How To Survive Indebtedness, The Next Pandemic Hurdle For Airlines
“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think and act anew” -Abraham Lincoln
Just over a year ago airlines stepped into 2020 ready to be bigger and better than their competitors, buy more fuel efficient aircraft, fly more — even to busiest airports, carry more passengers with more seats in the cabin, increase retail revenue to compensate for higher costs of their operation, and hope for a more profitable year ahead. No one could have imagined that only a few months later the COVID pandemic would bring the system to a halt and that the magnitude of the current crisis would be set to leave a big mark on the future of air travel.
“A tough future is ahead of us”, said IATA CEO Alexandre de Juniac, and continued: “Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. After surviving the crisis, recovering to financial health will be the next challenge for many airlines… Paying off the debt owed to governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover.”
There are many signals to suggest that recovery will be slow and may take unexpected turns and twists for many airlines. Unpredictable market conditions will inevitably cause problems with planning at all stages, from deciding which routes to fly, to costing, pricing, and allocation of resources. Frequent disruptions caused by rescheduling, flight delays, and cancellation will become sources of unforeseen losses. Preventing and minimising the negative impact of changes while learning through this trial-and-error phase will be crucial for airline survival.
The way we used to plan and make decisions will no longer work. Top down planning without insightful operational feedback will lead to more disruptions, more dissatisfied passengers, and unexplainable rise in costs. This time, there will be no historical references to rely on. Replacing them with unfounded intuitive predictions will lead to more failures and rise in indebtedness. And this has to change.
Managing through crisis means managing through disruptions, and seeing them as an opportunity for learning and validating our plans and strategies. Disruptions bring authenticity to decision making, they point to things in need of improvement and with the right technique, enable insights into interactions between data, people, and processes that can make these improvements possible and measurable.
Preparing airlines for the age of growing uncertainty and disruptiveness has been my passion for many years. Using my diverse and relevant experience across the industry, key insights and expertise, I have created and have been using a method and technique to equip leaders, regardless of their hierarchical rank, with knowledge and experience necessary to cope with disruptions of any scale. The method enables them to make informed decisions in hard to manage situations, to adapt, and make their airline more resilient to future challenges.
I couldn’t have predicted the vastness of the current crisis, but found the principles, practicality, and ease of implementation of this method useful to support airline endeavours to expand, conscious about ongoing risks, reduce debts, and find new ways to get out of crises more quickly while harnessing human values.
Making some progress in this situation requires a new approach to planning and decision making where deep insights in what is happening on the operational side become essential for creation of adaptive strategies.
This relies on cross-functional interactions that transcend organisational divisions and provide answers to currently unanswerable questions — the work supported by the OpportunityScanning technique and controlled focus. Here are some of the key aspects of this technique:
Data and insights
To make sense of data and human interactions, data need to be accessed near real time when it is possible to get insights into the origins of problems. As Satya Nadella, Microsoft CEO said, “it is not just seeing these things, but taking action. Data is only useful if you in real time or near real time can predict something better, can automate something better, can gain an insight — those are the outcomes that drive your data. That’s the true measure of your success with data.”
Introduction of relational and actionable metrics is crucial for making necessary adjustments and for measuring progress. This enhances the system view of business that looks more like a flexible learning network that needs constant fine tuning and occasional upgrades to keep up with changes in the operational environment. Introducing non-linear measures of cost and quality respecting their true nature becomes crucial for understanding what needs to improve.
These are collaborative events where the same operational problems were looked at from different organisational perspectives followed by prioritised actions.
What makes it all actionable are the relational action maps created during the cross-functional meetups.
This constant moving back and forth between strategy and operations is one of the key things that distinguished Southwest, the most successful airline in history from other airlines. Their founder and former CEO Herb Kelleher explained: “At a time when everything is created, deployed, and measured in real time, strategy and execution are one. Sequential thinking, which requires putting strategy first and execution second, is becoming more and more outdated, even irrelevant. Today’s business relies on a constant back and forth between the two”.
This practice has been instilled in Southwest from early days. Traditional airlines, however, have to act quickly to turn things around, and leaders and executives need a very rapid training in this field.
It couldn’t be done before because of the rigid organisations, information, and management structures shaped by 50+ years old industry standards and the existing business and education systems. The result: anything that is out of sequential views and measures is taken out of consideration including understanding and managing cost and revenue. The reason behind this is the lack of transdisciplinary knowledge based on the real-life experience — vital for making decisions that benefit the entire organisation. The new approach with previously described basics offers these opportunities through collaborative learning during earlier mentioned meet-ups and other practices described in my book and other published work.
So, we now have a historic opportunity to start afresh and act anew, to do things that will ensure a more sustainable future for the aviation industry.
I am here to support leaders to develop approaches and tools that will not only help them navigate their airlines through the current ever-changing situation, but also help with building new foundations which will allow for more astute leadership based on an integrative view of their business, making airlines ready for the next evolutionary step.