Coronavirus Crisis Is An Opportunity To Remake The Airline Industry

As recently as, oh, yesterday, we were wondering just how bad the coronavirus situation could get for the airlines and for aviation in general. We were saying - oh foolish, optimistic days of yore! - that we could not see the bottom of the dive yet. Now, it seems that we can see the bottom: it is at zero. The impossible scenario for all planning documents, the put-it-in-as-a-joke-never-going-to-happen nul hypothesis is here. No longer do we need to imagine a world without flying, we need merely to look at the airport.

For the airlines, and for the rest of the industry - airports, suppliers and so on - this is no laughing matter. We are out of hyperbole. Existential, cataclysmic, disastrous: none of those get close to expressing the impact this can have on the aviation industry. The world too will quickly realize that this is no joke. How do they think those supplies of hand sanitizers and face masks are going to get into their hands? The crisis shows us, yet again, that aviation is a fundamental part of modern life.

Airlines did not cause this crisis, but they are feeling its power. To the extent airlines have to put their hands up, it is in their unique ability to move what the epidemiologists like to call vectors quickly. We are all epidemiologists now, and the vectors? They are you and me and everyone else. For malaria, a mosquito is a vector. The airlines' trade body likes to talk about the 'business of freedom' and to talk up connectivity, but sometimes, it seems like we can have too much of it.

Boy, are we paying a fair toll for that freedom now.

The upside of this catastrophe -another of the not quite strong enough words - is that people may realize just how hard modern life is without aviation. Sure, yes, at the moment, there is brave talk about how we can proceed with virtual meetings and teleconferences and exchanges of notes, but let's be frank. The two most useful things any conference organizer can provide are long coffee breaks and wide corridors. I hate to break it to all you speakers at conferences out there, and yes, I include myself in that group, but no one goes to grandly named Summits and Congresses and Conventions for the presentations. They go for the networking, for the serendipity of contact and the spontaneous meetings and quickly exchanged words that spark new thoughts.

One year of this brave-faced virtual-meetings-are-the-way-forward malarkey and we will learn again what "pent-up demand" might mean. Airlines have always been a leading edge indicator of the economy, and right now, those of sensitive disposition should look away, but when things come back, the airlines will be there first.

The most important question is in what form will they come back? No one has started to think about that yet, or if they have it is been a blind assumption that we just get back to, please can we get back to, business as usual. The waiver of the 80:20 slot use requirement is a case in point. But, if we do that, it will be a huge opportunity lost. As Rahm Emmanuel once famously noted, we should not let a crisis go to waste. Watch us do it.

Why is obvious: because the incumbents are the winners in the status quo, by definition. So they merely want to reinstate the status quo. But even for them, there will be changes. The most obvious will be in picking up the pieces of the airlines that cannot survive. States will throw money at them, on that you can rely, but there is a very high chance that it will be good money after, if not bad, then at least, after chasing a regulatory structure 75 years old.

There is a very ripe field of possible changes out there. The most obvious is reform of the fragmented, disjointed and largely out-of-date air traffic control system. In the U.S. and in Canada, you have less appreciation of just how fragmented and disjointed it can be. It is run nationally, and you have big countries. Think about Europe for a moment... We continue to control aircraft as if it is 1972. Madness. On environmental grounds alone - the European airlines' association A4E calculates savings of up to 10% if aircraft could straighten up and fly right. Fuel, emissions, whichever you want to count.

The ownership and control rules are another that are well overdue a change. Why can't airlines become international companies? Because in 1944, fearing that the vibrant U.S. airframe industry would take over the world, the Brits stymied them. Take that, America!

The slots rules are another candidate for serious, wholesale change. In normal times, and yes, I accept that these are not, the rules allow 20% of an extremely expensive and rare asset to go to waste. Arguably, if we did not regulate airport charges we would not need slots either.

If one thing comes out of this crisis, you have to hope that it will be a long hard look at our nationality-based system. But with the retreat to nationality-based crisis management, the ignoring of forums such as the G20 and a global pulling up of the drawbridge that looks like it is the only thing we can do in a coordinated way, the prospects are vanishingly slight. A bit like the future for many airlines.

... Read More