A few days ago while talking to a colleague, I realized that I feel old. He argued that “all crises are the same” and that it is possible to come up with a standard methodology to manage any type of crisis. So I took a breath and counted the airline industry crises that I experienced in my career as a network and schedule planner.
I worked through 2001 (September 11th), 2003 (SARS), 2008 (GFC). There was another crisis in 2011, which only affected the airline where I worked, but that too was pretty bad. The whole fleet was grounded by the CEO to force an end to a crippling industrial action, which lasted over a month. The fallout was the same – planes not flying, lots of upset people not going where they needed to go and staff fearing for their jobs.
September 11, 2001, was 19 years ago (Yes, I am old). This was so long ago that many people currently working in critical airline roles were not around at that time. It is now these young people who will have to manage the current crisis, without having experienced one before.
So what was it really like? Was it different? And does experience tell us anything about how we can manage the current crisis? Every crisis felt different. The only thing that was same was the sense of shock and fear in the industry that grew with every passing day. Every crisis also taught us another lesson. There is no easy answer on how to manage this current crisis, but it is helpful to remember the previous ones:
September 11, 2001
In 2001 people stopped flying because they were scared they might die in a terrorist attack. It was a deep, personal fear born by the vision of those planes flying into the Twin Towers. Many people lost loved ones or personally knew people who became victims. That image, instantly and irreversibly, linked airlines and terrorism in people’s minds. There was something odd, however. Because if you still remembered the 1960’s, 70’s and 80’s, you would probably remember dozens of hijackings. There were hostages on the planes executed in public view. Planes were blown up mid-air and airport check-in queues sprayed by bullets from automatic weapons. Terrorism involving airlines was a common occurrence in those days, but no one remembered it.
This oddity pointed at the way out of that crisis. People would start flying again when they forget their fear. And to make people forget, someone had to convince the public that everyhting is now OK. It wasn’t the airlines that could deliver that message. It was the governments. Once people saw governments are again in control, airport security has been beefed up (which caused another headache for airlines) and the world hasn’t come to an end, then they started flying again. Demand for travel returned, although it took 3 years in some markets until it reached the levels prior to September 11th, 2001.
We learned quite a few things from that crisis. The biggest lesson was that we are exceptionally vulnerable to regulatory shocks. Government can shut us down, impose restrictions on the industry and dictate the way we interact with our customers. As an industry, we have absolutely no way of avoiding the cost of government decisions. Because of the September 11th attacks, airports, check-in, security queues and baggage checks became an unpleasant experience that made people wonder if travel was really worth it. We adapted by using technology and airlines moved quickly to manage and monitor passenger journeys electronically. New conveniences were created, such as online check-in, electronic boarding passes and baggage self-drops.
This crisis "cleaned up" the industry by killing weaker airlines and creating opportunities for stronger ones to improve their market position over time. Hovewer, 2001 was largely an American affair, it was not a “true” global crisis. But we learned that crisis of this magnitude can shift the global growth. Large American carriers were offloading their aircraft orders and airlines in Asia-Pacific were snapping them up at a discount, boosting their capacity. Also, who on September 11th, 2001, would have thought we would have Mega- Hubs in the Middle East only a few years later? We know now that we have to start planning for the future as soon as crisis strikes. Because the future has just changed. September 11th is still with us now and it has shaped the way we fly like no other event before it.
SARS, 2003
In 2003, we had a serious pandemic. At the beginning, it was similar to how the current pandemic developed, except it didn’t spread too fast or too wide. While major outbreaks were occurring in parts of Asia, for the rest of the world it was largely a non-event. Travel and movement of people was not restricted. Airlines were still flying, except some were flying empty. And to make things worse, they kept flying empty for a very long time, driving them nearly into bankruptcy. Many airlines did not know what to do.
We learned from 2003 the importance of “speed to market” and network optimization. A lot of airlines in those days worked within isolated silos in their commercial and operational planning structures. Network and schedules were decided 4-6 months before the season start in the Commercial silo. After that, there was a huge time gap when no one really “owned” the schedule. Operational silo would only take the schedule some 10 days prior to the departure to allocate maintenance and plan for the day of operation. It had no view beyond that. No one had a clear responsibility to adjust the capacity if demand was not coming in. If the flights were not filling, it was assumed that Revenue Management would do something about it on the pricing and inventory side. That process does not function when demand is completely gone and you can no longer stimulate it. That meant empty planes were still flying, cash was burned and there was a huge communication lag between management being advised, taking decisions and implementing them.
Some airlines did better than others. Those were the airlines that already had network optimization concepts within their network scheduling departments. There were different names for it in those days, usually something like “schedule variation” or “short term schedule” department. Optimisation was not common terminology, simply because powerful network and schedule optimizers (e.g. fleet assigners, hub and route optimizers, etc.) were just emerging and few airlines had them. But this crisis, once again, highlighted the need for such technology. It highlighted the need to review the way network planning was done and how these processes interface with the rest of the organization. We learned from it and embarked on building up the skills in the network scheduling that would help us to react faster in the future.
Global Financial Crisis, 2008
What is scarier than a faraway virus or the fear of terrorism? Losing your job and your house. It is scarier because you are helpless and can’t do anything about it. You can’t hide at home and avoid it. It will come for you. That was the kind of fear that people felt when the GFC struck and the world collapsed.
Except it didn’t. Once again, there was nothing really global about that crisis. If you were living in China or some other parts of Asia-Pacific that was experiencing strong economic growth and your economy was not over reliant on the American and European banks and debt markets, you wouldn’t even know there was a crisis going on if you didn’t watch the news. There was no restriction on flying, no physical danger, no regulatory barriers. Yet this was the biggest crisis for the industry thus far.
I remember turning up to work one morning to face empty cubicles where senior managers usually sat. They were all in the crisis meeting, deciding what to do next, since corporate bookings collapsed overnight. An hour later I was asked to reduce network capacity by a double digit ASK percentage for the next few months. I became scared too. But I was able to do what was required within the next couple of hours. That’s how long it took to change the whole schedule and trigger the airline to replan its resources and rebook thousands of customers. I could do this because we had the data, the interfaces, the fleet assigner, the scheduling tool and most importantly an efficient and determined management. This level of readiness was a result of the two previous crises.
We already knew that the world will not be the same and that we need to plan for the changed world. We also knew that all the above-mentioned things will help us: technology, efficient processes and integrated organization. But we didn’t know how long this crisis will last and what will actually happen to the market and demand. So we learned the value of extensive scenario planning. Think what prudent governments, who had good success in managing the COVID-19 outbreak are doing right now: They test, test, test. And then they keep testing until they find all the infected patients and isolate them. It was similar for us in network scheduling then. We evaluated many different network scenarios, for every possible timeframe and every possible market assumption. In the end, ONE had to be right. And we would have that scenario, for when we needed it. It was ready to be published and it would once again trigger the whole airline into action to grow and expand the network and to make money. It was a brute force really.
But how do you do so many scenarios? Just like capacity for virus testing, the capacity to do scenario planning has to be built over time. You need people, you need to skill them up and maintain that skill. You also need fast and powerful tools. It’s all about being prepared and not letting previous crises go to waste by learning nothing from it.
So…what about the current crisis?
Yes, experience will help in managing the current crisis. This experience of the past crises is already built into the processes and technologies most of us use. So even if you never saw the airline industry crisis, you are not starting from scratch.
Here is some more advice that I can share with the network planners, schedulers and other casual readers out there:
You can always assume that the fallout from the crisis is at least five times as long as the crisis itself (It’s a rule of thumb, based on no scientific data). So the fallout from this crisis will be with us for the next 5-10 years.
Try to understand the reasons why people are not flying. It will help you understand what needs to happen for them to fly again. From that, you can understand a lot about how demand will develop.
You will need to replan everything: Network, fleet, all of it. The future will be different so start preparing for it early. The best time to do strategic scenarios is when the times are really good or really bad. This is because at extreme point in history, you will have a unique perspective which will result in a unique strategy.
Those network planning departments who have been preparing for this over the years by investing in skills, data and technology, will have it a lot easier than those who didn’t. But those who are new and didn’t have the chance to prepare can still get ahead. You simply have to ask for help. This is why Lufthansa Systems has a department Airline Consulting.
Managing a crisis is not an intellectual exercise. It’s not a methodology or a hypothesis. It’s hard work.
Finally, do we know how to fix this current crisis? No one does, because this current crisis has no historical precedent. If someone claims otherwise, they are not telling the truth, so make sure you call them out on it. But we do know what to do until we solution presents itself. We will do what network planners and schedulers always do: we will model hundreds of scenarios and we will build thousands of schedules. We will make a million assumptions and use every single tool at our disposal. We will put up with it, we will work through it and we will figure it out, just like we did every time before.
And so, one day in the future, someone else will reflect on the COVID 2019 crisis and realize that this is all in history and that they are now very very old….
Besides Network Planning, we also offer support in the areas of Ops Control, Maintenance, Customer Experience and Cyber Security to help your airline navigate through the challenging times due to the Corona crisis. We have several experts with up to 40 years of real airline experience, who steered world-leading airlines through many crises. We are also sure that this is not the last crisis to come and that every airline should be best prepared – something that we can help you with.
About the author
Dear Reader, in these few articles I would like to share my 20 years of experience in airline network and fleet planning, transportation economics, regulatory affairs and freight operations.
Sergej Bukovac, Editor