By Patrick Appleton
Airlines and their partners must focus on sustainable and profitable growth instead of increasing route and fleet size without thinking of the impact on business operations.
That was the message from new Avianca CEO Anko van der Werff as he addressed delegates at the 6th World Financial Symposium in Miami.
He urged airline finance departments to ensure that the network and fleet planners did their homework before adding aircraft, routes and destinations.
“Airlines have never needed good finance departments as much as they do now,” said Van der Werff.
If your operation gets stretched and you can’t fulfil basic KPIs then you have to wonder, have we gone too far
The Avianca CEO said that in any industry, every decision either creates or destroys value and the air transport industry is no different. However, in the airline industry, “the cost of bad decisions far outweighs the rewards of good ones,” he said.
Van der Werff pointed out that “growth for the sake of growth” is afflicting the airline industry. He urged caution and said that when airlines feel optimistic about capturing a market, it is often assumed that external factors—political, environmental, economic—will remain equal.
“A former chairman in another company wanted a budget where we had double-digit capacity growth, yield growth, market share growth, load factor growth—the whole thing. That is surreal,” he warned.
Avianca’s CEO said that for airlines, being aware of macro-economics and the political situation in their own domain is key. He added that his airline, which is currently in recovery after a bailout plan was accepted, has scaled back operations to focus on quality over quantity.
“Our new ‘boring’ vision is simply ‘back to basics’,” said Van der Werff. “The growth has been too much, our customers are complaining, on-time performance has suffered so you are alienating your corporate customers and even your pilots, in our case.”
“Roster completion was dropping well below acceptable levels so pilots were not home at the set times they were agreeing to.
“If you see that your operation starts to get stretched and you can’t fulfil basic KPIs of running a decent company then you have to wonder, have we gone too far?”
Van der Werff also addressed the capacity concerns in the air transport industry and called on governments and airports to understand the knock-on effect for airlines, but also economies in general.
“Airport capacity is also an issue that affects growth,” he warned. “Growing is all very well, but governments and airports must help make this sustainable, or otherwise understand that growth can hurt in the form of people being constantly late for business meetings and other arrangements, which can in turn affect the economy.
In closing, the Colombian airline’s CEO called on suppliers to “force sustainability on us” and increase the profitability of aviation for all stakeholders.