Tomorrow's airlines will be leaner but not necessarily weaker

There is no doubt that many airlines will emerge considerably “lighter” from the COVID crisis. Fewer planes, fewer personnel, fewer routes. The only thing that will have grown is their debt. Lighter airlines, yes, but will they be diminished or weakened?

What is the difference between a legacy airline and a low-cost airline?

It should be noted that most often the slimming down process will be more violent for the “old” airlines than for the younger ones, especially the low cost ones.

This is easily explained: over the years a business tends to accumulate “fat”, regardless of its sector of activity, and in the case of the airline industry this is easily understandable.

This “fat” may consist of people who are surplus to requirements.

Many of the former airlines used to be national airlines in the original sense of the word, i.e. public businesses. They were an instrument of image and sovereignty, profitability was secondary.

Then they had to become profitable. But there always remained, at the level of culture, a little something which made that employment would not be sacrificed at any price.

When we find a way to do with 3 people what we used to do with 5, the two “extra” people are kept in the same position or elsewhere, but in the end it doesn’t matter if they are really needed or not. This will be compensated with “natural” attrition. Something that is true in all sectors.

This can also result in people in the wrong positions.

It is a consequence of the above, but these airlines often have an abundance of administrative staff or a Mexican army of managers. On the other hand, they do not have the capacity to invest to hire (or not as much as they would like) in a new sector precisely because there are too many people “elsewhere”. It is not the number of employees that is in question, it is their job.

This can result in a counterproductive complication.

This is a common ailment in too many organizations and even more so when it comes to former public businesses. Chiefs, reporting, useless committees, long decision-making processes, etc. But to simplify, we have to admit that it is necessary to reduce the number of employees and this is not well seen outside a crisis.

This can result in the unhealthy presence of a public shareholder.

Being a private business does not mean that the state has no say in your affairs. Sometimes it is there as a shareholder and sits on your board of directors. Sometimes it has other means of pressure. And in any case it wants you to preserve a certain social model which only it believes in, it wants you to set an example. In two words: the State makes its communication at the expense of your profitability.

Finally, this can result in an old and therefore inefficient fleet.

Young airlines have new and profitable aircraft to operate. The older ones too, but they also have much less efficient aircrafts from an economic point of view. But replacing a fleet takes time so they are changed “as they go”. And then there is an existing network, customers and demand.

A legacy airline that has enough demand to fill an aircraft to serve a given destination will do so to maintain its network and satisfy its customers, even if it means sending an A340 there. A low cost airline will discontinue the route if it does not achieve a certain level of economic efficiency and send the 340 to retirement. For them it is better not to fly than to do it in an insufficiently profitable way, while for the others we will try to satisfy the customer, the market, the State… with what is at hand.

In short, a traditional airline must constantly prepare for the future while accommodating a human, cultural, commercial and material history to which it would like to say goodbye but cannot afford to.

Nothing like a good crisis

They can’t afford it unless there is a crisis. There, everyone understands that there are choices to be made. During major crises the airlines do what they would have liked to do earlier but would not have been acceptable.

On supprime le personnel surnuméraire, on ferme les lignes peu rentables, on met à la retraite des appareils trop âgés. Except perhaps at British Airways at one time, attrition has never been a deliberate strategy in “normal” times for an airline, they wait for a crisis to justify it.

Lighter can mean more muscular

Losing weight is one thing, it remains to know where you lose it. Losing fat is good, losing muscle is not. As we said several weeks ago this crisis can be a real opportunity.

As long as you cut where you need to, in the right place. Not to slim down to lose weight but to come back more muscular and agile. Delta said no different in March. Its financial director said”[Nous sortirons de la crise] certainly a little smaller than when we entered, and then we will have the opportunity to grow“, also speaking of a “more modern and flexible fleet”.

It is a pity to have to wait for a crisis to make a business undergo a fitness cure knowing that the said cure would have been less violent without the crisis but it has always been so and it is not going to stop.

Depending on the choices that will be made, depending on whether certain shareholders will weigh in favor of their own image or the economic development of an airline, all will emerge from the crisis lighter than before, but some will be weaker and others stronger.

We’ll assess the situation in two years.

Photo : Lufthansa planes in Francfort byNate Hovee via Shutterstock