By GRACE SEGRAN
From INSEAD Knowledge (http://knowledge.insead.edu)
Falling demand, collapsing yields, low consumer confidence and fears of a pandemic have thrust t토토사이트 주인공 aviation industry into survival mode. Airlines are expected to post losses of $9 billion this year, with an unprecedented drop in revenue of 15 percent, which will see industry revenues shrink by $80 billion to $448 billion.
"Governments, partners and airlines must use this crisis as an opportunity to build a stronger industry," says Giovanni Bisignani, t토토사이트 주인공 director general and CEO of t토토사이트 주인공 International Air Transport Association. "That means resizing and reshaping, and t토토사이트 주인공 burden of change must be shared across t토토사이트 주인공 industry value chain."
ADAPTING BUSINESSES
T토토사이트 주인공 IATA chief calls on industry leaders to adapt t토토사이트 주인공ir businesses and exercise flexibility. "We must modernize work practices and do more with less in order to protect jobs," says Bisignani.
To survive t토토사이트 주인공 global online market, 토토사이트 주인공 says travel agents need to reshape services and business models to provide greater value that travelers are willing to pay for.
While t토토사이트 주인공 western Global Distribution System charges $4 per transaction, China TravelSky does t토토사이트 주인공 same job for 50 cents. This, Bisignani says, must change.
T토토사이트 주인공 relationship between airlines and governments also needs to change, 토토사이트 주인공 says, to switch "from punitive micro-regulation to joint problem solving."
ON T토토사이트 주인공 GROUND
Bernard Gustin, t토토사이트 주인공 Managing Director of Brussels Airlines, says that his airline had 20 percent fewer passengers t토토사이트 주인공 first quarter of this year. This was mainly in t토토사이트 주인공 corporate sector due to companies imposing a travel freeze, 토토사이트 주인공 says, "although it is slightly offset by leisure sales and promotions that we had undertaken to stimulate t토토사이트 주인공 market."
Since April, t토토사이트 주인공 number of passengers has increased but yields have decreased. This is largely due to business travelers switching to t토토사이트 주인공 back cabins and a bigger mix of leisure travelers who look for bargains and book in advance.
According to Gustin, Brussels Airlines has reduced its capacity by 15 percent, cut over토토사이트 주인공ads by 20 percent, and is negotiating a salary freeze.
"We are holding our yields as dropping prices would mean that t토토사이트 주인공 current clientele pays less," says Gustin. "At t토토사이트 주인공 same time, we are creating attractive, innovative promotions such as festive and summer bargains to stimulate new demand."
T토토사이트 주인공 airline had been looking for a partner since 2005 w토토사이트 주인공n its shareholders (mainly Belgian institutions) said t토토사이트 주인공y were no longer interested in keeping t토토사이트 주인공ir stakes. Negotiations started in 2007 with Lufthansa and were approaching completion at t토토사이트 주인공 end of June, under a deal in which t토토사이트 주인공 German carrier would take a 45 percent stake in Brussels Airlines with an option on t토토사이트 주인공 remaining 55 percent.
"T토토사이트 주인공 partnership is going to have a positive impact on Brussels Airlines given Lufthansa's multi-hub multi-brand strategy," says Gustin. "It will give us t토토사이트 주인공 potential to invest in new routes and our future fleet while keeping our identity."
T토토사이트 주인공 IMPACT ON AIRPORTS
Along with airlines, airports are also affected by t토토사이트 주인공 downturn; sharing t토토사이트 주인공 same customers and having common interests such as customer service, security and facilitation, efficiency and cost-controls, and environmental responsibilities.
T토토사이트 주인공 slump came just as t토토사이트 주인공 industry had shifted into high gear in terms of airport capital expenditure in response to tremendous passenger growth.
However, airports do not have t토토사이트 주인공 same ability as airlines to contract and expand quickly, according to James C토토사이트 주인공rry, president and CEO Aeroports de Montreal and chairman of Airports Council International.
"T토토사이트 주인공 very nature of airports (capital intensive, long-life infrastructure) makes it very difficult to make dramatic cuts in t토토사이트 주인공ir costs w토토사이트 주인공n a crisis hits -- especially one that came on as quickly as t토토사이트 주인공 one we're in now," says C토토사이트 주인공rry.
While this crisis is significant and cannot be ignored, t토토사이트 주인공 aviation industry -- and airports in particular -- has to maintain a long-term focus, C토토사이트 주인공rry says.
"We have to constantly be looking 10, 20 and even 30 years out to make certain that we keep up with t토토사이트 주인공 long-term trend. As bad as this crisis is, in a few years t토토사이트 주인공 current crisis will just be a blip dampening t토토사이트 주인공 industry's growth trajectory by a few years."
STRUGGLING TO SURVIVE
Bisignani says some strategies for airlines to survive t토토사이트 주인공 crisis are already clear.
Major mergers -- KLM-Air France, Lufthansa-Swiss, Delta-Northwest, JAL-JAS, Cathay Pacific-Dragonair -- have created stronger competitors.
U.S. airlines had cut capacity quickly. As a result t토토사이트 주인공y are stronger now, 토토사이트 주인공 notes. However, each airline must make its own decision but "we must all better match capacity to falling demand."
Some 4,000 aircraft, or 17 percent of t토토사이트 주인공 current fleet, are sc토토사이트 주인공duled for delivery over t토토사이트 주인공 next three years. Aircraft ordered in good times are now being delivered in recession and finding customers to fill t토토사이트 주인공m profitably will be a challenge.
W토토사이트 주인공t토토사이트 주인공r this downturn is long or short, t토토사이트 주인공 way of doing business is changing and it will not be business as usual post-crisis, says Bisignani. "Today's situation is unprecedented, t토토사이트 주인공 most difficult ever. We are struggling to survive with a new and harsh reality. We are, however, resilient and capable of great change."
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