Surviving the Aviation Recovery Phase: a new approach to economics

The aviation industry has experienced a shakedown of an extraordinary scale over the last year. However, industry operators, airlines and professionals are now finding hope on the horizon and taking a fresh look at how to survive the inevitable recovery phase.

We take a deeper look into some of the biggest economic challenges facing the industry on the runway to recovery. From optimising resources and creating flexibility on the ground, to improving scalability with a sustainable pricing model, find out how airports can plan, prepare and manage a new approach for successful take-off.

Surviving the aviation recovery phase

How pre-Covid pressures were driving change

Even before Covid, the aviation industry faced mounting pressure in terms of growing passenger and cargo numbers, spiralling operational costs, enhanced security measures and ever-increasing mandatory compliance.

As a result, airports were already working towards smarter solutions to help overcome some of the economic challenges and reduce operational costs. A general sense of positivity surrounded a modern, streamlined approach that increased efficiency, productivity and security. Cloud solutions simultaneously reduce costs and the reliance on resources within a dedicated environment and the future was looking brighter for airport flow and revenue streams.

Although today sees the industry facing a different set of pressures, the foundations have been laid for managing a new normal in the airport environment with this type of approach. To fully future proof however, flexibility and scalability will be key – and the economics of the recovery phase for many industry players will rely on that.

The impact of Covid on the traditional business model

The impact of Covid has been widespread, bringing a dramatic end to burgeoning growth in almost every sector of the aviation industry in just over a year. However, this unexpected turn of events has also highlighted a serious, game-changing problem with the traditional business model for far too many airlines, airports and ground handling teams.

While rising passenger numbers historically created operational challenges, falling numbers have inevitably created economic ones. This is in part because the typical economic business model involves long-term, fixed contracts and associated fixed costs, regardless of whether passengers are flying or not. When passengers are essentially grounded, it isn’t long before this model becomes unsustainable for many operators. This has, unfortunately, been proven with devastating effect since the start of the pandemic for a high number of aviation businesses.

In addition, many operators have dedicated, on-site resources and infrastructure, also incurring fixed, unavoidable costs. While this model has worked historically, Covid has again highlighted a greater need for flexibility within the workings of an airport and reinforced the benefits of a modern approach with cloud and other technologies.

Although there is some sign of the runway lights coming back on in earnest, it is too little, too late for many aviation players. Now, with lessons learned, it is time to ensure survival during the aviation recovery phase by creating a new economic normal.

Many industry professionals are now looking to move away from the traditional, business model. Saying goodbye to fixed costs and finding a more realistic approach could be the key.

Rewriting the rulebook for airport revenue management

Every cent counts on the runway to recovery and static costs under long contracts simply don’t balance the books anymore. With an overall positive outlook towards a strong recovery period ahead, there is however, concern across the industry surrounding potential future demand fluctuations. This is why the traditional rulebook for airport revenue management effectively needs tearing up.

Rewriting a new version of the airport business model may be ground-breaking. But is has the potential to enable airports of all sizes to enjoy economic stability like never before. The ability to increase flexibility within the management costs by moving to a PAYG model could give operators the scalability they need as they head for takeoff and embrace growing passenger numbers over the coming months.

Handling fast-changing guidelines with smart solutions

Streamlining is also important during the recovery phase so that airports can operate cost-effectively and as efficiently as possible. This takes us back to some of the historic challenges faced by airports before the global health crisis. It is perhaps time to take a fresh look at the benefits of cloud and smart airport solutions. Because these systems reduce reliance on dedicated infrastructure and resources, they can also help to create cost-efficiencies across all areas of the airport.

This type of integrated airport management is flexible enough to handle constantly fluctuating distancing and health guidelines, and so could tick vital boxes in terms of security, compliance and passenger flow management.

Integrating cloud and smart solutions speed up and streamline all areas of operations – passenger processing, security and ground handling – and could play a core part in creating the future-proofed, highly cost-efficient environment needed for survival.

Preparing the right approach to take-off

As the aviation industry looks forward to getting on the runway, the approach looks positive. Although the effects of the health crisis are still rippling through the industry and there is still a shared sense of uncertainty, many are carefully preparing for take-off.

With lessons learned, the industry understands that there is another way to handle both operational and revenue management and that future-proofing is key to surviving this recovery phase.

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