# Vision

Pivot
in the Skies

Few industries have been hit as hard by the coronavirus as aviation. Now is the time to develop ideas that will facilitate a rapid return when the crisis is over. Digitalization and sustainability will play an important role.

The coronavirus has been especially rough on the aviation industry. That is clear from the dramatic drop in takeoffs and landings, like here at El Prat International Airport in Barcelona, Spain.Kirill Rudenko/Getty Images

Up, up and away: for a long time the busi­ness of Satair, one of the world’s largest sup­pli­ers of air­craft parts, moved in a sin­gle direc­tion. It was all about growth, noth­ing but growth, for near­ly every­one in the avi­a­tion indus­try. “Our biggest chal­lenge over recent years was how to scale our glob­al busi­ness,” says Satair CEO Bart Rei­j­nen. “And that, of course, meant scal­ing up.” In the spring of 2020, this abil­i­ty to adapt became cru­cial. And now might be even more impor­tant. But this time the avi­a­tion busi­ness is tak­ing a dif­fer­ent course—at least for the moment.

Few indus­tries have been hit by the coro­n­avirus as hard as avi­a­tion. In early April the Euro­pean air traf­fic orga­ni­za­tion Euro­con­trol was record­ing an aver­age of only 3,200 flights a day—a decline of near­ly 90 per­cent over last year. Air­lines and air­ports were suf­fer­ing, as were engine mak­ers and air­craft man­u­fac­tur­ers. They all had to adapt with­in a peri­od of days. But they also had to ask them­selves this ques­tion: how can we make our­selves as fit as pos­si­ble for the day when growth resumes?

Planes parked on runways

“We were gear­ing up for near­ly 250,000 pas­sen­gers around East­er,” says Pierre Dominique Prümm, a mem­ber of the exec­u­tive board of Fra­port AG, the com­pa­ny that oper­ates Frank­furt Air­port. “With­in just a short peri­od of time we were down to only 5,000 or 7,000 pas­sen­gers.” Prümm and his col­leagues had to close large seg­ments of the ter­mi­nals, and turn a run­way into a park­ing lot for planes. They had to fur­lough work­ers, and shore up liq­uid­i­ty. Instead of con­cen­trat­ing on full capac­i­ties, they had to deal with acrylic sneeze guards, dis­tance mark­ings, and dis­in­fec­tant dis­pensers.

Plexiglass barriers were installed at shared assembly stations to protect Rolls-Royce employees, like here in the Trent XWB engine facility at the Rolls-Royce plant in Derby, United Kingdom.Rolls-Royce

Hygiene was sud­den­ly also the focus of atten­tion at the Rolls-Royce air­craft engine plant. “As impor­tant as pro­duc­tiv­i­ty is, our high­est pri­or­i­ty is always on occu­pa­tion­al safe­ty,” says COO Sebas­t­ian Resch. The plants in the UK closed for an entire week to allow the com­pa­ny and employ­ee rep­re­sen­ta­tives to devel­op and imple­ment hygiene and social dis­tanc­ing strate­gies. Among other pre­cau­tions, the indi­vid­ual shifts have no longer had any con­tact with one anoth­er. Con­sid­er­able time was invest­ed in mak­ing sure employ­ees under­stood the need for these changes and how they helped raise the level of safe­ty for all con­cerned. “That made an incred­i­ble dif­fer­ence,” says Resch. And any­one who was not need­ed for the actu­al work of assem­bling engines was sent home to work from there.

At the head­quar­ters of Air­bus sub­sidiary Satair in Copen­hagen, 95 per­cent of the staff worked from home dur­ing the lock­down. It was essen­tial to pro­vide these employ­ees with the req­ui­site infra­struc­ture, says Rei­j­nen. “It’s enough of a chal­lenge to be han­dling cus­tomer orders from your bed­room or liv­ing room.”

Rei­j­nen him­self faced a dif­fer­ent chal­lenge. With a dozen loca­tions in dif­fer­ent parts of the world, Satair was con­front­ed with a cor­re­spond­ing set of dif­fer­ent nation­al reg­u­la­tions. “My first impulse was to tell the peo­ple at each site what they should be doing—but that was not a good idea,” he recalls. Instead, the employ­ees were told to fol­low the instruc­tions of their plant man­agers in com­ply­ing with local rules. “An impor­tant les­son for me was that try­ing to run every­thing from head­quar­ters makes no sense in this type of sit­u­a­tion.”

At a Glance

Satair

… is one of the world’s largest suppliers of replacement parts for planes and helicopters. Its catalogue lists more than a million different components. Headquartered in Copenhagen, this subsidiary of the Airbus aircraft manufacturer posted worldwide sales of around two billion dollars in 2019.

Unclear rocket trajectory

The CEO of Satair, who pre­vi­ous­ly worked in the aero­space indus­try, likes to com­pare the mea­sures taken to com­bat the virus with a three-stage rock­et. The first stage is about safe­guard­ing employ­ee health. The sec­ond stage con­sists of keep­ing the busi­ness running—without clients suf­fer­ing from the fact that their orders are being processed from bed­rooms. Now the com­pa­ny is in the third stage, which accord­ing to Rei­j­nen is the most dif­fi­cult and prob­a­bly the length­i­est. Here the major fac­tors are eco­nom­ic: liq­uid­i­ty, costs, capac­i­ties.

The prob­lem is that no one knows what tra­jec­to­ry the rock­et will take. At the height of the coro­n­avirus cri­sis, the Inter­na­tion­al Air Trans­port Asso­ci­a­tion (IATA) esti­mat­ed that glob­al air pas­sen­ger vol­ume would decline by 38 per­cent in 2020 com­pared to the year before. Not even four weeks later, IATA cor­rect­ed this fig­ure to a pro­ject­ed drop of 48 per­cent, says Rolls-Royce man­ag­er Resch. All of that is extreme­ly dynamic—and we’re only talk­ing about 2020 here.

It’s important for all players in the industry to reinvent themselves to a certain extent.

Pierre Dominique PrümmPierre Dominique Prümm
Executive Director, Aviation and Infrastructure, Fraport AG

What makes these pre­dic­tions so dif­fi­cult is what Fra­port exec­u­tive board mem­ber Prümm calls a com­bined shock to both sup­ply and demand. We will prob­a­bly emerge from the cri­sis with fewer airlines–those that often incur high lev­els of debt and receive larg­er gov­ern­ment sub­si­dies. At the same time, many would-be vaca­tion­ers will have less money to spend. The eco­nom­ic sit­u­a­tion will also com­pel com­pa­nies to cut back on their busi­ness travel—or has already shown them that video con­fer­ences can work just as well.

New mindset replaces old baggage

Does that mean growth is a thing of the past? Not nec­es­sar­i­ly. It’s impor­tant for all play­ers in the indus­try to rein­vent them­selves to a cer­tain extent, says Prümm. Those who can do so in the quick­est and most con­sis­tent ways will emerge stronger from the cri­sis. But those who hang on to their old mind­sets and think that growth will just return at some point will be schlep­ping far too much bag­gage around for way too much time.

Sustainability will change aviation in fundamental ways—it simply has to.

Bart ReijnenBart Reijnen
CEO Satair

Dig­i­tal and sustainable—that is what the new ver­sion of the old avi­a­tion indus­try should look like accord­ing to the man­agers. Apps will guide pas­sen­gers upon check­ing in, drop­ping off their lug­gage, going through secu­ri­ty and bor­der con­trols, and even board­ing the plane. Dig­i­tal board­ing strate­gies are expect­ed to large­ly take over tasks that pre­vi­ous­ly required gate per­son­nel. “This trend was already under­way, but will now accel­er­ate as a result of the cri­sis,” says Joachim Kirsch, a senior part­ner and avi­a­tion expert at Porsche Con­sult­ing.

The other major trend is toward sus­tain­abil­i­ty. Although Satair’s incom­ing orders in May decreased by two-thirds over the same month last year, and although the pri­or­i­ty right now should actu­al­ly be on sav­ing money, Rei­j­nen has signed a new green ener­gy con­tract for his Dan­ish Air­bus sub­sidiary. Although not the cheap­est option, it is both eco­nom­i­cal and sus­tain­able. “Sus­tain­abil­i­ty will change avi­a­tion in fun­da­men­tal ways,” says the CEO. “It sim­ply has to. We shouldn’t make the mis­take of under­es­ti­mat­ing this mat­ter in light of the cri­sis.”

I’m absolutely convinced that the pace of technological change is going to pick up.

Sebastian ReschSebastian Resch
COO, Rolls-Royce

Rolls-Royce man­ag­er Resch also believes that the coro­n­avirus will accel­er­ate the nec­es­sary restruc­tur­ing process­es. “I’m absolute­ly con­vinced that the pace of tech­no­log­i­cal change is going to pick up, not least of all because the struc­ture of the avi­a­tion indus­try will change sig­nif­i­cant­ly in the wake of this cri­sis,” he says. For Rolls-Royce that means an even greater focus on more effi­cient engines and an even high­er pri­or­i­ty on alter­na­tive fuels, for which stan­dards need to be devel­oped togeth­er with part­ners. And—more research and devel­op­ment for fully elec­tric and hybrid power sys­tems, even though air­craft man­u­fac­tur­ers and air­lines will have the last word on dis­rup­tive tech­nolo­gies of this type.

At a Glance

Rolls-Royce

… produces large-scale power generation systems, propulsion systems for large yachts, the strongest tractors and the biggest agricultural machines, and above all, engines for airplanes and helicopters. Nearly half of its global workforce of 50,000 is active in the aviation sector, and they contributed around nine billion euros to the company’s sales in 2019. Before the outbreak of the virus, more than thirty different aircraft types with a total of 13,000 Rolls-Royce engines were in use.

Chance to reflect on quality

When will the indus­try take off again? “That is the mil­lion-dol­lar ques­tion right now,” says Rei­j­nen. IATA pre­dicts that pas­sen­ger vol­ume on domes­tic flights could reach the level of 2019 in two years. But for inter­na­tion­al flights that could take until 2024. Three to five years until full recov­ery is also the prog­no­sis of Rolls-Royce and Satair, albeit with a num­ber of ques­tion marks. Rei­j­nen is sure of only one thing. “Every­thing will be dif­fer­ent after the virus. Noth­ing will be as it was.”

But hard­ly any­one doubts that the avi­a­tion mar­ket will grow again in the future, although from a lower start­ing point. “When it’s pos­si­ble to do so, every­one will want to stroll across a piaz­za in Italy again or relax on a beach in Spain,” says Fra­port man­ag­er Prümm. “The human desire to trav­el is unquenched—and might even be stronger after the cri­sis than before.”

A sim­i­lar view is found at Rolls-Royce. “Avi­a­tion makes an incred­i­bly impor­tant con­tri­bu­tion to soci­ety, and is a valu­able and cru­cial dri­ver of glob­al growth,” says Resch. “All that will return—the only ques­tions are when and how.” Porsche con­sul­tant Kirsch sees a major oppor­tu­ni­ty for the indus­try in start­ing again. “Instead of cut­ting back on every cor­ner to win the price war, now is the time to reflect on the qual­i­ty for which avi­a­tion was once a sym­bol. The dig­i­tal trans­for­ma­tion offers enor­mous oppor­tu­ni­ties for this along the entire value chain, and can com­plete­ly reshape pas­sen­ger expe­ri­ence.”

At a Glance

Fraport AG

… not only runs Frankfurt Airport but also is involved in the operation of thirty additional airports on four continents. In 2019 it posted worldwide sales of 3.7 billion euros and served 182 million passengers. Frankfurt Airport alone accounted for 70.5 million passengers and more than 500,0000 flights.
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