The "New Normal" in Airline Operations - Part 3

The global airline industry has been hit by a new virus and is going through its biggest crisis ever. Several airlines went into bankruptcy or voluntary administration and some may not survive. State owned airlines will get government financial support. The silver lining might be a ?new normal“ in airline operations with several changes for the future.

2015 I wrote an article about airlines. Some weeks ago, I started to write my thoughts on the future of airline operations.

Part 1 Part 2

OPERATIONS CONTROL CENTER

Attending many industry events and organizing an own industry event since several years I regularly ask airline people what they like most from such industry events. The general answer is ?meeting other airline people and network“. Airline people are very social and like to enjoy time with their industry peers. The people working in an Operations Control Center (OCC) are closely coordinating decisions with other colleagues all being in one large room. Airline disruption management is all about collaborative decision making with all airline operations stakeholders.

Going easily from one OCC desk to another and quickly check a critical disruption situation, solution alternative and decision was usually done from person to person and talking in person with each other.

Under the new normal, social distance will also be required at all airline workplaces on the ground. Tight seating in an airline OCC will not be possible anymore and could affect the entire airline operations. New regulations will require less people in the same room with more distance amongst each other. The national ?working from home“ during the nationwide lock-down phases will also the new normal for airlines and OCC staff. The digitization and technology will make collaborative decision making also possible without being in the same room.

This will have a positive impact on personal life of parents with kids who have less commute times and stress to get through traffic jams and in time to their workplace.

Technology will support airlines to require less workforces in the OCC which will also reduce costs. The crisis affected airlines will not require more OCC workforces because digital technology will support growth and business changes. Increasing complexity will be management from optimization technology will be consider data points from various sources and make sure that climate change targets, fuel and performance metric and passenger demand are considered while decreasing which aircraft to assign for which flight. What is done manually in OCC today will be done from technology under the new normal and help airlines to save costs and CO2 emissions.

PROCESS CHANGES

The only constant in life is change. This is true for airlines, too. The airline industry was only changing gradually and technologies from 1960s (e.g. mainframe IT systems) or information formats (e.g. NOTAM) from the 1920s are still the standard. The current crisis is an opportunity which will help airline to optimize many items in parallel. Congested airports, delayed flights, stranded passengers, missed bags and narrow margins were the old normal in the airline industry.

Many current airline processes will be required to be updated and changed: passenger check-in, security, aircraft boarding, cabin seating, just to mention a few, because social distance requires more space and time.

In the past, global legacy airlines were forced to change their operations model due to external factors, e.g. from new market entrants. Low-cost carriers were disrupting the high price legacy airline market environment. Legacy airlines had to adjust their entire business model, airline structures, ticket prices and operating costs. The current crisis might change the ticket pricing and the entire airline market.

DIGITIZATION - POTENTIAL FOR AIRLINES

In 2007, a smartphone was brought to the world and has changed our world radically. Human beings are since communicating totally different than with an old fashioned cellphone before. Social media platforms could suddenly easily be connected with the smartphone and personal pictures taken on the fly and shared with friends in seconds. The internet is in our hands and mobility is a no-brainer for private life.

The digitization was a big external factor for many global industries and affected billions of people. So for airlines and existing processes and procedures had to be adjusted, in order to make use of the newly available technologies. The benefit were tangible for passengers and the airlines with more revenues and decreased costs for certain parts of the business.

New business models emerged and legacy market players were under dramatic pressure. The cellphone industry leader NOKIA is one prominent example who was replaced from Apple, because the iPhone was replacing many NOKIA 3110, 8210 or 6110 cellphone globally. Digitization disrupted markets and industries.

Airlines were making use of passengers smartphones or wearables as boarding passes. The airline website and direct internet booking channel were saving paper, printing and GDS costs. Airline loyalty systems were appearing on smartphones, too. Airlines were using social media platforms to market their services, communications and playing games with passengers. Social seating was a new and innovative way to find the right seat mate during a flight.

Many airlines started to become more digital, however there’s still big potential for more. The airline backbone and operations information technology (IT) is everything else but digital. Looking on 120 airlines which were visited globally old IT systems are still the standard. These legacy mainframe and IT systems from the 1960s till 1990s are not enabling airline staff to easily work from home. The maintenance costs for these IT systems are high. Regulatory changes and new normal aviation regulations which require additional data and check points are not possible to be implemented quickly. Manual workarounds would be required which are driving costs even more.

COST SAVINGS

Operating an airline operations with a legacy mainframe IT system comes with a huge cost and process inflexibility. The maintenance of old system requires know-how which is difficult to find at universities because the programming languages of these mainframe systems are not taught anymore. Instead, costly IT experts are required. Who knows someone who knows COBOL or other old school programming languages.

In addition, the mainframe IT systems are not having necessary data fields or system integration capabilities which are necessary with the new normal business requirements. Loyalty, passenger, crew, flight and cargo management systems will all require additional health and check data points. The current barely connected IT silos within the airline operations can be replaced with digital platforms. The possible harmonization of IT silos will enable the airline management to take quicker and better decisions if the business kicks-off again.

What has been harmonized since 2007 with the smartphone - replacing four or more devices with one iPhone - will finally harmonize IT systems and process within the airline industry.

The costs savings are huge. Airline disruptions - delays and flights cancellations sum up to 60-200 billion USD annually, depending the statistics and source of data. Large airlines therefore spent millions for delays alone every month. In addition to pure delay costs are costs for passenger rebooking and passenger compensation costs. Depending from the geography legislation and regulations (e.g. EU261) require 250-600€ per individual passenger for flight delays or flight cancellation compensations. The costs go in the billions every year.

OUTLOOK

Crisis are painful, because they change things dramatically. The airline industry had to cope with many crisis in the past and always rebounded. 9/11, SARS and the finance crisis in 2008 were shaking the industry. Airlines went bust, new airlines were founded. The desire of people to go abroad will no vanish. The current lock down situation in many countries might create a greater desire to get out and visit other countries and go on vacation.

The virtual happy hour during the crisis time will be again replaced from happy hour times in bars and a good diner in a foreign location restaurant with friend or colleagues.

This will be the case this time, too. However the airline industry will be different after the crisis. The way people will travel will be different. Social distance and the fear of another virus will implement new airline procedures, measures and also digital technologies. Airline will find ways to meet the new normal requirements and will restart to fly soon again.

Digital technology will play a vital role that airlines can manage all the upcoming new normal requirements and regulations and cope with future growing passenger demand.

The current crisis will be a cleansing crisis for the industry and will create a new way of traveling: more sustainable, more socially distanced, more flexible, more expensive and more digital.

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ABOUT THE AUTHOR

While visiting globally 121 airlines and their OCC's Daniel is exploring airline IT environments and processes. As Vice President and Head of Global Sales for Airline Operations he is responsible for global sales and business development of the brand new airline operations digital platform "iFlight". Daniel has more than 25 years of experience spanning over the logistics industry (e.g. courier, express, parcel, air cargo, airport ground handling, freight forwarder, cargo carriers, airlines) and has been traveling almost two million miles, in order to meet with industry experts and customers from the air cargo industry and airline business IT solutions industry.