But if new coronavirus variants force governments to continue with travel restrictions and quarantines then the recovery in 2021 would be limited to just 38% of 2019 levels.
Moreover, the traffic mix will likely be different. Depending on restrictions in individual countries, new city-pairs may come to the fore, leisure traffic is likely to dominate business travel, and domestic journeys will do better than international trips.
Airlines therefore need to be agile and throw away accepted conventions about the industry and its markets. Not surprisingly, new entrants spy opportunities.
Moov is a Swiss-based operation, looking to start short-haul routes out of Lugano in 2022. Lugano hasn’t seen any service for two years, but a private company is due to take control of the facility soon. A low-cost long-haul offering is expected to follow in 2023 using various European bases.
CEO, Alvaro Nogueira de Oliveira, says he is excited by the prospect. “We have been working for two years on a disruptive business model,” he says. “This will be an airline for the future.”
There are four pillars to the Moov concept:
- A decentralised model
- A point-to-point network primarily using secondary airports
- A seamless customer experience
- A leveraging of the digital economy.
It is the first pillar that de Oliveira believes will characterize the industry of the future. And it also speaks of the way the airline will be financed. Moov intends to use a security token offering (STO), most often described as an Initial Public Offering (IPO) in advance, alongside traditional investment methods.
Essentially crowdfunding, the STO also hints at the greater flexibility airlines will need to show going forward.
“There is no single benchmark for low-cost long-haul operations,” says de Oliveira. “It’s not like copying Southwest in the short-haul sector. But we’re convinced we are offering something completely different.”
For all airlines, what has gone before is no longer a marker of things to come. The changes in the market will create plenty of opportunities and not just in terms of destinations and airport slots. There are qualified staff looking for jobs, new passenger requirements and expectations, and next generation aircraft immediately available.
Moov will probably hold out for the Airbus A321 XLR says de Oliveira, which will enable many Europe-United States routes. It has a low unit cost and will help keep fuel costs—the biggest expenditure item for most airlines—under control.
“Our belief is that fuel prices will be stable for the foreseeable future and we won’t get close to $200/barrel again,” says the Moov CEO. “Even so, a fuel hedging strategy can be effective.”
Sustainable Aviation Fuel will become increasingly important, and de Oliveira also holds out hope for hydrogen-powered aircraft. “I don’t think we will see passenger-carrying electric aircraft and certainly not in the larger categories,” he says. “The issues with the battery are too problematic right now. Hydrogen is a better short-term bet. But until we get there, next generation aircraft and engines will give us fewer emissions and less noise.”
Environmental concerns will affect all airlines. Recycling will be essential as will avoiding plastics and using alternative power sources where possible. “Airlines that are truly invested in these measures will fare better,” believes de Oliveira.
A growing awareness of a carrier’s green credentials is just one of the changes in passenger preferences in the post-COVID world.
Moov is banking on travelers wanting to avoid major hubs. The idea is that the crowding, extra transit processes, and potential queue time at busy gateways will accelerate the trend for point-to-point services already apparent before the coronavirus pandemic.
Secondary airports would then need to maximize the advances already made by the industry, including IATA Travel Pass. Automated screening, boarding and check-in will become the norm.
“The industry is doing a great job with health requirements,” says de Oliveira. “But remember, spraying aircraft and needing vaccines for certain countries was already happening. This is about scaling up and not reinventing the wheel. All operators will need to do this.”
de Oliveira also questions assumptions in the door-to-door journey and thinks the advantage may lay in those airlines that can leverage partnerships with taxi firms, rail companies, and bus operators. Potentially, this will limit the hassle factor and give travelers peace of mind, particularly if arriving in an unknown destination where local coronavirus rules may differ.
Authorities will need to keep pace with these changes and ensure regulations facilitate more efficient processes in this new normal. Moov’s plans are based on current agreements at the local and international level and de Oliveira isn’t concerned that massive bailouts and State influence on airlines will corrupt market forces. “I don’t think there will be too much protectionism going forward,” he suggests. “Governments will not go back to the 1960s or 1970s. And they know their economies will never be strong without aviation.”
IATA polls show that there is pent-up demand. 81% of respondents said that they will be more likely to travel once they are vaccinated. Serving that demand, however, will take innovators with new models and new ideas, according to de Oliveira.
“The industry will continue to be all about serving the customer,” he concludes. “But the pandemic will change behaviors, it will change markets. Airlines will have to adapt to the new reality.
“Moov will assist the transformation and foster economic competitiveness.”