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The influence of COVID-19 on European low-cost and regional airlines

Low-cost carriers can accelerate opportunities with data-driven decision processes

Parts of this article first appeared in Aviation Business News, with contribution from Cirium Market Development Vice President David White

The continued uncertainty of the trajectory of the COVID-19 virus has governments cautiously lifting and often re-imposing travel restrictions in Europe. After a prolonged period of hibernation and during a somewhat shakey recovery, we are seeing airlines slowly but steadily ramp up their operations.

While the industry faces a long haul to full recovery, signs point to low cost carriers (LCCs) recovering faster than their mainline counterparts in Europe.

As of late September, 2020, Cirium data shows LCCs are operating at around 60% of their capacity when compared with the same period last year. Meanwhile, mainline carriers are operating slightly more than 40% of their 2019 levels, as COVID-19 continues to restrict long-haul flight operations.

Favorable conditions

As the graph illustrates with a surge of activity for LCCs in the peak August holiday period, much of this can be attributed to the leisure market rebounding more quickly than business travel. In light of a shift to remote working and increased duty of care concerns among corporates, the highly profitable corporate travel market looks set to remain depressed for some time. This trend favors LCCs, which are well positioned to cater to the demand for short-haul travel to popular European leisure destinations, thanks to their point-to-point route networks. Travelers also understand that direct flights (flights with no connections) have a safety advantage – fewer touch points and less time spent exposed to potential carriers in airports.

The influence of COVID-19 on European low-cost and regional airlines

In the near term, LCCs have a distinct competitive advantage over full-service operators with the opportunity to not only retain but grow market share and build customer loyalty at the expense of mainline carriers.

But, these short term gains do not guarantee a return to profitability. Since most European LCC flights are intra-European, travel restrictions and quarantine requirements remain dynamic and unpredictable.

The recent spike in COVID-19 cases in Spain and France, and the continuing 14-day quarantine requirements imposed upon returning UK passengers, is an example of how the travel experience can change with almost no warning. Sadly, this is something that will do little to restore consumer confidence in air travel, which is already at an all-time low.

Competitive moves

Competition in the low-cost and regional market also remains fierce, putting downward pressure on prices and squeezing profit margins. According to IATA, 80% of airline seats globally are on routes with at least two competing carriers, while nearly 30% have five competing carriers.

At the same time, LCCs are less able to adopt social distancing measures onboard if they want to achieve break-even load factors. Operating with an empty middle seat policy or similar would cap load factors at around 60% for single-aisle aircraft — making cash-positive operations nearly impossible.

With fears of a second wave of the virus looming in Europe, this could see safety-conscious passengers choose to pay more for mainline carrier flights, which offer socially-distanced seating options as well as the added space and privacy of business class.

Resilient operations

Efficient use of assets is key to profitability for LCCs and regional operators. However, the introduction of new health and safety protocols at airports around the world is also putting pressure on aircraft turnaround times.

LCCs must quickly turn flights around and maximize utilization of every active aircraft in their fleet in order to operate profitably. But new aircraft disinfection and sanitizing requirements as a result of COVID-19 are strict. Initial figures suggest hygiene measures have significantly increased turnaround times, adding approximately 10 or more minutes on average or 40% to an already tight target turnaround time of 25 minutes.

LCCs are already counting the cost of higher ground services fees, higher airport fees from additional time spent at the gate, and lower daily utilization rates for active aircraft in their fleets. As a result, they’re now looking for ways to mitigate the impact of added cleaning time by finding new ways to improve other aircraft servicing processes – accelerating changes already underway before the pandemic.

For example, a few carriers are experimenting with machine vision and other innovations to gather data on each step in the turnaround process gathering the data necessary to monitor, analyse, and reduce turn-around times. This includes increasing efficiencies in baggage handling, catering, refueling, safety inspections and boarding and deboarding protocols, in order to offset the additional time spent on aircraft disinfection.

For more insights, read the articles in the Autumn edition of Low Cost and Regional Airline Business.

Digitally differentiated

Innovation through digital transformation will be a key differentiator for airlines across the board as the industry enters the recovery phase. Those willing to embrace change are better positioned to take advantage of opportunities in a post COVID-19 market, as well as become leaders in driving recovery across the rest of the sector. The new normal requires a new approach – less reliance on decisions made from past experience, to greater situational awareness and more data-driven decisions. The path to recovery is digital – creating the agility and resilience needed to adapt to an ever-changing operating environment.

The current situation is painful and requires some very tough measures to align costs and revenue. However, continued investment by LCCs in data and analytics is more important than ever before. Those who accelerate their digital transformations now will emerge from this crisis stronger and more competitive than those who don’t.

COVID-19 is a catalyst for change – since change has become a necessity, rather than an option for the survival of an airline.


Read more about airline recovery on the Thought cloud or review our upcoming and recently recorded webinars.

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