Air Serbia and Swiss/Lufthansa airline executives: Leading an airline in 2021
As COVID-19 vaccinations are being administered around the world, the hope for the return of travel and tourism looms on the horizon. The first step to kick starting travel will be through the airlines.
- Senior airline executives discuss the current status of aviation during the ongoing COVID-19 pandemic.
- What are the forecasts for 2021 and how accurate are they?
- Can the airlines survive on reduced capacity flight schedules?
Chief Commercial Officer of Air Serbia Jiri Marek and Chief Commercial Officer at Swiss Tamur Goudarzi Pour and Senior Vice President Channel Management at Lufthansa Group discussed with Executive Editor Commercial Aviation at Aviation Week Network Jens Flottau a critical thinkers session of CAPA Live that focused on leading an airline in 2021. Transcript of the session follows:
I’d like to start with a question about the current status and the renewed travel restrictions in Europe, and how they are affecting Swiss and Air Serbia. I guess you’ve essentially been forced to cut back further than you thought in the past few days, right? Jiri, you want to start?
Well, definitely. Thanks. Hello, everyone. I think that we have on this a bit different perspective because since we are already outside of the EU, basically over the last year, we’ve been already heavily impacted by these restrictions, where our colleagues within Europe, they can still serve the demand within the Schengen area. However, for example, Serbian citizens are not allowed to enter Europe already since July last year.
So, we already had to adjust through the course of the last year to something which we called really essential travel. So basically, people which has to travel, they’ll travel, or the people usually with dual nationality, a resident permit in both [inaudible 00:01:59] and so on. So last Thursday, Euro control a new forecast, which is again, more pessimistic. It came a bit as a surprise, but it will not require too much adjustment on our side because we already been on this limited capacity. We currently operate around 38% of the 2019 capacity. It’s a slightly above EU average, which was in January certified, but we will of course do the optimization, but it’s not really faster, because there is no really big change in the travel restriction versus what was for us through the whole last year.
Tamur, in Swiss you just reduced in Geneva and in Zurich, right?
Yes, of course we have reacted to the recent developments of the pandemic and we have further reduced our capacities as a European carrier with global reach. We of course affected all regulatory regimes of European, of worldwide regulations. So, we had to react very quickly and flexibly, as we have learned since the beginning of the pandemic. And we have just reduced our capacity to about 10% of flights, about 20% of ASK of what we had in 2019 for the month of February now.
Yeah. Jiri, you said you didn’t really change much, but Tamur, from where did that come down? Before this latest cut, where were you before?
We were about double the capacity of that, but let’s remember most of the European carriers had a small Christmas peak that was lasting until probably the first 10 days of January. And after that, the demand of course went down. Plus, now the extra regulations and the changes in the pandemic definitely have led that most carriers, like us as well, have not adjusted for the month of February or the end of January for February. And I’m pretty certain that for March, there will be further adjustments too.
Yeah. So, let’s look ahead a bit. The summer is nearing, vaccinations not quite as fast as everyone would have hoped. How do you prepare for this? Do you prepare several scenarios and then decide at some point which one to pursue, or are you just continuing as you go? Jiri, what’s the process in Serbia?
Look, definitely the processes are completely different than it was before, as we used to know. And I would basically claim that what we know for sure is that the things will change because that’s the only one which is a hundred percent granted. And I think that the main issue, what we see is now that still any kind of independent external forecast, being Latta, being Bureau Control, at the moment, each of these forecasts is still coming down. The question is what is about them? We already saw at the bottom of last year, however, is the latest forecast from the Thursday, it’s still going down. So, the question would be rather when it will start to go up.
I would rather say that, yes, we are working with this couple of scenarios constantly for the longer term window as well and we keep adjusting them to be aligned with the external sources. However, like all the bookings and demand is now usually happening in last 10 days before departure. So, it’s more critical as the processes, which you also, which my colleague mentioned, how you basically manage your network now on a very quick and flexible way in order to adjust to fluctuation of the demand because the regulations are changing on very short notice, and it has a strong impact on the demand.
What we usually see is that if there is no restriction, let’s assume a hundred percent, as soon as you impose some travel restrictions that you limit some nationalities to travel, usually you get, let’s say between 20, 40% reduction. And if you introduce a PCR is another 20 and it is less impacted than if you introduce a quarantine. If you introduce a quarantine, and especially how we saw that very much between Serbia and Switzerland, the quarantine has basically taking 80% of the demand immediately from one day to the other. So, it’s really, and if some countries have like PCR plus quarantine, that basically almost like the fight ban.
So, I think that at the moment, what we foresee for Q1, we will more or less operate around those 35, 38% of the capacity. And this is what we really manage on daily basis. And we have couple of scenarios for summer but those might dramatically change depending how the market goes around, what the restriction will be, also if there will be finally some coordinated restriction, because it’s a big jungle now to understand which country, what restrictions you have. And we will try to obviously flexibly adjust ourselves to it, what we’ve been in successfully so far.
And what are the summer scenarios? You say you’re at 38 right now.
The summer scenarios at the moment, we are forecasting ourselves between the last two Eurocontrol scenarios, because even during 2020, we’ve been always operated above the average of the rest of the EU with a higher KPIs achieved in terms of road factor. So, we at the moment forecasting between those scenarios so I would say as a Q2 we would be around most likely 40, 45% of the 2019 level.
Okay. And Tamur, with Swiss, what are the scenarios that you’re looking at right now?