Even in the most challenging of times, there are opportunities for airlines to develop new business and a sustainable future. Christophe Ritter, Founder & Chief Executive Officer at Predictive Mobility, explains.
During the IATA’s Summer season 2020, in an aviation market plagued by lockdown and travel restrictions, more than 25 new routes were launched every day. It’s a significant drop versus 2019, however who would have expected that during the Covid-19 pandemic some airlines had launched a new destination?
Looking at Predictive Mobility’s Aviation Market Database, we have identified three key strategic objectives that these airlines want to achieve, and we will further suggest a practical analytical grid to implement on your flight network.
The initial objective airlines wanted to achieve by starting a new route was to operate on a monopolistic destination. With the yield dropping on their trunk routes, made to both stimulate the demand and match their competitors’ pricing, the challenge was to limit losses by finding niche markets with limited competition. Even if weekly operations were limited, the focus was on the net margin each passenger would bring to the company.
When, according to IATA, in 2020 airlines would be losing around USD 66 per passenger boarded, finding a high yield route that would consistently contribute positively to the balance sheet was of paramount importance.
The second reason for launching a new destination is more structural, and was already implemented by some airlines, especially the low-cost carriers (LCCs). It is called network agility. Focusing on the biseasonal flight schedule, Summer and Winter, with few adjustments, is something from the past. The ‘new normal’ is to work on your route network not twice but rather 4 to 5 times a year, with more differentiation of schedule during an IATA’s season. The rationale is to help fight the lower yield trend by looking at pockets of revenue opportunities during the peak summer or around key vacations, and to respond quickly to underperforming markets. LCCs are agile and ditch routes that do not perform after 2 months, and look for replacements, rather than carrying a dead market over an IATA season.
Another development that will mark the way companies work on their network is the destinations portfolio concept. Airlines are now focusing in segmenting their destination around key categories such as pure leisure sea and sun, diaspora, business regional, etc.
During the pandemic crisis, the main objective was to focus on the most resilient typologies of clientele and to have destinations with a positive price elasticity of demand, being able to fill up the seats despite a limited sale period.