Corona – the New Measles

Measles

MeaslesA few days ago someone on the media compared Corona to the “new measles. Ever since I use the analogy and sure gave it some thoughts how that will impact our industry.

Like the Measles, Corona is a virus that is in the wild. About 5 March, WHO admitted Corona containment to have failed, taking another six days to declare Corona officially a pandemic. While in hindsight it shows the failure of the world health system and China to contain the virus quickly and efficiently, pointing fingers is futile and does not help.

Ever since, political and health care PTBs (powers-that-be) started a spiral that now pushed the world on the brink of commercial collapse. Sweden and other countries going less wild where accused to spread the virus but again in hindsight seem to have done everything right.

Crisis Communication – Scaremongering

Flatten the CurveTo date, the PTBs communicate in the sense to stop the virus. That is crap and they should know it. The time of containment has been missed, see above. So it is not about stopping it, but to flatten the curve. To make sure our health care systems, our hospitals can manage the infected cases with severe, life-threatening symptoms. Until we have a standard treatment and can avoid infections with a commonly available vaccine.

While there will be reasons why aviation will recover slowly, it will likely be mostly economic reasons. People recovering from the economic impact to their lives are more likely to “safe the money”. But in Europe, U.S. and other “developed regions”, there have been crises and travel recovered relatively quickly.

P.S. 24. May 2020

I have been asked to add the referral I usually use here: We came to live with the Measles, with the Flu, SARS (since 2003), HIV (no treatment or vaccine yet), Polio, Malaria, Ebola and many other threatening viruses.

A brief lock-down was possibly called for to make people aware of the need of social distancing, but like in Sweden, it is time governments lift the bans and return their countries to life. And trust their citizens to be careful – and if they aren’t, live with the consequences.

And our (aviation) lobbies to make a case that airplanes are safer than hospital operation rooms, that travel is at own risk and that use of disinfection at airports and in the aircraft cabin and there also the use of face-masks is useful. But we must hold the horses and come back to the new normal. A normal that takes into account another lesson learned but won’t require acrylic seat shields, empty middle seats or other such placebos.

Else I keep with my Corona Assumptions.

Food for Thought
Comments welcome!

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Corona Assumptions

I’ve been asked to put my statements and assumptions on Corona-impact to the aviation industry into a short article. And learned while summarizing that there’s quite a few, topic-related issues.

Post Corona Take OffPre/Post Corona Vaccine

There will be no start into a recovery before a Corona vaccine is commonly available. As such, we must discuss the options pre- and post-vaccine-availability.

Pre-Vaccine Placebos

Aviointerior CoronashieldsThere is a lot of discussion about face masks required to fly, new seats and plastic shields between seats or other such “smart ideas”. They are all placebos. And while some high demand routes may be flown pre-vaccine, those will be exceptions and at high cost. Keep middle seat on a 737 or 320 empty takes out 1/3rd of the seats. Low demand will likely reduce the real passenger load to 50% or less. Even with face masks, you never know who sits next to you and a sneeze can spread up to half a meter. Think about the typical rush into the aisle, even before the aircraft has come to its complete stop.

Pre-Vaccine operations will be restrictive and expensive.

CASK, Low Cost & PSO

The Cost per Available Seat Kilometer (CASK) combined with a slow recovery in demand will require increased ticket prices.

The Ryanair model will suffer most. Which region can afford the indirect subsidies inside the Ryanair model. The authorities will be under high scrutiny what they invest into airlines. There will be more PSO-routes (Public Service Obligation) and a need to improve the requirements for such.

London Luton grounded LCCsAircraft

Given all the grounded aircraft, it will take three to four years for the surviving airlines to reutilize them and bring them back into the air.

During this time, only very few, if any, new airline will be delivered by the aircraft makers. Mostly ones where the loss of downpayments is higher than the loss from owning a currently dead asset.

KOLIBRI.aeroRegional Aviation – Use of Smaller Aircraft

Aviation will recover with smaller aircraft on the previous high-density routes. Testing the waters: Will the passengers return? This will be for scheduled flights the same as for tour operators.

The first ones to recover are domestic and regional flights, using the smallest aircraft the survivors can fly.

It’s why we believe KOLIBRI.aero

Save the Dinosaurs?

Burning EurosIn many cases, it will be cheaper and healthier for our industry to let the dinosaurs die. And allow the mammals to take their place. It’s called evolution and survival of the fittest. And if you save them, demand the overdue change. Sustainability. Social responsibilities (also towards “your own”). And no more “Shareholder Value” at all cost!

It can work, we have developed KOLIBRI.aero from the ground up on those two principles, in line with profitability, USPs and business cases. But if you save the dinosaurs, you deny or slow such evolutionary developments. Investors interested to fund a Corona Profiteer, get in touch with me! If you know investors, trigger their attention for me.

Who Takes the Risk – Who Pays

Domino Effect CircleEveryone is proud to “get rid” of cost, securing the own survival. That show of the Saint Florian’s Principle will hit us in the back!

Who takes the risk and who pays the bill. Airlines? Really? I see a revival of Tour Operators taking the risk by chartering a flight. PSO Routes. Scheduled service guarantees from the regions (re)connected limiting the airline’s risk.

#ThinkPositive

“As for your Future, your task is not to forsee the future, but to enable it!” [Antoine de Saint-Exupéry]

Food for Thought
Comments welcome!
And personally get well through the crisis!

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Evolution … or why should we save the Dinosaurs?

Burning Euros

Discussing with a friend and intellectual sparring partner, why we focus to establish a new airline and not simply buy a failing airline, the reasoning was easy.

If you acquire an airline, you acquire it’s heritage.

Change resistanceTo which he replied: “I couldn’t agree more. I have seen the same firsthand when it came to [product] engineering. Initially we were going to work with an established manufacturer and have them make modifications for us. That was quite the trip down the rabbit hole, and more trouble than it’s worth. Now we’ll get [products] that were custom engineered for us, from the ground up.”

Most of the times I was asked for support in project management, the project itself was fine. What caused the trouble was the missing change management.

Air Berlin Example

Backstabber Assassin shutterstock22635031In direct conversation, one of the later board members of Air Berlin told me, the airline would not kick the bucket because the new CEOs wouldn’t have good ideas, but because they failed on the heritage. The existing “networks”, afraid of the change, afraid to loose their job, torpedizing the management.

When Stephan Pichler took the helm, he i.e. identified the “different fleets” as a concern. With little to no interaction on scheduled flights or tour operator charters. Still, when he left, there were still the different departments interacting little to none. There was a lot more to Air Berlin’s unnecessary demise, as there was to FlyBEs. Usually it is attributed to the management, but “internal resistance” can be a first-class back-stabber.

Save the Dinosaur or Fresh Start?

Disruptive Events - Meteor kills DinosaursAs addressed in To Save or not Save in the Corona Papers, The question in my opinion is mainly, how much funds you are willing to pump into the existing airlines and for how long. And if you now start to shove money down their greedy throat, will that ever end? The U.S. carriers complained instantly when they learned that they get only 30% of the bailout “for free”, but would get the other money as a credit.

To turn this around. We developed a business concept to invest € 1.6 billion into a new airline covering Europe. With a business concept based on USPs, profits, low residual risk, attractive profits, but also socially responsible and sustainable. i.e. A positive overall impact on greenhouse gases.

Triple that amount to invest into three new players instead of just one and you cover what we have today. Now airlines asking +$50 billion in the U.S., € 20 million for Germany, IATA calls for +$ 200 billion. Emirates will take up long haul, maybe challenged by a U.S. carrier and a Chinese one – connecting the long-haul world.

Dinosaurs …

The existing airlines will need to survive. Realistically downscale. At first and until a vaccine becomes available in sufficient quantity, we talk about “leave the middle seat free”. That cuts one third off the seat capacity of 189 seat A320 or B737. 126 seats. Given an inital slow start of traveler confidence to use flights agin, we realistically talk about max. 50% average load. Down from above 90%. That means that the ticket prices will likely be double. But the “administrative overhead” must be split to less aircraft, so we will have a totally different cost level.

Ryanair’s O’Leary clings to keep his “known model” and predicts even more aggressive discounting post-Corona. But in the end, someone must pay the bill. Does anyone really believe O’Leary to not plan for the stupid to pay his bills? Including airports, regions and naive passengers… I wonder how long even a Ryanair could keep  that illusion up?

… meet Evolution

evolution dino vs manDoing a staged setup and focusing to stake our own claims, select strategic bases aggressively outselves, we can establish the company for a mere €25 million. € 15 million per additional base. A fraction of the food the dinosaurs demand to survive. Condor now half a billion? What evolutionary wonders we could achieve with that money.

We’re the mammals. We’re effective, profit focused, sustainability and social responsibility driven. Evolution. Don’t pump millions and millions into the dinosaurs until the crisis is over. Invest into the future.

Food for Thought
Investors welcome!

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