Understanding the importance of airlines and their contribution to the development of tourism is vital. Gavin Eccles, Managing Partner, GE Consulting & Advisory, provides insights into how destinations and airports need to be aligned to the new realities post covid-19.
The aviation industry is undergoing fundamental change, and, we are seeing a shift from managing supply (what new routes can we build), to how to support demand generation (looking to bring passengers back on those services that we need to restore). With this in mind, airlines need to see the key benefits in ‘why should I fly’, and, this is not just financial, but, the drive from the destination and its airports to work on co-ordinated campaigns and protocols in assurance that they are working to support the destinations’ development.
Air services development was the backbone of tourism generation since the start of the new millennium. The low-cost airlines of the United States, Europe and the Far-East have all worked closely with airports and tourism boards to support routes of strategic interest. In particular, funds and incentives have been created that allow airlines to be supported when deciding new routes, and, such monies help stimulate demand. Can airports and tourism boards still find the incentives needed to help airlines in their business case and planning decisions?
Two sides of the same coin
The importance of connectivity is crucial for the vision of any destination. So, the launch of even one new route creates enormous trickle-down benefits. Monies that destinations invest through incentives and funds from their tourist boards and Chambers of Commerce to support the development of airlift, in essence, contributes back to the government through the tourism spend contributions, A strong route development scheme is bringing tourists, and, such spend is often greater than any incentive given to support the route.
So, for 20 years we have witnessed many new routes that have brought great tourism development to multiple countries and regions, and, whilst we have seen significant growth in aviation, we have been able to see equal growth in new routes and tourism development. We have come to see growth of flight as a precursor for the growth of international tourism, and, prior to Covid-19, both aviation and tourism were witnessing tremendous success. It has never been clearer that aviation and tourism are working the same side of the coin.
The road to recovery
It goes without saying that since February/March 2020, both the aviation and international tourism industry, have, both fallen off a cliff. The challenge is quite simple: how to stimulate demand for travel? Fundamentally all airports and destinations will be thinking about what will recovery look like. The consensus view is that traffic for many airports will not get back to the levels achieved in 2019 until the end of 2022 or early 2023. In the meantime, as airlines look to redeploy their route strategy, key for destinations and airports is to consider the following:
- Airline engagement will be more important than ever – maintaining relationships, understanding their business and being a true partner will help ensure future success;
- Route development business cases will need to focus on destination and market trust, and, be more important than traditional route forecasts and market numbers;
- Whilst retrenchment into strong proven markets and networks may dominate the early period of recovery, there will still be opportunities for new routes in the rebuild – weakened airlines will have vacated markets leaving new entrant opportunities or creating a vacated opportunity for competing airports.
For destinations and airports to support the transition, and, support airlines in the re-building and connecting their aircraft to key tourism destinations, attention should focus on understanding market demand, airline behaviours, and, destination development.
Crucial to all airports and destinations will be how the airlines react post crisis. The key question is, how should airports alter what they do, based on the variations of airline behaviour which may emerge. In particular, being more aggressive on route support, and working harder to capture markets by:
Undertaking a detailed ‘network health check’ of the airport’s current routes, analysing load factor, passenger volumes, market share, etc. This will help airports and destinations gain an understanding which of its routes are poor performers and may be at risk routes and which are its strong routes that may justify additional capacity or new airline customers.
The challenge for the wider tourism industry is lift, and route and connectivity support is key, and, it is this area where the tactical and more specific support measures will need greater state involvement. After all, it is the air routes and their connectivity that breathe the life into many of our economies. Schemes that were for tourism development will need expansion to serve a much wider range of cities which are left with little or no air
service in the aftermath of the virus. Pushing programmes that offer risk mitigation for airlines with their route development, driven by clear impact assessment, will allow regions to harness air connectivity with their economic rebuild.