CAPA TV

Passenger expectations have created a competitive aviation landscape where experiences have become key to winning customers. The lure of low fares and brands has been broken as travellers demand more – from the best in-flight experience to the comforts of a private suite.

In the past, a low fare or brand familiarity could almost guarantee loyalty. That is no longer the case and customers are increasingly willing to pay more for the services that are most meaningful for them.

Businesses that are slow to adjust to those expectations face the prospect of customers leaving. That’s why a great customer experience ranks highly as a brand differentiator, and paying a premium isn’t seen as a deal breaker.

COVID-19 accelerated the industry trends towards digitalisation, self service and customer expectations of being ‘always online’. It also revealed that the pain points around the air travel experience are yet to be relieved.

If anything the pandemic has resulted in more frustration for passengers rather than less, as they have had to deal with onerous COVID-19 health requirements, additional layers of checks, confusing mazes of new regulations and changes to physical travel processes.

Meanwhile, the biggest pain points post-pandemic – flight delays, cancellations, lost baggage, security and immigration queues – continue to haunt the industry.

How airlines and airports navigate not only the new layers of expectations and requirements the pandemic has imposed on them, but continue to work to relieve pain points around the passenger journey will be key to their success.

• How can airlines and airports ‘build back better’ to deliver a better travel experience and meet traveller expectations?

• How are airlines and airports adapting their offer to meet changing traveller habits and needs?

• What innovations are the top priority and how has the pandemic helped the digital transition?

COVID-19 threw the airline industry into disarray, with a high number of market exits. That number would have been much higher had it not been for state-sponsored aid packages, but many in the industry are continuing to tread water and face a battle for survival. 

In several regions, airlines availed themselves of large government bailouts or took on large amounts of debt to avoid going under during the height of the COVID-19 pandemic. The result is the industry now has a heavy debt burden that will take years to unwind. In addition, government has stepped back into the industry.

The airline industry is today saddled with hundreds of billions of additional COVID-related debt. Simply servicing that additional debt will cost more than the industry has on average generated annually in profits.

Much of that debt falls due from 2023 onwards, and unless trading conditions are strong at that stage, real embarrassment is possible, particularly where debt is backed by aircraft assets.

As a result, 2023 to 2025 will be the critical period for the survival of traditional models and airlines. Given the dimensions of the COVID crisis it is remarkable that so few airlines have fallen by the wayside. But that cannot persist indefinitely.

• Have we not yet witnessed the worst of the COVID crisis on airlines?

• How active will governments be in controlling airlines in the future?

• Has COVID been a prelude to a perfect storm and airline debt crisis?

For the surviving airlines, partnership and alliances appear as an increasingly attractive option. Before the pandemic many had started to question the value of alliances. Now they are providing an important safety net for carriers enabling them to serve strong, profitable markets and allow partners to support wider connectivity.

Mergers and consolidation have accelerated as a result. JetBlue’s acquisition of Spirit Airlines from under the nose of Frontier Airlines – and the premium it paid – could be the start of a trend as airlines seek to solidify their market penetration.

The expansion of partnership has not just been within the industry though – it is also looking at expanding collaboration with other transport providers, technology partners, environmental organisations and more.

The global pandemic has significantly accelerated the pace at which companies are bringing new ideas to market, including massively expediting some processes and applying pressure on industry ecosystems to deliver services in new ways.

• How should companies use partnerships to build business resiliency?

• Can strategic joint ventures bridge the supply and demand gap?

• Will the COVID pandemic break down the Mergers & Acquisitions wall or actually make it stronger?

Martin Gauss is the CEO and Chairman of the Executive Board of airBaltic since November 2011. Under his leadership, airBaltic has successfully carried out a robust turnaround plan and achieved a strong growth path. With the early decision of ordering up to 80 Airbus A220 Gauss has built a foundation for the airline’s global success story. Martin Gauss is an experienced CEO who has worked in the aviation industry in different countries for more than 30 years. He still holds a Captain's license on Airbus A220.