AVIAPRO CONSULTING BLOG
Airports are opening up, and airlines are getting ready for takeoff
27 May 2020
by AviaPro’s Head of Industrial Services, Jorge Abando
Across the globe, airlines are implementing procedures to bring a new level of safety into the cabin that ensures their passengers feel protected from each other! Who would have ever contemplated this scenario six months ago?
Operators initially involved in repatriating passengers on chartered flights have ensured their cabin crew’s safety by outfitting them with PPEs from head to toe. In many cases passengers were also asked to wear masks and gloves for the duration of their flight. But will this be the new norm?
Many measures have been imposed on passengers by airlines, such as mandatory hand sanitization, temperature checks before departure, and mandatory use of face protection for the duration of the flight.
Staff monitoring passengers' body temperature on board of a plane in Boryspil International Airport, Kiev. Photo: Vasyatka1
Who will absorb the cost of the changes?
In the cabins, procedures for more routine sanitization efforts and pre-packaged meals are in effect, and there has been much debate whether the infamous middle seat should be sold at all.
In the past, passengers seemed all too willing to accept newly imposed conditions to achieve their desired travel goals, such as when restrictions were placed on carry-on liquids, and when increased security checks at airports meant longer queues and more delays. The question now is, in additional to these newly imposed conditions, how much more is the passenger willing to pay in ticket price, in the face of an industry fighting for survival?
The Direct Operating Cost of an aircraft flying from point A to point B will break even when just enough passengers are paying just enough of a fare each. With low average fares, the flight needs to be practically sold out. Flight costs will likely increase given additional costs of the new COVID-19 measures being taken, which are likely to be passed on to the consumer. Airlines are faced with the challenging task of having fewer seats to sell in the case of a blocked middle seat, while trying to keep fares affordable.
Rethink pricing, and rethink revenue
The perceived value of a ticket will be different to every passenger, given their individual needs, wants, and desires for air travel. Indeed, these are the basic tenets that drive the practice of Revenue Management (RM) systems.
Milan Airport Authorities testing people's temperature on 6 Feb 2020. Photo: Dipartimento Protezione Civile
There are always many prices for one seat, which can be imagined as a price-demand curve, with demand on the X-axis. The area under the curve represents the airline’s total potential revenue, presuming it can offer an infinite number of ticket prices so that each and every willing traveller can be tempted to buy a ticket. What stops many passengers from gaining the advantage of the lowest fare on the curve is a set of conditions imposed on the inventory of seats available. What can entice the sale of a higher fare are the perks granted. A new operating environment brought on by COVID-19 suggests a new set of imposed conditions and a new set of perks on the inventory to influence buyer behaviour.
Competitive positioning is still the key element. While customers prefer lower prices, price is more often a secondary consideration in most purchase decisions, and as travel restrictions are lifted there will be seat inventory challenges. An airline’s reputation for quality, service and availability are always key decision factors.
AviaPro’s expert consultants are available to help airlines adjust their Revenue Management strategies in the new post- COVID-19 world.
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