The unprecedented nature of the global shutdown will call for a new social contract and management must get ready with techniques acquired through reading the performance of successful corporate entities that succeeded through disruptive innovation. This could be done with the application of knowledge acquired, to experiences.
by Dr. Ruwantissa Abeyratne
writing from Montreal
You cannot escape the responsibility of tomorrow by evading it today
Abraham Lincoln
Winston Churchill once said, “ it is always wise to look ahead, but difficult to look further than you can see”. These two quotes from two of the most illustrious leaders in history subsume the predicament we are in today. We cannot foresee the future. However, we can adopt sensible measures to manage the crisis in our own professions and it is hoped that the principles enunciated below for air transport would resonate with other areas of management as well.
It is incontrovertible that the three areas hardest hit by the Covid-19 lockdown are transport, retail, and recreation. Examples are air transport; clothing and cosmetics; and restaurants, respectively. Of these, air transport is the only commercial activity which unintentionally helped proliferate the crisis. On 14 April 2020, The International Air Transport Association (IATA) said: “airline passenger revenues will drop by $314 billion in 2020, a 55% decline compared to 2019”. Earlier, on 24 March IATA estimated $252 billion in lost revenues (-44% vs. 2019) in a scenario with severe travel restrictions lasting three months. IATA went on to say:“[T]he updated figures reflect a significant deepening of the crisis since then, and reflect the following parameters: severe domestic restrictions lasting three months; some restrictions on international travel extending beyond the initial three months; worldwide severe impact, including Africa and Latin America (which had a small presence of the disease and were expected to be less impacted in the March analysis)…full-year passenger demand (domestic and international) is expected to be down 48% compared to 2019”.The two main elements driving this are overall economic developments during the recession brought about by the lockdown of social activity and travel restrictions.
The Economist says: "Wall Street analysts expect only a slight dip-in profits in 2020 (in the overall economy)…don’t be fooled by all this. In the last recession two thirds of the big American firms suffered a fall in sales", saying that the median drop was 15% year-on-year. “In this downturn falls of over 50% will be common”.
The aforesaid analyses are conclusive that the current situation is dire, prompting some analysts to say that we are not in the midst of a recession or even a depression but a global paralysis. However, some are using the well worn cliché “this too will pass” and indeed pass it will for the simple reason that we humans are societal and communal and love to travel. Air travel will resume, some day, although we could well adapt to online conduct in areas such as education and the conduct of meetings. Therefore, this is the time air transport managers (a collective term encompassing airline, airport, and air navigation services managers) have to seriously think of both the present and the future.
Firstly, these managers should collect knowledge. This should be acquired through reading historical facts on the survival of the industry. A look at post 9/11 measures might help as both 9/11 and the current crisis have one thing in common – the fear factor. USA Today recorded that “[D]irectly after the terrorist attacks on 9/11, the federal government closed airports, canceling thousands of flights at a direct cost to airlines. However, even when the airports reopened, passengers were wary of air travel, and airlines experienced at least a 30 percent reduction in demand during the initial shock period immediately following the reopening”. Post 9/11 the global insurance market for airlines collapsed forcing States to be the ultimate insurers of their airlines. States called on the International Civil Aviation Organization to formulate a global insurance scheme which was later called Global Time, until the market took over, which it eventually did”. Eventually, global air transport was revived with changes to security – a fact that could prevail after the Covid-19 crisis is overcome - but this time the measures could apply both to security and safety.
The unprecedented nature of the global shutdown will call for a new social contract and management must get ready with techniques acquired through reading the performance of successful corporate entities that succeeded through disruptive innovation. This could be done with the application of knowledge acquired, to experiences. PepsiCo which successfully applied what it called Performance with Purpose (PwP) to oust the soft drink giant of the time – Coca Cola – says in the Harvard Business Review: “ companies wishing to pursue a purpose driven strategy” ought to devise a unique product (whether it would be in the airline or airport industry or any other industry) where “leaders should consider setting up a team that reports directly to the CEO and scouts out the megatrends that would affect the Organization”.
The Megatrends that would come under the purview of management would be: the economic shift from the West to the East; rapid urbanization; demography; the technological revolution; and the environmental impact. All these will impact a new management approach in a post Covid-19 world in the face of the changes that would be brought to those trends which existed pre Covid-19 era. In late 2019 we were faced with such facts as in 2020 the global middle class will number 3 billion people, and the aviation industry will be able to connect with them all through the smart devices in their pockets. We forecast that by 2020, 21 billion network devices will be in use – up from two billion just a decade ago. Mobile technology, cloud computing, data analytics, biotech and genomics, and artificial intelligence are all advancing rapidly. Consequently, one could expect growth opportunities related to aircraft digitization and new high-performance materials, as well as for hybrid engines and 3-D printing.
Managers who wish to be in a PwP team would have to be conversant with addressing the aforesaid facts with answers to questions such as “what new measures and creative innovations in management are necessary in a post Covid-19 air transport world”? “what areas of talent should be developed to reach competence in the face of a different would view?
The third and final management technique would be to act globally and not nationally. This would require global networks of management and information sharing. Online platforms provided by training institutions would be invaluable in this regard. Management consultancies and training firms should start thinking of ways and means to provide these services. We cannot get away from the fact that this unprecedented crisis portends lasting effects on the world requiring radical changes to the business community of the world.
We can take comfort in the fact that we are armed with a potent weapon that was not available to us during the 1918 Flu pandemic or even the 2003 SARS crisis – information technology. However, managers should be acutely aware that artificial intelligence will be a double edged sword that could be used for invasive identification purposes in the context of air travel and therefore, this must be harmoniously balanced with privacy concerns. It is a disturbing fact that the fear brought to bear by Covid-19 upon the world will impel us to think that when it comes to competition between health and privacy, health considerations will prevail.
Dr. Abeyratne is a former senior official in the United Nations system who teaches air law and policy at McGill University in its management programme. He is also Senior Associate, Aviation Law and Policy at Aviation Strategies International.
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