Powering through uncertainty in times of crisis

In the short term, it is vital to do whatever is required to keep operations afloat, to protect the health and safety of employees and to align the senior management into a Crisis Response Team.

Many companies are facing or will be facing cash flow problems. It is vital for airlines to cut costs and conserve cash, as well as gain access to funds to guarantee their survival, recently said Garry Kelly, CEO of Southwest Airlines. Unfortunately, some airlines will likely not have enough capital to see them through the crisis. Montie Brewer, former CEO of Air Canada, further added that airlines “..need 30% of turnover as readily available cash to guarantee safety”.

The airline needs to continue to act defensively, stabilising operations, preserving cash and protecting revenues. In addition, offensive tactics and strategies must be developed e.g. is there an opportunity to leverage cargo operations to generate cash flow? Can operations be maintained into certain markets?

VP and CTO of Flight Business of Trip.com, Yudong Tan, advises that investing in technology for automating customer service is vital. During the peak volumes of cancellations and rebookings, Trip.com were handling 95% of the domestic Chinese traffic in an automated manner. Comparing this with only 50% to 60% of international requests that can be handled in an automated manner, it took Trip.com more than 1 month to manually clear the backlog. Clearly, technology can help reduce costs and improve efficiency in times of crisis.

Jane Lim, VP Business Operations and Strategy for TripAdvisor, commented that travel companies can learn from other industries and invest in community forums to assist their customers, removing the call centre bottleneck. She also added that it is very important to continue to invest in the technology required to enable your business to deliver the human touch at the scale needed during the crisis.

Airlines should first focus on survival and ensuring they have sufficient funding to weather the current crisis. Those with sufficient capital or access to cheap debt, through cash on hand, investment, M&A or state initiatives, should invest in Digital Transformation projects that will position them well for the recovery.

Airlines were already under-investing in technology pre-crisis. With almost twice as many contractors as full time airline IT staff and most of the contractors let go to save costs, the fear is that airlines will fall even further behind.

While it may sound counter-intuitive, investing in Digital Transformation during a downturn can lead to significant returns in the long run, positioning airlines for a strong recovery. Companies that tend to be more proactive and progressive in this area believe that once the market rebounds, they will be more streamlined and focused, be in front of the competition, be prepared to operate at an historically high profit margin and be more nimble and better prepared for future macro level or sector-specific issues that may arise.

From speaking with airline CEOs, Henry Harteveldt of Atmosphere Group highlights the following areas as the primary focus of their revenue-generating efforts post-recovery:

During these difficult times, OpenJaw believes that airline partners can support the airline’s strategy by:

The commercial model must be transparent, based on usage and must come with no hidden or punitive costs. In such a dynamic market, contracts must give full ownership of data to the airline, must be flexible and cannot lock the airline in for multiple years, with no ability to change. Airlines must also play their part and ensure that traffic is prioritised based on the value of the source. Unlimited look-to-book regardless of channel and value is not sustainable in a fair usage model.

In these difficult times, we must face the current hardships head-on, while remaining optimistic about the future of our industry and taking advantage of the current situation to better prepare us for the future.

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