Act now to secure the future: Part 1
Author: Michael Bryan, Founding Principal & Managing Director, Closed Loop ConsultingSubscribe
Michael Bryan, Founding Principal & Managing Director, Closed Loop Consulting, with Marcus Carr, Closed Loop’s Director of Projects and Data Science and Martin Mitev, airline Captain and Aviation Futurist, share some thoughts on planning out of COVID for a more efficient and resilient future.
It’s no surprise that everyone in the aviation industry, including its leaders, are focused on what the sector might look like after COVID but so far not much in the way of concrete activity is going on to make things happen. There are many opinions, leaflets and new manuals in circulation but unfortunately, not much real planning or execution in the overabundance of ‘good ideas’ that are not much more than exercises in managing perception.
In this article, we consider two possible options for which way the industry might go. In one, the sector looks backwards to its past, where things weren’t actually as rosy as we want to remember them to be, and severe inefficiencies were a handbrake on the industry. The other is to look forward, and for the industry to grasp the opportunities that it has been handed by the pandemic because the rear-view mirror won’t return us to an industry looking the same as it was.
This article is intended to challenge thinking and hopefully generate some action and is co-authored by Marcus Carr, Closed Loop’s Director of Projects and Data Science and Captain Martin Mitev, Aviation Futurist well known for his challenging perspective on the aviation industry. Marcus is known to readers for his work with the military and pharmaceutical industries, and our work with customers. Martin is well-known through his regular LinkedIn posts and webinar appearances.
Together, we’ll delve into why the industry focuses on 2019 as the bellwether to the industry’s exit from COVID. Is it because 2019 was known to us? Something with which we were comfortable, and which was working for us? It turns out 2019 wasn’t a great year for the industry, and some long-term issues were emerging that had been ignored for a while.
The article will include abstractions because abstraction allows everyone to fill in the gaps with their own reality. We’ll propose a framework for something different — working together to design a new vision for the industry. Together, we’ll confront the status quo.
NOVEMBER 2019 AND SINCE
It wasn’t long ago that some of us were worried about the explosive growth of the industry. While most applauded it, it was running into problems (figure 1). It had been for a while, but few had noticed.
The aviation industry was becoming a victim of its own success. Scarcity was creeping into our lexicon, but not many seemed to understand its looming consequence. It took the industry 71 years to carry 10 billion passengers but, by the end of 2019, it looked as if the next ten billion would be reached in less than a quarter of that time. 8 billion annual passengers and a near doubling of flights in most markets were being forecast for the early 2030s. But there was an omen in all of that good news: the success required an urgent solution to the ballooning, multi-billion-dollar cost of system delays, the unintended consequences of success.
Everyone looked at the growth as something to be celebrated, and new players continue to attempt to get a piece of it, but how did that end up? Others worried about where the industry was going to put all the people and all the airplanes. The ideal solution has been conceptually designed, but it means working together on the outcome, something the industry had tried before in numerous committees that take decades to get their work done, some more successfully than others. Trajectory Based Operations (TBO) (figure 2) will test everybody but not because it’s technologically challenging. Instead, it requires modernization of thinking, co-ordination, sharing information about operations, schedules, flight plans, with everyone. It means integrating every aspect of the passenger journey with the airline operation, and it will mean streamlining every element of the operational landscape – data, process, people and technology.
This topic was recently covered in a two-part article in Aircraft IT (issues 9.2 and 9.3 in 2020), in the context of whether the airlines are ready for it. The piece concluded that the gap in capability required to make it work was in the realm of science fiction—but not for the reasons you might think. The article proposed that for the solution to work, we need to break industry and airline silos down and start coordinating and collaborating with partners, suppliers, competitors… everyone, to keep stuff moving as efficiently as possible. Furthermore, we said there’s no choice; things will have to be different. Have a look at the last paragraph in the article and decide for yourself: science fiction? Except that it’s not.
Words meant to drive action for a different era, but seemingly just as appropriate now. Here’s why.
Have a look at Figure 3. The first quote is a no-brainer: Everybody is saying it, including us; but it’s what everybody is doing about it that needs some examination, particularly when it’s followed by the inference in the second quote. “…in times of crisis leaders come together, put aside their differences and work cooperatively.” How are we going with that? The comments that follow come from aviation industry leaders; what do they say about the industry’s cohesion as we move through the COVID crisis?
There’s an abundance of ‘thought bubbles’ from the likes of ICAO and IATA suggesting what’s needed to steer a course through the lingering pandemic. But it seems that everyone, governments, airlines, States and even global airline bodies are doing their own thing instead of developing that comprehensive and holistic solution we keep reading about. Where is the coordinated approach? Quotes four and five in figure 3 are telling; is anything changing? We keep hearing about what’s needed to facilitate the recovery, but the implementation details remain conspicuously absent. IATA is working hard but seems to have missed the flight on its travel pass with governments and individual airlines developing their own systems. How is that all going to come together, particularly for international travel?
Is it just an issue that the industry can’t seem to come together, even in a crisis; is it leadership; or is it more fundamental? Last year, Europe tried to fix COVID travel by itself and Australia, like others, was negotiating travel bubbles, both ostensibly ignoring ICAO’s proclamations about a harmonised re-start. What does a coordinated re-start look like anyway?
MARTIN MITEV: A COORDINATED RE-START
At an online IATA event last year, I was reminded how, more than ever, the industry needs what it is actually good at—communication. The significant business perturbations that COVID has required of us have generally stressed just that — coordinated action through that communication. However, what has bothered me since March 2020 is, what we are going to talk about when the next crisis hits us? Assuming everybody agrees that the industry is indeed cyclical, we should expect to see the next ‘crisis’ eight to twelve years from now. When I look back, I see that after 2010/2011 and the GFC, we did what we had done after 2001 which was, basically, to try to grow as much as we can, as fast as we can and then we ended up in… what looks like the same place. In other words, nothing changed. So that is the place that Michael has been referring to above. In light of that, my question is, in 2029, will it be déjà vu? Will we be sitting around virtual meeting spaces or even real ones with somebody asking, ‘You remember that event we had in 2020, from which the outcome could have been one from a myriad of possibilities, but we ended up in the same place?’
There are several messages from the past that could help us in our search for the future.
“Never let a crisis go to waste.” – Winston Churchill c1940.
“In the middle of difficulty lies opportunity.” – Albert Einstein.
If so, what are those opportunities for the airline industry amid COVID and beyond? Can the airline sector collectively take advantage of the once-in-a-lifetime event, or will historical fragmentation, silos and irrational market behavior keep it stuck in its present or, worse, back in its past? Let’s examine 2019, where everyone, it seems, wants to be (figure 4).
IATA Economics tell us the airline industry made a profit of about $26 billion in 2019. That ‘great’ profit represents a paltry average margin of about three per cent of revenue, globally. For the year, the margin over the cost-of-capital was less than one per cent. Significantly, only 30 per cent of the world’s airlines contributed to these results; the rest, almost three-quarters of the industry, were in various stages of distress; again, according to IATA economics. Our exploding growth has generated massive capacity and delay costs – the costs of scarcity.
Yields have declined, profits have sagged the industry has been unable to achieve its cost-of-capital for most of the past two decades. It seems reasonable to ask then, why are we in such a hurry to go back there, and why are we so resistant to changing the model? Marcus and Martin discuss the conundrum.
WHY GO BACK TO FAILURE?
Marcus Carr: I think that the analogy is that when you’re lost and don’t know how to get out of a situation, like being lost in the jungle, you tend to just keep following the same path: you have no reason to think that things are going to come out any better by following that path, but humans are optimistic creatures, so we tend to just put trust in the fact that it’s all going to be OK. The problem is that by the time we realise that it’s not OK and we get to the hard part of the jungle, it becomes clear that we should have turned back long ago, or deviated from our course. But we had nothing to tell us to do that and human nature is just to blindly keep plodding on. Our industry is suffering from the same thing: nobody really knows what a change to the industry would look like, or what sorts of things it would produce. So, the tendency is just to try to get back to what we knew, where we were in 2019. It’s the same as following a blind path because we have no idea or become unwilling to see what’s in front of us and backwards always seems simpler. Unfortunately, history would suggest that’s not going to be a very productive approach.
Martin Mitev: The current state of things, as I’ve observed for a couple of years, reminds me about the ‘Allegory of the Cave’, which was first penned about four thousand years ago by Plato. It tells of a group of people chained inside a large cave, only able to face the inner wall. A fire burns behind them, throwing shadows from what passes on the wall. As far as the people are concerned, the two-dimensional shadows represent their reality. But even a child would tell you that’s not an accurate representation of the real world. In our context here, Plato’s story illustrates the inward thinking of airlines. Aviation sector thinking tends to fixate on how we’re doing things now as the only way to do them. However, if allowing ourselves to experiment lets us, figuratively, get up and turn around to see that the real world is full of colour and three-dimensional objects. The back wall of the cave, our constant internal reflection is a mirage that limits us. To move on, the industry and its airlines have to consider whether how they are doing stuff is the optimal way of doing it. To use a cliché, we have to challenge our thinking and see whether a different way is possible. COVID has forced the industry to examine its worldview. It’s time to get up, turn around and build the new one.
Through parable and simile, Marcus and Martin imply that our industry is often caught in a doom loop of its own making. Although COVID was unleashed upon us through no fault of our own, we wonder if the industry’s collective approach to doing the same thing over and over, but expecting different outcomes, is the best way to rebuild? Or is it time to reexamine the inward focus, look up from the inside wall, turn around and consider a really different path?
In the second part of this article, we’ll look to the future and air some creative ideas about how it could be different and better than what we’ve allowed ourselves to accept in the past.
Michael has enjoyed an Aviation Career spanning over 45 years. Recently retired from an A380 Command with a major carrier, Michael holds a Master of Aviation Management, a business degree in strategic planning and is a certified PRINCE2™ practitioner. He has experience in Airline, Corporate and General Aviation operations including training, system development, project and management positions. Michael’s management experience has included Strategic Planning and operational system development and Project Management across all industry segments. He is the founding Principal and Managing Director of Closed Loop Consulting.
In his twenty years at Allette Systems, Marcus delivered projects dealing with complex data sets covering civilian and military aviation, legislation, mortgage lending, telecommunications, drug and medical data, case law, technology and almost everything in between. Clients include Qantas, the Department of Defence, KBR, Telstra, the Department of Health and Ageing, The Australian Tax Office, LIXI, Butterworth’s, CCH, AusDI and dozens of others.
Knowledge of data systems has been fundamental to Marcus’ success in project management. He has been the longtime editor of a set of standards produced by LIXI and adopted by the whole of the lending industry in Australia. He has also spoken at numerous conferences, particularly dealing with the delivery of critical data sets in time-critical projects.
Marcus holds the position of Director of Projects within the Closed Loop Group. He is a PRINCE2® Practitioner and a firm believer that project management is a human task, not a software function.
Martin has worked in the aviation industry since 2010. He has held many titles until today, of which “airline pilot” and “aviation futurist” for the longest. He has helped develop airline IT systems and advised flight operations management, flying planes and researching predictions all the while. His passion for aviation runs much deeper – since he first touched the controls of an aircraft at age six. That motivates his, sometimes contrarian, insights which he freely shares, hopefully for the benefit of all.
Closed Loop is a global team of aviation professionals supporting industry and airline management, and their people, to deliver strategically crucial, business-driven, financially sustainable and assured transformation outcomes. The business specialises in assisting airlines and other stakeholders to manage and deliver the coming wave of industry change and to integrate that with airline strategic and efficiency program portfolios; providing support, guidance or direction through all levels of the airline – from the Board to the tarmac and into the aircraft.