How Airline Industry Responded towards

Covid’19

Airline response to COVID-19

The aviation industry made major changes to business and operations models to stay in the air
during pandemic.

Airlines responded to the COVID-19 crisis by quickly developing new business processes and
operations research (O.R.) models. Longer term, airlines are also seeing a shift in their O.R.
development priorities and unique opportunities to conduct research.

Perhaps the most visible responses to COVID-19 – at least from the perspective of the traveling
public – have been the modified boarding and de-boarding processes, reduced-contact/contactless
in-flight service, mandatory mask requirements and blocking the middle seats on planes. The
blocking of seats in particular has been somewhat controversial given the ongoing debate about the
true risk of transmission during a flight and the impact that reduced seating capacity can have on
airline profitability. While most airlines initially blocked middle seats, Delta is the only U.S. airline
that continues to do so [2]. Further, on select routes where customer demand is high, Delta actively
looks for opportunities to upgrade to larger aircraft or add more flights to provide additional space
on board [3]. This desire to provide additional space and thus lower load factors places additional
pressure on revenue management systems to more accurately predict demand and increase yield.

Sander Stomph, vice president at KLM, notes that at the beginning of the pandemic, airlines had to
reinvent how they looked at bookings and revenue management, as the previous booking curves
were no longer relevant and the training data used for machine learning algorithms were no longer
valid [4]. Many airlines initially reverted to a manual process for forecasting demand or began
incorporating shopping data, and are currently “exploring new ways to shorten the historical period
used in forecasting, pick up on trends more quickly, and incorporate demand adjustments made by
human revenue management users” [5, 6]. Richard Cleaz-Savoyen, director of revenue optimization
at Air Canada, notes that as airline demand has been returning, they have developed a process to
help decide when to transition from manual forecasts back to historical data for their no-show
forecasts – a process that relies on ensuring forecasts based on historical data are consistent and
stable. Air Canada is planning to use a similar approach to help them decide, on a market-by-market
basis, when to transition back to historical data for their demand forecasts [7].

Airline Changes Post-pandemic

The focus on recovery post-COVID-19 significantly impacts revenue management development

priorities. Air passenger demand today is fundamentally different than it was before the pandemic.
The booking horizon has decreased to around 10 days and nearly all tickets are refundable [8].
Consequently, the demand mix has changed and leisure travel has become more prevalent than
business travel. In this environment, the role of revenue management is changing. As Peter
Belobaba at MIT explains, “revenue management has always been traditionally one of managing
demand when demand is very high and optimizing to protect seats… but that’s not what the world
looks like anymore…. Even with low demands you have demand that is selling down or buying down,
and estimation of elasticity becomes much more important” [6]. As a result of these new changes
many airlines including Air Canada, United and Qatar indicated they were placing a greater emphasis
on dynamic pricing and continuous pricing [5]. In part, this shift in development priorities is driven by
the belief that post-COVID-19, business travel will take longer to recover and the passenger mix will
have a large proportion of leisure travellers and those visiting friends and relatives (VFR). New O.R.
models will be needed to account for a post-COVID-19 environment in which flexible and refundable
tickets become the norm.

Operations.

With regard to airline operations, COVID-19 has precipitated many changes and innovations. For
example, Tim Niznik, director of analytics in the Integrated Operations Control Centre for American
Airlines, describes a flight cancellation model his group developed at the beginning of the pandemic
that incorporated several new dimensions: The model did not leave crews overnight in COVID-19
hotspots, reaccommodated passengers on other flights while adhering to social distancing load
factors, accounted for abnormally high no-show rates, and distributed excess idle aircraft in stations
that could accommodate the aircraft while facilitating their short-term, intermediate and long-term
storage [9].

Sanitation.

Separately, there have been significant innovations in the way aircraft are cleaned. In the passenger
cabin, JetBlue was first to pilot the ultraviolet (UV) cabin cleaning systems produced by Honeywell
International Inc. in partnership with Dimer [10]. In the cockpit, United Airlines has begun cleaning
its flight decks using handheld ultraviolet C (UVC) lighting technology made by the American
Ultraviolet company of Lebanon, Ind. [11]. The new cleaning protocol was developed by the
Cleveland Clinic, and other companies, such as Texas Air Industries, are proposing to leverage their
ozone building cleaning technology for aircraft [12]. Looking ahead, many airlines see a need to
permanently incorporate aircraft sanitation procedures into turn times at the gates without
impacting aircraft utilization.

Air travel.

COVID-19 also created an unprecedented situation in which we are currently operating aircraft in
uncongested skies. Consequently, as Tim Niznik points out, as airlines ramp back up operations, they
will have an unprecedented opportunity to learn when exactly delays start occurring and determine
the most effective ways to manage congestion [9]. Separately, there is much speculation that air
travellers will soon have to provide evidence that they have been vaccinated and are free of COVID-
19 via a “health passport.” Such a process will require additional infrastructure to enable secure
storage and transfer of the necessary information between the entities (airlines and government)
who will require access to the information in a passenger’s health passport to determine whether
they should be allowed to travel and/or enter a specific country, and could also raise ethical issues.

Scheduling.

Before the pandemic, flight schedules were fairly stable. Today, however, many airlines have a lot
more capacity in their schedules than they will actually fly. As Eric Ruhlin, managing director of
revenue decision support at United Airlines explains, the challenge today is “figuring out what the
demand is really going to be, keeping your schedule out there until you decide how many flights
you’re actually going to be able to fly, and then reducing the schedule,” which in turn creates new
challenges across multiple business areas including revenue management, operations, maintenance
and flight scheduling [13]. Given the high degree of uncertainty in demand and flight cancellations,
Sander Stomph of KLM notes that “we’re moving to a world where we build 100 different schedules
instead of one and make operational planning for all of them and then choose at the latest [possible
time] a particular schedule to operate” [4].

Finances.

The pandemic has also highlighted the complexity and crunch of cash flow in the industry. While
flights suddenly came to a standstill, other costs incurred by airlines due to aircraft ownership and
maintenance costs, as well as crew and staff salaries, continued to be incurred. IATA estimated that
airlines incurred costs of $51 billion in terms of unavoidable costs, debts and refunds in the form of
vouchers and credit to customers whose itineraries were canceled due to the pandemic [14]. The
crisis spawned a new metric of “daily cash burn” to measure airlines’ performance [15]. In October
2020, IATA’s liquidity analysis on the cash flow management at different airlines estimated that the
median airline has 8.5 months of cash remaining at current burn rates [16].

Data-

A New Model
Airlines find themselves in the challenging position of trying to continue to attract customers while
respecting changing lockdown rules dynamically imposed by governments, as well as dynamically
changing schedules, which in turn affect the itineraries they offer. This is further compounded by
fewer resources in the form of fewer aircraft, fewer flights and nearly one-fifth frequencies in some
markets. To offer customers a variety of products (itineraries and fares) that can translate to
purchases amidst the changing climate, airlines have been creating micro-alliances with other
airlines that allow them to offer the partner airline’s content, new destinations (defined dynamically
based on countries whose borders are open) and create new itineraries so customers of the airline
still retain a diversity of options. The key difference in these micro-alliances compared to existing
alliances is agility, flexibility and granularity, i.e., the ability to forge alliances and create contracts at
the level of single seat or customer instead of 5-year long expensive contracts or code-sharing
agreements.
Kartik Yellepeddi, cofounder of Deepair, a startup that creates infrastructure that enables airlines to
create and adopt micro-alliances, notes that multiple airlines, particularly in Europe, have been
embracing this model. Each airline thus has the ability to be a retailer as well as a supplier and cross-
sell each other’s content while staying true to their original brand, without needing to be part of an
alliance. Combined with dynamic pricing tools for different products, airlines expect that such micro-
alliances can allow for a gradual return to normal operations and avoid a price war once schedules
begin to operate at pre-COVID frequencies.

Response of airline industry towards the pandemic:

Airlines industry responded to the covid-19 crisis by quickly developing new business processes and
operations research models. Modifications regarding sanitation and air travel have also been made.

Sanitation

Covid-effect: Before taking flight, a three-hour deep clean

From the lavatories to windows and from baggage cabins to the cockpit, every fixture in the aircraft,
including the seats, foldable tables and hand rests, are being cleaned with disinfecting chemicals so
that passengers can rest assured on the flight that their chances of being infected by the virus are
minimal .