An existential crisis for airlines? Will the digital shift help?

Aviation is emerging from the crisis of the pandemic into an environment of heavy economic costs as a consequence of the tragic events in Ukraine. Escalating and record-breaking energy prices will have major ramifications for aviation and the global economy at large, contributing to rising costs and inflation, while putting pressure on consumer demand in the months ahead.

It is too early to judge the extent of the impact on the airline industry’s continued recovery in 2022. But what is clear, is that already hard hit by COVID-19, airlines now face another year of navigating significant adverse economic shocks impacting their costs and activities.

It is equally evident that COVID-19 has already forced airlines to rethink their priorities and operating models to function profitably. One could be forgiven for thinking that airlines face the years ahead in the throes of an existential crisis.

A cocktail of challenges

As we look towards the months and years ahead, one thing is obvious: financial sustainability will remain crucial. With balance sheets battered over the past two years, airlines must now cope with a new cocktail of challenges compounded by today’s crisis in Europe, among them air space closures across Russia and Ukraine, soaring fuel prices, rising interest rates, and passenger volumes still well short of the highs of 2019.

Domestic flights may be picking up fast in some markets, such as in the US, but flight activity around the world remains uneven. The pressure on airlines, wherever they operate, remains huge, as they seek to carefully manage the recovery in their revenues and yields, while keeping a sharp focus on cost containment.

Added to the mix is volatility. As the world tries to shrug off pandemic-era restrictions, varying health requirements are still in place depending on the destination country – requirements that can still change at any time. Any resulting entry restrictions are accompanied by passenger confusion and uncertainty, with the possibility of cumbersome manual checks at the airport.

And if that is not enough, through IATA, airlines have also now taken the courageous and responsible decision to set targets to become carbon zero by 2050. These ambitious targets require clear and immediate action. With 7-10% of the industry’s more immediate carbon emission savings expected to come from improving operations and infrastructure (Waypoint 2050: Aviation: Beyond Borders), the industry needs to start embracing technology to address the sustainability challenge today.

Agility, costs and a transformed travel experience

To help recovery in a still volatile environment, airlines will need to maintain the greatest of agility, while paying careful attention to cost management. Having learned these lessons over the last two years, for many of the world’s airlines it will become second nature in the years ahead.

Airlines will also need to continue the digital transformation that is reshaping our industry, to find more intelligent ways of working, and to help return to sustainable growth. As consultants McKinsey point out, the focus on transforming the travel experience must remain, making check-in and boarding processes seamless, simple and understandable for passengers, at the same time as using data and analytics for better decision making.

The IT trends are encouraging

We are encouraged by the IT trends that we see. SITA’s Air Transport IT Insights survey finds airline IT investment focused overwhelmingly on passenger confidence and convenience, through automation and self-service technologies that will change the journey forever, such as biometric self-boarding gates, self-bag drop, mobile apps and more.

Tellingly, that IT investment is also being ploughed into creating better and more efficient operations through improved data management, business intelligence, data exchange and artificial intelligence, among other things. The results also clearly show that most airlines now prioritize new IT to make their operations more sustainable.

IT investments to help the recovery and sustainability

SITA is owned by the world’s airlines. We work for the air transport industry, and our membership and customer-base represent almost every country and region where an airline wants to fly. So we gain a close-up view of the industry’s digitalization, through global, regional and local lenses. In 2020, we switched our portfolio developments and innovations for customers to help bring about the recovery of air travel, a focus still in place today.

That includes accelerated IT developments to deliver digital health and border capabilities to deal with testing and certifications whenever the need arises, as well as advance passenger information, with biometric and mobile-enabled passenger processing to make travel convenient, touchless and seamless.

It includes cloud platforms serving airports globally, which enable quick responses to events and changes, as well as data management, APIs (Application Programming Interfaces) and analytics to unlock the value of data across the passenger journey and industry operations.

And it includes addressing aircraft operational efficiencies and sustainability, through optimized data-driven flight paths to reduce emissions, in addition to enhanced flight and turnaround operations thanks to effective management of the data and digital touchpoints around today’s aircraft.

Joined up thinking

It is our belief that the digital shift is crucial for airlines as they undergo transition through the pandemic and as they face a new reality of economic shocks in the times ahead. But it is not just about the technology. Travel processes are intertwined, so SITA works to support the future of a connected digital industry involving airlines, airports, governments and other stakeholders – all working together to join the dots, to tackle the pain-points and to smooth processes, making travel seamless, safe and easy.

In our opinion, for the airline industry to fly successfully in the years ahead, the accelerated digital shift, along with strong cross-industry collaboration, will play a fundamental role in the revival of airlines’ fortunes.