• Adit Shah

COVID-19: Airlines & Aftermarket (Part 3)

Not surprisingly, airlines have been one of the worst affected sectors due to COVID-19. Outlook and projections have been bleak – everything from air travel not returning to same levels for another 3 years, to several bailouts and nationalisation of airlines. Since MRO (Maintenance, Repair, and Overhaul) and aftermarket sector depends on airline operations, they are also in damage control mode. Like my last post about manufacturing and engineering, potential positive effects that airlines and aftermarket (and the world) may benefit from are hard to find, but here they are.


BENEFIT #1 – The end of vertical seating concepts

If you don’t know what vertical seating is, the image below demonstrates this concept.


(Image source: BBC)

Yes – this was a thing, and several airlines such as Ryanair and Spirit have expressed interest this. Even though this probably was not going to happen even after several companies making several attempts at it, it’s good to know that the new social distancing ‘culture’ will likely put an end to future versions of this. For now.


BENEFIT #2 – More hygienic air travel

It’s unlikely that social distancing culture we have now will become a norm in crowded places such as airports – it just isn’t practical. What’s more likely to happen is focus and awareness of good hygiene. Several solutions are already being worked on – from thorough cleaning of aircraft after each flight or daily, to a complete redesign of aircraft seats.


The air conditioning systems in aircraft are already as hygienic as can be as the cabin air is constantly refreshed with some recirculation, and hospital level filters are used. Here is a great post on this topic by an experienced pilot.


We don’t know at this point exactly what innovations will make it through to operations or if they even be needed once things become more normal, but there’s some sense of relief in knowing that solutions are being worked on. This affects not just on aircraft – on airports, every passenger might have their temperature taken, for example.


Once we come out of this pandemic, air travel will certainly be more hygienic, even if it means longer queues at the airport.


BENEFIT#3 – More destinations and smaller airports

Point to point networks have been more prominent in the airline industry with the success of airlines such as EasyJet and SouthWest Airlines. This opened up smaller airports near major hubs, allowing air travel to flourish with the boom of low cost carriers. Major airports such as London Heathrow are hubs that would typically see a lot of traffic. Due to COVID-19, routes to smaller airports may become more attractive since it would be easier to socially distance from other passengers – or at least in principle. Social distancing at airports, small or large would be very difficult, but public perception often trumps facts. We may even see small airports getting more traffic, and therefore growing and attracting more air traffic. This might lead to a reinforcing effect in the longer term where airlines fly to these airports more, with the end result being more choice of destinations (and therefore competitive prices) to choose from.


All of this would also mean the demand for smaller aircraft goes higher – something that already has been a trend. This brings me to the next benefit.


BENEFIT #4 – Even higher momentum for greener air travel

Green and sustainable air travel has been a hot topic for years now, with several established companies and start-ups working on solutions. Goals for reduction in emissions are tough to achieve with this economic climate, but there is still a strong industry will to become more sustainable. There’s also some political will - for example, where the French government asked Air France to hit green targets of sourcing 2% of its fuel requirements from sustainable sources and stop competing with the greener alternative of trains for short domestic flights. Although there are several problems with these terms, it clearly shows political will to address green aviation. However, most airlines haven’t had these terms put on their bailout T&Cs.


Even though the likes of Airbus and Roll Royce are struggling to keep these green aircraft R&D projects going, there are start-ups and small companies developing some great products who still seem to be going full steam ahead – for example, Lilium.


The combination of industry’s will to become green, smaller regional airports opening up (see benefit #3) and the trend of short haul routes growing can be a great catalyst for building momentum for hybrid-electric, more electric, and all-electric aircraft and greener air travel.


BENEFIT #5 – Leaner MRO operations

MRO and the aftermarket sector depends completely on the airline industry. Aircraft not flying severely disrupts the MRO supply chain – Oliver Wyman estimates that the impact on global MRO demand could drop by around 30% in 2020. To keep the supply chain alive for when things start picking up, OEM or supplier driven consolidation is likely to happen, like discussed in the manufacturing post.


Consolidation (if done right) leads to operational efficiencies and therefore a leaner organisation (see previous post). This benefit is really amplified when combined with digitisation and automation of processes. This is a great opportunity for companies to try and reduce their fixed costs.


Lean operations with increased digitisation and automation will be instrumental in the eventual growth of the aftermarket sector. Greater utilisation of older aircraft that haven’t been retired yet, and aircraft coming out of storage after this downturn would likely be used by airlines to bridge the rising demand until OEMs start ramping up manufacturing of new aircraft. This is where a lean and more efficient aftermarket sector will be crucial.


TL;DR

Potential positive side effects on the airline and aftermarket include a more hygienic and green air travel, more choice in destinations to choose from, and a leaner aftermarket.