains where adaptation has become the unique state-of-mind to survive and lead the global market’s race. Whilst evolving into that “Permanent Crisis”, whatever the nature and impact of them, they also face a simultaneous range of pitfalls creating an overall discomfort to operate and serve their clients. It’s a moment some are aptly calling a “Poly-Crisis”, and this stew of the confluence of interrelated geopolitical, economic, technological and climate threats heat up sometimes simultaneously. As the phenomenon amplifies the complexity and severity of each event, it results a compounded and interconnected set of problems that pose significant risks and strain resources for airlines, regulators, and customers. Immediate concern for business leaders is whether they are prepared.
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The cold reality is that many are not enough to mitigate these crises. At the heart of the problem is the fact that many executives are inadvertently behaving as if nothing’s changed or are unable to transform their business models and operations at pace. The vast majority might be blinkered by an outdated risk-management mindset that seeks to master risks by rigidly allocating resources and management attention temporarily according to a mix of probability and impact. Obviously necessary, however that approach falls short as so-called low-likelihood/high-impact events become more unpredictable, more complicated, and, via their widespread knock-on effects, more costly for their businesses.
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MAIN THREATS NOWADAYS
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Seeing and responding to risk differently first requires airlines leaders to clearly pinpoint where plausible/potential risks could materialize and do the most damage to key operations, products, services and client’s relationships.
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A.??? Geopolitical Instability
The recent escalation and multiplication of geopolitical tensions all over the world in the last couple of years has tremendously increased the overall business and operations risks for airlines, mainly for global carriers.
Armed conflicts, security threats, coups, terrorism introduce a layer of uncertainty and complexity for the airline industry in several regions, with immediate consequences such as closure and avoidance of airspaces, routes suspensions or itinerary diversions – See Appendix to get the list of current no-fly zones, as of April 24.
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All these violent events lead to various mitigation measures, including their significant costly consequences. Airlines must carefully monitor these events, assess potential risks for their crews, personals, and passengers, plus develop robust contingency plans to navigate the challenges posed by geopolitical dynamics like:
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-??????? Closure and/or avoidance of airspaces,
-??????? Retaliation Measures,
-??????? Routes suspensions,
-??????? Potential diversions to define safer routes,
-??????? Disrupted schedules,
-??????? Safety bulletins to be regularly posted,
-??????? Additional safety measures to protect employees, aircrafts, and crews,
-??????? Re-organization of direct flights into multi-legs routes to avoid crews spending layovers in dangerous zones,
-??????? Additional training for flight and ground crews to handle challenging situations,
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In the last two years, a couple of major events have highly hit the aviation industry; let’s have a little break to quickly walkthrough them:
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1.???? Russian airspace closure as an immediate consequence of the war in Ukraine and western sanctions.
The closure of Russian airspace to western carriers has sent shockwaves through the global aviation industry, reshaping flight routes, disrupting travel plans, prompting airlines to reassess their operational strategies, and finally highlighting the intersection of geopolitical dynamics, economic interests, and operational vulnerabilities. Rerouting flights has the immediate consequence of longer flight times, increased fuel costs, and operational complexities. This disruption affects not only flights directly passing through Russian airspace but also those operating in neighboring regions, amplifying the ripple effects across global air travel networks.
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2.???? Rise of tensions in the Middle East (Israel / Gaza / Iran)
On the night of the 13APR24, the Islamic Republic of Iran fired hundreds of missiles and attack drones at the state of Israel. A conflict of this sort poses a very hazardous environment for airlines, leading airlines to route their flights around the conflict zone or cancel dozens of their scheduled flights.
Reuters News Agency reported on Monday that global airlines are continuing to face disruption to flights after Iran's massive missile and drone attacks on Israel. This has narrowed the route options for aircraft flying between Europe and Asia. This latest routing problem is compounded by restrictions on the airline industry due to ongoing conflicts between Israel and Hamas in Gaza and Russia and Ukraine. Iran's airspace is part of the route – narrow corridor - used by airlines traveling between Asia and Europe - now they are left with alternative routes either through Turkey or over Saudi Arabia and Egypt. In the event the situation between Israel and Iran escalates, then at a minimum, the airspace of Jordan and Iraq will likely continue to be used by drones, missiles, and/or warplanes. Israel and Iran do not share a common border, and therefore need to cross other nations' airspace with attacks. A full-scale war between the two Middle Eastern powers will cause more massive disruptions in the aviation industry.
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Reuters reports that at least a dozen airlines, including Qatar Airways , 汉莎航空 or Air India Limited , have been compelled to cancel or reroute their flights. For example, Qantas paused its London-Perth service due to the conflict. Emirates was also among those who canceled or diverted flights amid the disruptions.
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The tragic pro-Russian shootdown of MH17 by a missile over Ukraine in 2014 and the Iranian shootdown of Ukraine International Airlines flight PS752 in 2020 demonstrate the danger of flying over active war zones involving air defense.
This recent event should be likely considered as the largest disruption to air travel since the attack on the World Trade Center on 11SEP2001, over twenty years ago.
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These dramatic events cause massive chaos in the aviation industry. Disruption of operations generates even an increase of airlines costs to operate, or a brutal drop of revenues if the airline decides to whether temporarily or permanently suspend its operations in the region. Rising geopolitical tensions can also broadly result in the increase of operational costs with longer operations / routes, higher fuel prices, insurance premiums, and security-related expenses. Network is the backbone of airline's operations by connecting destinations, optimizing routes, and facilitating seamless travel experiences for passengers. In an interconnected world where air travel plays a vital role in connecting people and economies, the significance of robust network and planning strategies cannot be overstated as it must drive efficiency, resilience, and competitiveness for airlines. The more airlines face network disruption due to geopolitical or any other factor, the more they must re-design their network and operations to sit in a less volatile and ambiguous business environment.
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Since airspaces are closed, routes might be diverted, re-designed or suspended. These tensions can significantly result in altered travel patterns, with passengers avoiding specific routes or destinations. This can lead to uneven demand distribution among different routes, requiring airlines to adapt their schedules and capacities accordingly because of the inducted network dis-balance due to extended flight-time or networks suspensions. All of these tend to increase operational costs and pose financial challenges for airlines. Since this growing political instability led to disruptions and important currency fluctuations on key markets, cost to deliver are likely increasing for airlines and affect their profitability; potentially leading to fare adjustments, a reshape of broader pricing strategies, or restructuring for the weakest airlines.
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This unprecedented move, amidst escalating geopolitical tensions, carries significant implications not only for airlines but also for businesses, travelers, and international relations, at the end of the day all of the listed are airlines customers.
In this context, airlines leaders struggle to maintain their financial sustainability and engage vast programs to contain ripple-losses of the context; primary reflex is to legitimately focus on the core business to ensure airline’s viability. Oman Air Chairman, his Excellency Saif Hamood Al Mawaali recently stated:
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“For now, we should focus on 1. Filling the seats and 2. Improving the yield for this period to make sure that there is good financial sustainability for the airline.”
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B.??? Global Economic Uncertainty:
Considering the above as the primary roots of risks, the massive flow of ambiguities generated by this “Poly and Perma-crisis environment” disrupt industry’s balance and generates significant pressure on air travel demand and yields, for both passengers and cargo segments.
Most of the events listed in the previous chapter negatively affect demand for passengers and supply next to conflict regions, as travelers may avoid destinations perceived as risky. All segments* will be severely hit leading to reduced load factors, high inflation and financial strain on those routes. Then airlines face financial losses due to operations suspension or increased operating expenses if they decide to continue served these zones.
*Note - VFR – Visit Friends and Relatives / L – Leisure / B – Business
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Consumer preferences and expectations evolve according to trends (technology, environmental considerations, desire for seamless travel experiences, new destinations), however reaction of geopolitical instability remains the major shift airlines must deal with as it generates the following side effects:
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A.???? Reduced Travel Confidence
Geopolitical tensions often lead to increased uncertainty and decreased confidence among travelers. This can result in sudden shifts in demand as passengers become more hesitant to book flights to regions affected by tensions.
B.???? Business Travel Impact
Tensions in certain regions may particularly impact business travel, as companies may postpone or cancel trips due to safety concerns. This can result in fluctuating demand patterns, affecting airlines that heavily rely on business travelers.
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Changing travel patterns, such as preferences for shorter, regional flights or shifts towards alternatives, may necessitate strategic adjustments in route networks and service offerings. Economic ramifications of ?Perma-Crisis? are far-reaching, and can dampen consumer confidence, discretionary spending, resulting in a reduced passenger demand for air travel, decreased ticket sales, revenue losses, and underutilized capacity. The disruption of customer habits destabilizes markets, pockets of opportunities, catchment areas, and imped the overall shape of the airline’s industry growth. Further than the direct effect, demand volatility overlays key markets generating hard impacts on airlines management, forecasting passenger numbers, cost, and revenues optimization, to adjust capacity accordingly.
All these factors can in some cases significantly weaken airlines' business models and financial performance. Airlines leaders have nowadays to mitigate this wide range of simultaneously rising risks and issues, by increasing their anticipation, strengthen their forecast and derive new business scenarios.
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Thus said, a quick reminder about the airline industry as of APR24 should be meaningful:
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Despite the strong recovery of traffic and operations, airlines remain hardly disrupted in the meantime by the various crises and their multi-faceted roots. Then, the subtile financial balance airlines usually set during growth periods is severely impacted with exacerbated liquidity constraints, increased cost of service-delivery, debt burdens, and potential credit rating downgrades.
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“The more you expect the unexpected, the more you will be able answering threats as you already have anticipated the worst. You are operationally ready to face them. Though you can switch from day to night your operations to adjust. Meanwhile, competitors are starting to figure out how to get the problem solved.”
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I do not want to conclude this paper too early, but you obviously understood that it may be ambitious to consider this path not paved of dangers; 2024 presents a complex profile for the airline industry. Despite a solid pent-up demand for travel in the last couple of years, airlines Boards remain cautiously optimistic about the future as strong traffic disparities emerge from some key regions - e.g. Asia Pacific -, cargo payloads golden months are over, and passengers’ yields tend to align back to a more reasonable horizon. Furthermore, these challenges and their ripple-effects prolong the recovery process, perpetuating cycles of low performances in some regions and stagnation. As the market continues recovering, tension points have moved upward the value chain, requiring strategic adaptation and resilience for global airlines.
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FOCUS ON P&L IMPACTS
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TOP LINE
Uncertain geopolitical situations can instill fear and anxiety among travelers, leading to a decline in passenger demand. Concerns about safety and potential travel restrictions can deter individuals and businesses from booking flights, changing habits, impacting the overall revenue of airlines.
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1.???? Top Line Management (Revenue Management) is necessary but not good enough to manage performance. Demand volatility impacts Fares stability, though analyzing Market Dynamics, through a deep definition of what the most accurate network strategy is and allocating appropriate assets to the operations (aircrafts, capacities, Available Seats per Kilometers – ASK) remains foundational.
2.???? The optimization of the Revenue Seat per Kilometer (RSK) is a top priority by having a strong focus on Capacities, Products and Fare Management / Pricing.
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Main recurring Revenues categories could be classified as follow:
Dynamic Pricing strategies might be an interesting response to be implemented against changes in demand. If there's a sudden drop in demand due to geopolitical tensions, airlines might adjust fares to stimulate demand or, conversely, increase prices to offset potential revenue losses.
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OPERATING MARGIN
3.???? Cost-of-Goods-Sold (COGS), Cost-to-Deliver (CTD), Cost-to-Support (CTS), and Unit Cost (UC) must be scrutinized at their best to maintain decent Operating Margins,
4.???? Working Capital must be much more considered,
5.???? Foreign Exchange (FX) effects, to lessen fluctuations on key markets
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Main recurring Costs categories could be classifid as follow:
Fuel prices fluctuations are probably the most important financial pitfalls for airlines as fuel cost should get up to 25-30% of their overall cost mix yearly. Since fuel is a significant operational cost for airlines, variations in fuel prices directly impact their operating expenses and can lead to adjustments in ticket prices. Fluctuations in oil prices, exacerbated by geopolitical instability and supply chain disruptions, pose a triple challenge for airlines: 1. Fuel procurement (availability), 2. Fuel price (value), 3. Fuel hedging (trading and risk management).
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Higher fuel expenses can strain operating budgets, leading to increased ticket prices, reduced profitability, and financial volatility. Cost management and Hedging strategies remain key to sustain reasonable Operating Margins.
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Insurance Costs-related to events such as conflicts, terrorism, and geopolitical instability, can increase insurance premiums, liability claims, and legal expenses for airlines, further impacting their financial stability and risk management strategies. Flexibility, adaptability, and a proactive approach to risk management is essential for airlines as all of them could face disruptions in their operating areas.
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Global supply chain has also faced disruptions in recent years, and airlines are not immune to these challenges. Tensions in specific regions can disrupt the global supply chain, affecting the availability and cost of critical components for aircrafts maintenance. This can lead to potential price increases for certain goods and services within the industry and uncertainties in the supply of aviation fuel.
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Managing a reliable and resilient supply chain is crucial for the uninterrupted operation of airlines. Shortages of critical components and logistical challenges may lead to delays in aircraft maintenance, repairs, and fleet expansions, affecting operational reliability, safety standards and passenger satisfaction in the end of, the day.
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“End of the day, Strategic and Scenario planning are more than ever essential for airlines to efficiently allocate resources, capabilities (Available Seat per Kilometer – ASK), optimize fleet utilization, and maximize revenue potential across their network.”
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Carriers must rely on meticulous route planning to identify profitable/stable routes from a business perspective, forecast demand, and adjust flight schedules to meet passenger needs while minimizing disruptions and operational costs.
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The success of an airline's performance hinges on continuous analysis, adaptation, and innovation, as market dynamics evolve quicker than ever, new opportunities arise, and challenges emerge daily. Effective Scenario Planning strategies enable airlines to respond swiftly to changing market conditions, mitigate risks, and capitalize on emerging trends, ensuring long-term viability and success in a volatile industry. That means Business and Commercial Analysts should rely on an extended pool of data to identify which unserved catchment areas might be used as interesting alternatives to suspended routes. Moreover, companies often take an inward-looking, siloed approach to managing risk, considering each business unit separately and failing to think hard about how they interact—let alone what customers will see or experience. This is visually depicted in the elaborate “stoplight” charts that companies use to display the risk levels of various functions, or businesses using red, amber, or green indicators. The resulting rolled-up picture seems complete, but these analyses sometimes exclude the connections between the silos. At their very worst, the charts are biased, better at depicting company politics than risk. Human nature (and weak risk cultures) can make it tempting for contributors to nudge a red light to amber, or an amber to green—particularly when reputations and budgets are at stake.
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And senior executives often start out on the back foot when risks materialize because they have long instinctively prioritized financial resilience over operational resilience. They may have hedged against currency risk or liquidity issues but not paid enough attention to vulnerabilities embedded in the operating infrastructure that delivers their services and products to their customers—the things that matter most and that they’re in business to provide.
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As a collateral comes the vital necessity to constantly innovate to mitigate these risks, lessen their potential impacts and move further with solutions to define what the airlines of the future should look like.
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OTHER COMPLEXITY FACTORS EMPHASIZING ?PERMA-CRISIS? EFFECTS
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Regulatory, Compliance and Safety Uncertainty
?Perma-Crisis? may prompt governments to introduce or implement stricter environmental regulations, emissions standards, and travel restrictions, leading to compliance challenges, increased operating costs, and regulatory fines for airlines. Airlines operate in a heavily regulated environment, with stringent safety standards. Meeting evolving regulatory requirements while ensuring the highest level of safety adds complexity to airline operations. Staying compliant with changing regulations requires continuous adaptation and investment. Uncertainty surrounding regulatory frameworks, including carbon pricing mechanisms and emissions trading schemes, complicates long-term planning and investment decisions for airlines.
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Government Regulations and Compliance
Heightened geopolitical tensions often result in changes to government regulations and security protocols. Airlines must stay abreast of these developments and ensure compliance, which may involve additional investments in security measures and procedural adjustments.
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Labor Shortages and Workforce Dynamics
The aviation industry is highly dependent on skilled personnel, including pilots, maintenance crews, and ground staff. In 2024, airlines are grappling with labor shortages, driven by retirements, training challenges, and a changing work landscape. Addressing these workforce dynamics is crucial for maintaining operational efficiency.
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Environmental Sustainability Pressures
With an increased focus on climate change and sustainability, airlines are under mounting pressure to reduce their environmental footprint, necessitating greater scrutiny of airlines' carbon emissions and environmental footprint. Stricter emissions regulations, rising fuel costs, and the need for sustainable aviation fuels present considerable challenges for the industry in 2024. Pressure from stakeholders, including governments, regulators, investors, and consumers, to adopt sustainable practices and invest in cleaner technologies, may necessitate costly fleet modernization and operational adjustments to mitigate their impact on climate change.
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Technological Disruptions
The rapid pace of technological advancements introduces both opportunities and challenges for airlines. Incorporating new technologies such as artificial intelligence, blockchain, and advanced analytics requires substantial investments and operational adjustments. Moreover, ensuring the cybersecurity of increasingly connected aviation systems is a priority as crisis heightens the risk of cyberattacks, data breaches, and IT system failures targeting airlines' critical infrastructure, reservation systems, and passenger information, posing significant operational and reputational risks.
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MITIGATION APPROACH
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While ?Perma-Crisis? presents significant challenges for global airlines, it also offers opportunities for a comprehensive and integrated approach, encompassing corporate reforms, business transformation, technological innovations, and collective action. In a nutshell, we could barely structure ?Perma-Crisis? mitigation and transformation approach as follow:
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Three distinct transformation strategies for Airline Industry in 2024
a.???? Transformation for Value Creation
b.???? Transformation for Future Strength
c.???? Transformation for Agility
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Before moving any further to transformation-levers, the strategy for success should consider what might be considered as five of the most important areas for action and investments by players during their transformation journey:
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-??????? A clear strategy and positioning,
-??????? Enhanced revenues through customer experience and modern airline retailing,
-??????? Sustainability throughout the organization,
-??????? Operational resilience,
-??????? Effective Cost Control.
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Once said, the overall Mitigation and Transformation Approach should rely on the building blocks in the below:
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A.????? Start with what matters most for the Business and Operations,
Seeing and responding to risk differently first requires leaders to clearly pinpoint where plausible risks could materialize and do the most damage to key operations and services. This can be complex if companies have traditionally approached risk in a siloed way. Airlines leaders should spend time with one another to work through “What if Scenarios”, with an eye toward highlighting where exactly in the business a problem or failure would be most catastrophic to customers.
Key outcomes = End-to-End Business Scenarios / Business User Stories / Business Processes Maps / What if set of Scenarios? / Business Personas
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B.????? Connect facts and figures, reveal blind spots and hidden angles,
Determining which operations and other areas of the business are the most vital—and most vital to customers—requires considerable focus and commitment. The next step, mapping out the relevant processes, handovers, and dependencies, can be equally challenging.
Businesses struggle to do this well because it’s complex and can involve multiple functions, departments and business stakeholders. It’s not the usual approach in which business continuity is looked at solely within the siloed functions. The way the whole service is delivered, not individual mechanisms, needs to be identified. At that point, the strengthening of the processes appears to be an interesting playground, because weak areas are identified, and to deliver greater operational resilience.
Though blind spots may lurk anywhere and might be emphasized by mistaken assumptions. Larger conversation about what it would take to put in place scenarios and operational plans that could absorb the impact of the closure of key market airspace or drop in demand of key customers segments is necessary.
Key outcomes = Dependencies impact assessments / Key process handovers assessment / Risks Magnitude Map
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C.????? Pull all data together to get cross-views and allow dependencies management,
The best resilience strategies will be underpinned by technology that helps anticipate, simulate, respond to—and learn from—the web of risks and disruptions companies now face.
Nevertheless, there is heavy lifting involved in gathering the data and introducing new tech—and no less so in educating leaders on how to respond. These are often investment decisions that require board and C-suite support, as they involve both time commitments and money.
?Perma-Crisis? accelerates the necessity to adopt integrated digital technologies and innovative solutions to enhance customer experience, operational efficiency, reporting and planning. Opportunities exist for airlines to invest in digital platforms, mobile apps, and contactless technologies to personalize their business services, streamline planning processes, and improve business decision-making protocols in response to evolving business environment.
Tech-powered dashboards can help executives track in real time the different key dependent operations—and prioritize action (see “Making the best of a bad day”). Dashboards also help flag danger signals that require attention, such as missing staff or low cash balances heading into a payment period and estimate the impact of system failures based on the tolerances set by management.
As a worked example, the initial phase of collecting data and building a similar dashboard at one of my airline clients took six months—a significant commitment of resources. Now, if there is a system failure in one part of the resource planning function, the dashboard will show how many customers are affected and list the actions necessary to recover seamless operations.
Key outcomes = Steering and Data Models (incl. Strategic KPIs derived from Strategic Scenarios Planning) / Reporting portfolio / Business Process Maps / SIPOC Impact Matrix
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D.????? Ensure both operations continuity and customer-centric approach,
Traditional business continuity planning would focus on recovering business as usual for the whole system, whereas creating resilience flips that assumption to instead ask:
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How to recover some degree of operational capacity immediately—and survive a potential catastrophe?
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Strategic Alliances and Collaborations
?Perma-Crisis? fosters collaboration and partnerships among airlines, industry stakeholders, and governments to address common challenges and capitalize on shared opportunities. Opportunities exist for airlines to form strategic alliances, joint ventures, and code-share agreements to optimize route networks, share resources, and pool expertise in areas such as procurement, operations, sustainability, technology, and crisis management.
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Enhanced Operational Efficiency
?Perma-Crisis? encourages airlines to optimize their operations and streamline processes to adapt to changing market conditions and mitigate risks.
Opportunities exist to leverage data analytics, artificial intelligence, and automation technologies to improve fuel efficiency, flight planning, and maintenance operations, leading to cost savings and enhanced competitiveness.
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Diversification of Revenue Streams
?Perma-Crisis? prompts airlines to explore new revenue streams and business models to mitigate reliance on traditional passenger travel. Opportunities exist to expand ancillary services, cargo operations, loyalty programs, and partnerships with travel-related businesses, to diversify revenue sources and capture emerging market segments.
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Regional and Niche Market Expansion
?Perma-Crisis? may shift travel patterns and preferences, creating opportunities for airlines to tap into regional and niche markets with tailored services and offerings. Opportunities exist to develop new routes, partnerships, and alliances to serve underserved or emerging markets, including secondary cities, leisure destinations, and niche travel segments.
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Sustainable Aviation Technologies
?Perma-Crisis? underscores the urgent need for the aviation industry to transition towards more sustainable practices, aircrafts and technologies. Opportunities exist for airlines to invest in research and development of alternative fuels, electric propulsion systems, and carbon capture technologies to reduce emissions and mitigate environmental impacts.
Key outcomes = Position Paper / Synergies Map / Business Stakeholders Network & Landscape
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E.????? Develop Scenarios Modelling and Capacity Plannings,
To make better sense of the sheer volume of data involved, airlines should use AI data-collection program to create sets of dashboards of all the dependent parts of these operations. Importantly, dashboards must show two things:
The combination of resilience and speed is vital for airlines, but it is not the whole story. Frequently, it’s noticeable that when companies look at risk with fresh eyes / steps back, they find knock-on benefits all while keeping customer disappointment to a minimum.
Nonetheless, being able to move quick requires a solid Scenario and Capacity planning upfront. Each single disruption should be anticipated, assessed prior being mitigated. Unless airlines do not shift to that approach, they will continue react rather than anticipate and adjust to any inconvenience.
Key outcomes = Scenario and Capacity Planning / Revenues & Costs Baselines / Key Business Assumptions / Scenarios Rationale
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F.????? Promote a strong Anticipation and Risk culture,?
These practices can help any airline become more resilient. Making the changes stick requires attention to company culture and how people work. This includes underlying incentives—formal or tacit. It’s true that bringing together a cross-functional team to identify risk blind spots can help tear down silos, but participants aren’t going to look terribly hard if they feel they’ll be penalized for the problems they might find. That’s why there needs to be a true culture of speaking up, in a transparent fashion, and identifying potential systemic and or environmental failures.
Below are a few practical tips for leaders to make sure their airline doesn’t inadvertently improve financial performances at the expense of operational resilience or overlook the role their people play.
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Manage up and down, and side to side,
Boards need to understand why the C-suite has changed the way it views existential risk and buy into the new approach, as it will affect investment decisions and even the compensation of the leadership team. C-suite leaders must ensure they communicate across functions, and, with a mandate from the top, the message also needs to be communicated throughout the business.
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Focus on empowerment,
When employees have power and choice, they are happier, better at their jobs, more innovative, and more likely to go the extra mile—beneficial traits for any organization seeking to bolster its resilience.
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Avoid the “blame / shame game”,
Small-scale failures are in most cases not tolerated. This is decidedly unhelpful, as finding blind spots or vulnerabilities in the way described earlier requires a close examination of small-scale failures. By embracing transparency and staying blame-free, airlines leaders are more likely to spot the weakness before it’s too late. Pre-mortem exercises that start with the assumption that a plan can fail can reduce overconfidence and help make finding weaknesses a strength.
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Bring all the right people together,
For risk to be looked at through a cross-functional lens, key people across the different disciplines—from IT and operations to Network, Planning, Sales, Finance, HR and Communications—need to become part of the conversation. Don’t make it hierarchical or siloed; instead, let all key people contribute their expertise and voice concerns when necessary. Only by turning silos into business partnerships can there be true enterprise resilience.
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Set resilience KPIs,
Being able to absorb shocks depends as much on rapid and decisive response capability as it does on pre-shock risk mitigation and preparation. Work out what is necessary to deliver key services and how long it will take to get them up and running—from end to end, across all the dependencies that are mapped. Set goals for activating backups and workarounds. Understanding the highly interconnected components of operations ensures that rapid responses are accurate, which is critically important when communicating to customers and outsiders alike.
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Invest in preparing people,
Effective crisis-management skills are developed through frequent exposure to the characteristics, pressures, and demands faced when disruption occurs. Leaders need to develop the relevant skills, mindsets, and behaviors to respond in times of crisis or disruption. They can do this through tech-based microsimulations or through scenario-planning discussions with key business stakeholders. It’s an approach that builds the muscle memory required for setting strategy, making decisions, and managing stakeholders in an uncertain world.
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CONCLUSION?
?Perma-Crisis? represents a tremendously overwhelming convergence of interconnected, interdependent challenges, risks and issues that demand urgent attention and decisive action from airlines Executives. By acknowledging these interdependences of geopolitical, financial, commercial, operational, social, and environmental systems, Executives could reach a complex but solid perspective on their challenges ‘complexity.
Addressing a portion of the problem is a good start, but not enough to get rid of this ?Perma-Crisis? and ?Poly-Crisis? environments. To emerge stronger and fit-for-purpose within that complex landscape, Executives have no other choices that adopting holistic and “End-to-End” approaches to build resilience and sustainable businesses. So, they can be able to confront the root causes of ?Perma-Crisis? against their business objectives, and then chart a path towards a more balanced, prosperous, and resilient future.
Navigating through economic uncertainties, embracing sustainable practices, adopting new technologies, and addressing workforce challenges are critical for airlines aiming to thrive in this ever-evolving environment.
Only through concerted efforts and collective engagement, airlines backed by their trusted partners will be able to mitigate the impacts of ?Perma-Crisis? and safeguard the well-being of the present and future endeavors. The industry's ability to adapt quickly, implement effective strategies, and manage operational flexibility will play a crucial role in mitigating the impact of such volatility and diversity of causes affecting the business in all its core dimensions. Flexibility, innovation, Strategic and Capacity plannings will be key elements in overcoming these challenges and ensuring the long-term success of the aviation industry.
While ?Perma-Crisis? poses a wide range of multifaceted risks and challenges for global airlines, the environment presents a lot of pockets of opportunities for innovation, adaptation strategies including resilience-building measures, growth, diversification of revenue streams, and investments in sustainable technologies.
By embracing an enhanced operational efficiency and fostering collaboration, airlines can navigate the complexities of the era, ensure long-term viability in an increasingly uncertain global landscape, and emerge stronger to face the next decade to come.
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Transformation isn’t an option; it should be at the core of airlines strategies in the next years.
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?Author - ? Olivier Joffet - 17APR24
APPENDIX
List of current no-fly zones of restricted airspaces, as of APR24:
-??????? Ukraine – since Feb22 (armed conflict),
-??????? Russia – since Feb22 (retaliation measures for western airlines after sanctions following the invade of Ukraine)
-??????? Israel / Gaza – since Oct-23 (armed conflict),
-??????? Yemen – since Oct-23 (armed conflict),
-??????? Iran – consequence of middle eastern conflicts, plus USA-Iran tensions,
-??????? Sahel and Sub-Saharian countries (coups in Mali, Burkina Faso, Niger, Sudan) – since 2022
-??????? Libya – since 2014
-??????? Irak and Syria – since 2011
-??????? China / Taiwan – Regular tensions in the last decade
-??????? Koreas – Frequent frictions and ballistic launches leading to airspace closures and avoidances.
-??????? Afghanistan & Pakistan – Sporadic troubles at the boarder since early 2023,
-??????? Myanmar – Civil war in the north of the country
-??????? Venezuela / Guyana
-??????? Somalia
Technology Transformation Leader | Aviation Data & AI Visionary | Software Entrepreneur
6 个月Love the article, would have referenced it in my Aleatoric Solutions post if it were easy to link things across! Airlines need to adapt to the new now, where "just the way we planned it" is no longer in the cards.