Editor’s note: Andy Turton is SVP ENGINE Insights, Westlake Village, Calif.
COVID-19’s impact is profound; the virus is active in 210 countries and more than 100,000 have died (at the time of this writing). The United States has the dubious distinction of having the most COVID-19 infections and deaths to date, and life as we used to know it has been turned on its head – more than 95% of Americans have been ordered to stay home, schools and most businesses are closed and while the full economic effect has yet to be realized, it’s already clear that the cost is enormous. Seventeen million have filed for unemployment in the last four weeks, while many more have been furloughed or had their wages reduced. With less money to spend and fewer opportunities to spend what they do have, in an economy where consumption accounts for 70% GDP, many economists already agree that COVID-19’s effects have pushed the U.S. into recession, even though official data is not yet available.
The path to recovery: pent-up demand
As the infection curve flattens and experts learn more about ways to limit the damage caused to those infected with COVID-19, federal, state and local government minds are turning to when and how to kick-start the economy. In that context it’s clear, whether the recovery is a quick V-shaped or a slower U-shaped rebound, that with consumer spending accounting for such a large share of U.S. GDP, recovery fundamentally depends on consumers buying the goods and services that they have either been prevented from buying or have shied away from.
There are some encouraging signs in this regard: 85% of the adult population miss going out to restaurants, more than 80% miss shopping for non-essentials and more than half miss cinema visits and going to live events. In other words, the great majority are ready to do their part in getting things moving again.
Airlines are a key to the economic recovery
Over 70% of Americans have stopped flying on business since the start of the COVID-19 crisis, the number of commercial flights in the U.S. on April 12 stood at just 8% of the number on the same date in March. Delta saw Q2 revenue drop by 90% while United’s schedule has contracted 80%. But with more than 1.3 million trips each day in normal circumstances, domestic business trips have been important not only to the airlines but to the overall U.S. economy – it’s estimated that in a typical year, business trips alone contribute more than $280 billion directly to GDP. Fewer people flying damages the airlines, but it also has a direct effect on the economy. Similarly, when consumers start to fly again it will be a key part of the country’s economic recovery.
But airline attempts to address concerns so far have had limited impact.
Almost 90% of those who’ve so far cancelled a business flight or a flight for personal reasons did so because of concerns about the coronavirus (the remainder cancelled because of illness, or for other personal reasons). And while the industry took steps to allay consumer concerns, they have not proved enough to encourage people back into the sky. The fear generated by COVID-19 runs too deep. As a survey respondent put it, “There’s nothing they could do. I wouldn’t fly if they paid me!”
Moreover, many of the changes that might encourage consumers to fly again before the CDC announces that the virus is contained are challenging for the airlines to deliver; until now airline business models have been built around optimized pricing to deliver full occupancy of cabins that have been carefully designed to find a balance between consumer comfort and total seat numbers. Consumer suggestions of the things that would encourage them back into the air include lower prices and fewer seats (to ensure safe spaces between passengers) but neither idea fits viably into the current airline business model.
And to make the challenge harder still, even if it was possible for the airlines to cut prices while also removing seats, there would be no guarantees; as another survey respondent put it, “I would still be concerned and having second thoughts…it’s still spreading all over the world.”
The airlines’ challenge runs even deeper
Whether we believe the experts who predict a quick V-shaped recovery, or those who argue that recovery will take longer, we can all envisage a day when all the turmoil and anxiety created by COVID-19 are behind us, a time when things return to something like normal. No doubt, the airlines long for that day, too.
The problem is that even when life has returned to normal for most of us, and the economy is on a recovery path, without concerted steps to manage consumer concerns there might be no return to normal for the airlines – 13% of U.S. consumers say that even when the CDC gives the “all clear,” they will avoid flying if at all possible. And another 22% say that they will fly less often than they did before the crisis. Plainly, the airline industry needs to act.
Solutions born out of crisis
Human beings are endlessly inventive. History is full of new technologies, drugs, medical techniques and other solutions to the problems thrown up by human-made or naturally occurring disasters. The airline industry is no exception, and the good news is that the steps they plan to take once life gets back to something like normal resonate with consumers.
Enhanced sanitation is the clear priority. Figure 1 contains responses from consumers who had cancelled a flight and within that group those who specifically cancelled due to concerns about COVID-19 infection. The message this data contains is clear – of the multiple steps tested, the priority is to disinfect aircraft and airports to the highest standards, including TSA security screening areas. If those steps are taken then the great majority will return and additional steps will also resonate, such as advice on safe places to travel to and promotional pricing.
The airlines are ready to act
Obviously, processes that consistently deliver enhanced levels of disinfection need to be formalized and approved, and the implications for traditional airline business models need to be absorbed, but the airlines are poised to act, and examples exist which can be modelled for wider application.
As Joe Leader, CEO of the Airline Passenger Experience Association (APEX), the only nonprofit membership trade organization comprised of the world's leading airlines, industry suppliers, major media groups and related aviation industry leaders, commented:
“The ENGINE Insights study clearly validated a need for airlines to make viral cleanliness a long-term priority. Airlines have an opportunity to lead the entire travel industry because we already focus on safety and this will become a natural extension. Leading Asian and Middle Eastern airlines have long been leaders in on-board cleanliness, but the introduction this month of ‘Delta Clean’ shows a recognition of how important cleanliness will be for trusted airline brands moving forward worldwide.”
Methodology
The data referenced in this article was provided by ENGINE’s ACCELERATED INTELLIGENCE team and in three waves of ENGINE’s CARAVAN omnibus survey. A total sample of 3,011 adults 18 years of age and older. Completed interviews are weighted by five variables: age, sex, geographic region, race and education to ensure reliable and accurate representation of the total U.S. population, 18 years of age and older.