Sunday, 11 July 2021

The business of Air Travel after Covid

There was a news report about how SIA may be in a good position to gain market share in the post-pandemic air travel business.

Firstly, the business of air travel is going to change fundamentally.

Pre-pandemic, airlines and the industry was powered by business and first class travel. The pandemic has changed business travel. Zoom and WFH has shown that you can meet online and it can be as good as being there in person. Companies will scrutinise business travel - can a zoom or conference call achieve the same effect? 

Business travel is going to be reduced, and with fewer business travellers, there will be fewer flights, and with fewer flights, there will be fewer seats in economy, to fill with leisure travellers. 

Yes, there is pent-up demand for leisure travel, but this segment of the market is VERY PRICE SENSITIVE. Those low low airfares pre-pandemic, are not likely to endure. Sure, when planes fly again, airlines may offer promotional, cut-throat airfares. but it will not last.

Second, during the pandemic while passenger traffic was grounded, many flights continued. Flying empty (of passengers). But carrying air-freight. In the midst of the pandemic when planes were grounded, air freight rates shot up 3 or 4 times. There was demand! Normally, these air freight would "tumpang" on a passenger flight - after loading the passengers and their luggage, there may be free space for freight. But without passenger flights, the air freight were just sitting there. So planes were flying during the lockdown period with only freight. And even the passenger cabin was loaded with cargo. This may be a market SIA and other airlines can try to capture. This may mean re-configuring planes to have smaller passenger cabins/fewer seats, and more cargo space.

And still, airfares may go up, because there are no business travellers to drive the industry. Or the airline business will have to restructure its business model. [I have reservations about "unbundling business class" in the video (link). The suggestion is that Business class will "die" because there will be fewer Business travellers. So the video suggests that the expensive current business class, should be made more affordable by "unbundling". Sell a basic business class seat for a lower price. But charge for everything else - inflight meals, entertainment, luggage, seat selection, etc. Presumably, the Business Traveller will book the Business class seat, and pay for whatever else he might need - luggage, inflight meals, etc. This may result in a "Business-lite" airfare. Except... this ASSUMES that the business traveller is price sensitive. They are not. Business travel will fall because there are alternatives to "having to be there". If the business traveller has to travel, they have to and they will pay whatever the price is asked, and BECAUSE the price is so high, they expect privileges like better seats, better food, and priority. The assumptions are backwards. However, if "Business-lite" were targeted at the leisure travellers...]

Thirdly, travellers may start to be conscious of their carbon footprint, especially in air travel. SIA will need to offer "greener" flights, but there aren't any truly "green" planes offered by Boeing or Airbus, and they won't for years.

Airbus has plans for their Zero Emissions planes - ZEROe. But that's not until 2035. And those are just plans for planes to run on hydrogen. There are a lot of technical issues to be resolved. And then there are infrastructural needs - like Hydrogen plants to generate hydrogen, distribution of hydrogen and safe storage and dispensing of hydrogen.

Will 10 - 14 years be enough to solve all these questions?


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