Post Pandemic Aviation Strategies

How are airlines adapting to new and evolving realities? Is the balance of power between low cost carriers (LCCs) and full service carriers (FSCs) shifting? Is consolidation a good option for airlines struggling to fill seats and routes? 

These were just a few of the questions raised in a discussion on aviation growth strategies airlines are applying to survive in the post pandemic world. The webinar was hosted by OAG, a data-driven information services provider for the aviation industry. Read on for highlights.

Blinking into the sunlight

Airlines are feeling like they’re coming out of a war zone. 

‘Proceed with caution; no sudden movements’ seems to be the general strategy. For instance, airlines are not immediately adding extra capacity as borders reopen and demand gradually rises. They are experimenting with fleets and networks opening up new or direct routes. 

Some are looking for strategic partners. This does not necessarily mean full-blown consolidation, always an expensive, exhausting strategy. And it is not easy to deliver on all the ‘strategic rationales’ that underpin M&A especially cost savings. The latter will be key to the success of the Frontier – Spirit merger, which positions the combined group in fifth place in the US market, especially given their complementary routes. 

Others are grabbing market share where they can. Ryan Air has increased its share of the European market from 10% to 15%; Finnair is flying long-haul from Stockholm; legacy carriers are exploring the seasonal leisure market . 

And new airlines, such as India’s Akasa are popping up. 

Clouds on the horizon

However, there are reasons for concern. 

The rising price of crude could put a serious damper on the return of long-haul, intercontinental flights. The lack of leadership on developing a stream lined approach and implementing a uniform set of travel protocols and regulations is limiting international travel to the region. Since international tourists to the region tend to hop around multiple countries and tourist spots in a single trip, the absence of a uniform travel policy for the region is limiting regional travel too. This does not bode well for LCCs which need international travel to return to the region in order to survive. 

There are also reasons to worry about airline start-ups. It isn’t always clear that start-ups are investing in the due diligence and careful evaluation required to start an airline. 

Silver linings

More broadly, the more agile LCC’s might come to dominate certain markets by driving out legacy FSCs. For instance, in Europe, LCCs already account for over 30% capacity 45% traffic in Europe. New technology, such as the A321 XLRs, is opening up ‘hub busting opportunities’ and enabling airlines to by-pass hubs. One of the newest routes is from North America to Singapore (JFK – SIN | 15,332km). 

A new moon

Meanwhile, something’s happening in India. The government is moving out of the aviation industry and encouraging the private sector to invest. It is developing a domestic aircraft leasing hub, the Gujarat International Finance Tech City (GIFT) to bring the aviation financing business ‘in house’.

Air India has returned to Tata’s fold. It’s new owners have signalled their ambition by hiring the ex-Chair of Turkish Airlines. 

Will the airline be targeting local competitor, Air Indigo or Qatar, the global FSC? Or both?

And is India a growing market? It has a sizable Indian domestic market but there are suggestions its middle class is shrinking. What will that mean for Akasa Airlines? 

All will be revealed in the years to come. Maybe 2024. More likely 2025. 

Source: OAG: Zero to Hero: Successful Network Experimentation by airlines through Covid. February 16 2022.

John Grant, OAG Chief Analyst, Becca Rowland, Partner, Midas Aviation, Mayur Patel, Regional Sales Director, JPAC, Shukor Yusof, Founder, Endau Analytics, Peter Hoslin, Director, Pan Asia-Europe Aviation Limited 

Photo Credit: Photo by Bing Hui Yau on Unsplash

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