Photo by Stefan Fluck
Aviation expert and advisor, Richard Nanton, writes:
Fortune favours the bold, and those organisations that are not bold or willing enough to plan their post-pandemic projects now, will be left far behind when the Covid pandemic is over. Three factors will influence whether Caribbean airlines survive or thrive as Covid’s legacy lingers post-vaccine & incumbents will find themselves at a significant disadvantage to start-ups.
The first influencing factor is the capacity of Caribbean airline balance sheets & cash reserves to invest at a time of low investment costs. Airlines that existed before COVID, and survived, will be at a significant disadvantage to airlines that commence operations after the pandemic. The losses from 2020 and the loans to organisations during the same period would seem to bear this fact out. (IATA 24th November 2020)
Whilst airline costs have fallen, there will be a significant debt level after the Covid pandemic. Even carriers that have traditionally had strong cash reserves will have “burned” through cash reserves during the pandemic, due to asset costs and the inability to operate. Airlines commencing operations post-pandemic will be able to benefit from the following:
- Low cost of labour and, in particular, that of pilots;
- Low asset cost and, in particular, that of the aircraft and overheads;
- Oversupply of suppliers in all areas of the industry.
The result of this is that the traditional area of most cost, operations, would be open to a whole new world and way of doing business. Traditional business models of either legacy or low-cost carriers will be a thing of the past, because of the ability of the new entrants to provide agility and adaptability to benefit from the situation that the industry finds itself in.
Secondly, Caribbean airlines who are able to outsource to and partner with relevant suppliers will find it easier to adapt in the new operating environment than those that are burdened with out of date legacy relationships.Partnerships and joint ventures within the industry will be open to change. The ability to control costs through the effective management of resources through outsourced methods, whilst also retaining the safety oversight and functionality of airlines, will be part of this new world. Dealing with suppliers in new ways and commencement of ventures will allow the new entrants to not only enter into the market with lower start-up costs but, also ensure that those costs remain below those of airlines in operations before the COVID pandemic.
Finally, there is the relationship between a Caribbean government and it’s airline. For the Caribbean and, in particular the Eastern Caribbean, this presents a significant opportunity. The governments no longer have the burden of the pre COVID costs associated with legacy carriers such as LIAT. The possibility exists for private entities to partner with governments to set out a national aviation strategy that leads to national growth through tourism and air cargo. These conditions not only present an opportunity for new entrant airlines that are commercially viable with commercially viable business models, but also allow the governments and people smaller nations of the Caribbean to chart a new course for an industry that is vital to the region.
- Caribbean airlines whose balance sheets and cash reserves offer capacity to invest at a time of low investment cost will be best-placed to capture the new opportunities
- Caribbean airlines who are able to outsource to and partner with relevant suppliers will find it easier to adapt in the new operating environment than those that are burdened with out of date legacy relationships
- Independent Caribbean airlines who work closely with their government to define a national strategy will be the first to win back market share
Call to action
Getting all the above right is not difficult, but does require some effort. The Caribbean Council is collaborating with Airline Transformation Department, a group of airline & airport experts. They are ready to help Caribbean carriers thrive. Are you? Write to firstname.lastname@example.org or email@example.com to make it happen.
About the Author
Richard Nanton is an experienced aviation industry expert with over 30 years’ experience in the industry. Born in Trinidad and Tobago with close family ties to St. Vincent and the Grenadines. Richard has held senior managerial roles across the globe and has gained experienced in managing Flight Operations in carriers such as Easyjet, Thomas Cook, Qatar Airways, and GoAir. Richard is still a practising pilot, whilst also being a consultant, offering advice on the development of Flight Operations and Organisational Development.