COVID-19’s impact on the airline industry is devastating. The pandemic exposed the vulnerability of an industry based on globalization — business and leisure wise. What does that mean for innovative and digital developments in the airline industry? We put together five predictions!
Airlines & COVID
It is tough to write an article about the airline industry without mentioning COVID-19 at the moment. Indeed, COVID-19’s impact on the aviation industry is incomparable to anything past but also other industries. Travel restrictions, parked aircraft, or employee layoffs — just a few examples of news you read about airlines daily. Although the impact differs according to world regions and business models, most airlines still struggle to respond adequately to this crisis.
Airlines Have Been Hit In The Middle Of A Digital Transformation
When the pandemic started to shake the aviation industry back in March 2020, many airlines found themselves in the middle of a digital transformation. Especially large network carriers —that are struggling most— have started to focus on innovative and digital approaches in recent years. Undoubtedly, they were far away from the finishing line when CORONA appeared.
Moreover, COVID-19 forced most airlines to stop projects, secure cash-out, and layoff personnel. This, of course, was reasonable and necessary to survive in the long-term. However, we tried to make up our minds and put together our predictions for the future. Based on that, we collected five aspects of how innovations and digital approaches will develop in aviation.
#1 — Chinese Airlines Will Take Over The Innovative Lead
Based on several reasons, Chinese airlines seem to handle the pandemic better than European and US competitors. Although China was the origin of the pandemic, the impact on European countries and especially the United States is much more significant. Therefore, Chinese airlines could rely on a quick recovery of their huge domestic market. Moreover, Chinese airlines were very quick to pivot to cargo operations. That has helped even to grow market shares during the pandemic.
Chinese Airlines Are In Much Better Financial Shape
As a result, the financial conditions of Chinese airlines are incomparable to European and US competitors. On top of that, Chinese carriers are not planning to layoff employees or to reduce aircraft fleets. These three factors —strong domestic market, financial conditions, and reliable workforce— put Chinese airlines in a perfect position to set the next innovative standards.
#2 — COVID-19 Will Accelerate Specific Innovations Massively
COVID, similar to any other crisis, will also accelerate specific innovations. This isn’t necessarily about the big bangs — but small improvements.
Here’s an example: The aircraft’s fueling process—for ages— was highly manual (at least at many airlines). The captain of an airplane had to liaise with the fuel provider to place the order fuel verbally. And once refueling was completed, the fuel provider handed over a paper-based receipt to the cockpit crew. An inefficient process, but somehow acceptable for airlines. However, due to COVID, this manual process reflects a potential infection risk for the entire crew and passengers subsequently. Therefore, from one day to the other, many airlines started initiatives to digitize this process.
Of course, this is a very particular example. Nonetheless, we are convinced that it’s just one example, among many others. For many small innovations and digital approaches, COVID-19 will be the final reason to start.
#3 — Industry Cooperations Will Be Essential
Due to many airlines’ reduced financial abilities, we will likely see more industry cooperations. This, especially, account for more significant innovative concepts. From our point of view, three forms of partnerships will become essential in the future:
- Direct airline partnerships: More often than in the past, airlines will team up on projects that serve a joint goal. This, most likely, is going to happen across countries, business models, and competition status.
- Alliance partnerships: The importance of airline alliances (Star Alliance, Oneworld, etc.) will grow. Contrary to recent years, where alliances were reduced to network expansion and marketing, they will be used as a platform for joint innovations.
- IATA Initiatives: We predict that airlines will accelerate the implementation of global initiatives — mainly driven by IATA.
#4 — Cross-Industry Cooperations Will Become Standard
In recent years many airlines focused on in-house innovations. Therefore, several leading airlines set up innovation hubs and dedicated incubators. Since the IT industry is one of the profiteers of the crisis, we believe that airlines will enter cooperations with tech companies. On the one side, this is about partnerships with the big players to drive large-scale innovations. On the other side, we will also see more intense cooperation with startups.
#5 — A Chance For Real Disruptions?
Every crisis is an opportunity. I hate to say that. However, Coronacrisis has the potential to disrupt the entire industry massively and create entirely new innovations. The bigger the mess is, the more creative companies get. And as mentioned above, the collaboration and joined forces of airlines and tech companies probably unleash unprecedented ideas.
Airlines & COVID — What Do You Think?
About The Business Perspective
With the Business Perspective, we provide a view on business topics once a week. We usually cover topics from technology to employee engagement and business intelligence. And frequently we also talk about our favorite industry: aviation. The article does solely reflect the authors’ opinion.