UK 'Travel Chaos': Be careful what you wish for
The widely reported issues relating to travel, predominantly travel by air, are starting to dominate the news agenda here. As post-Covid, summer travel starts to ramp up, we are beginning to see huge cracks appear in the integrity of our travel infrastructure. Not just in one location or within one company, but almost all of it.
Until now, the aviation industry has largely tried to paper over its cracks, but, as we saw for a short time at Easter, the industry, in effect, got found out and now its returned. In fact, it never really went away. When the media start picking up on it, like a dog with a bone, it's going to be difficult for them to put it down.
The delayed effect of the mass exodus of staff during the pandemic is now starting to have a devastating impact. Despite the various support and furlough schemes at the time, their retention in such circumstances was the net result of a simple economic equation: survive or fail, reduce costs at all costs. But what did the industry think would happen when things returned to normal?
To be honest, there not a lot of evidence that they actually thought that far ahead. It's quite surprising that many of our key aviation organisations survived. Almost without exception, most now carry unprecedented (that word again!) and huge debts which will take years to pay off.
Going into this summer period, it's clear that the price of many travel-related services has significantly increased, such as hotels and car hire, but what about airfares?
Airfares have held a relatively stable and low-ish position, almost comparable to pre-pandemic levels, but for how much longer? It’s not a sustainable position overall, but low airfares (being one of the two primary sources of revenue for many airlines) will ultimately not do anything significant to the bottom line.
Other post-pandemic storm clouds are now forming, and they are not as far out to sea as you may think. The war in Ukraine, the price of oil, and the cost-of-living crisis will hit the pockets of the travelling public as the year progresses.
Whilst advance revenues for the summer period and hedging will partly insulate the industry in the short term, how will this play out as we enter the winter period and as the demand drops and the cost of living crisis starts to bite as its predicted to do?
Will we, once again, witness lines of dormant aircraft sitting idly at our airports? This time because nobody can afford to travel on them? Hopefully not.
No longer an attractive place to work?
Through the media, we now see long queues and delays at airports and airlines announcing cancellations in advance; although airlines can be quite tactical when planning cancellations in advance, it currently appears to be due to a lack of staff: security staff, ground handling staff, and aircrew.
The cold hard fact is that the aviation industry is no longer the attractive career proposition it once was, re-recruiting all of the staff, skills and knowledge lost at the height of the lockdowns and balancing this against a very seasonal demand is a huge, almost impossible undertaking. The reality is that many of those staff have moved on (physically and emotionally).
When much of the population seek stable employment, the vast travel peak followed by the inevitable trough as the summer ends is unlikely to entice many to return to the aviation industry anytime soon.
Many of the new staff currently being recruited lack previous experience and require a lot of mandatory training before finally taking up their position on the front line. With employment lead times longer than other industries, combined with working within an often highly unsociable and chaotic environment, it will hardly encourage many of them to stay.
So two main problems; very difficult to get the staff to return and very difficult to retain those who have just started.
Back in the day
But this issue first started long ago and was highly predictable.
During the eighties and nineties, a time mainly before the emergence of low-cost carriers (LCC), the lower volumes and less choice meant much higher fares compared to the low fares we enjoy today.
While there were shining stars, many airlines came and went at a higher rate than today's level. At a time with less stringent approval and certification requirements, it was easier to start an airline.
Those who worked in the industry at the time will remember wave after wave of predominantly reactive cost-cutting measures, largely a result of the profit warning alarm bells. The industry did not have a sharp focus on costs, and its ability to withstand the effect of significant world events was much less.
9/11 (2001) caused oil prices to soar, rapidly contracting the industry. The industry was in panic mode. Swissair, Sabena and others quickly went down, and British Airways announced internally to its staff that without a (borrowed) cash injection, it was six to nine months away from bankruptcy.
This was another time where skills were lost by the industry, organisations arbitrarily and quickly losing headcount without, in many cases, understanding the full net effect.
The impact of LCCs became apparent in the early 2000s, bringing a very different 'pile high, sell em cheap' business model. As the LCCs grew, their model had more impact and was quickly emulated by the legacy carriers. Evolve or die.
Whilst the LCCs brought low fares to the masses and sparked colossal industry growth, something that many of us have benefitted from, behind the scenes it also started a slow burn, race to the bottom.
The low-cost model (the clue is in the name) is largely predicated around the simple premise that if an airline can continually focus on keeping its costs low (as opposed to the reactivity of the past) but supply significant volumes, it can justify low fares and still make a profit. On the face of it a win-win, and many LCCs became hugely profitable.
High frequencies, go anywhere, £5 fares, halcyon days!
But the real issue here is that to do this, the entire airline supply chain, airports, ground handling service providers, and other services all have to provide their services at the lowest possible cost, often with an absolute minimum margin. The reality is that the LCCs have been the main and sometimes the only benefactor.
Pre-Covid, front-line staff's pay levels were approaching a low watermark against other comparative industries. In many cases, a high proportion of front-line roles were undertaken by agency staff. While this is not uncommon in many industries, it tells a story, and not a particularly positive one.
Agency staff most definitely play an essential role, fillings gaps that arise through high seasonal peaks and contingency when the industry is affected by other events. But such an increased reliance often only undermines performance and, possibly, safety margins if not addressed over the longer term.
Be careful what you wish for
Whilst the approaching holiday season is essential both for the industry and those going on much needed holidays, there's a more significant issue that the industry needs to deal with.
The race to the bottom that I mentioned earlier now appears to be approaching (or has reached) the bottom. The big issue is that the industry is no longer competitive within the employment market in its sector, with the middle of the night start times and low wages no longer making it the great and exciting place to work that it once was.
Hourly rates for front line staff are now often advertised as under £10 per hour. They can get earning more quickly, and more importantly, they can often earn more elsewhere. Supermarkets, for example, are paying rates of between £10 to £12 per hour. The lengthy employment lead times mentioned earlier mean that working for a supermarket is a more attractive proposition where terms and conditions might be more favourable.
As we move through the summer and into the winter period, many people will slowly think about the reality of the general global uncertainty and the inevitable 'eat versus heat' debate as winter energy prices and the general cost of living both increase and will affect many people.
So, stable employment becomes more critical for many, and aviation is currently unable to provide it in many cases.
Squaring the circle
So how do we square the circle? It is complex and involves the acceptance of some hard realities both by the industry and the public.
We all want prices, including airfares, to be cheaper, but we all want to earn at least enough to live comfortably and cover our costs. Rampant inflation means that wages have no hope of keeping track, and disposable income is rapidly reducing.
The aviation industry must change (something that I've blogged about many times). It must reflect on what has happened in recent years and accept that some current business practices are no longer sustainable.
The whole commercial aviation infrastructure is pretty much dependent on the actions and decisions of airlines, how much they fly, where to (and from), and what they charge; when airlines can't or choose not to fly, the entire supply chain suffers and as we saw during the lockdown, its a house of cards.
Industry wages, particularly for front-line staff: Dress it up any which way you want, but people need money and enough of it to at least survive. The industry must accept that it has fallen behind and that pushing too hard on its supply chain only has one ultimate effect: it drives down wages, creating huge resource issues.
The depressing news is that the industry probably has a few more turbulent years to go through, facing and dealing with the numerous global issues; ultimately, we may have to get used to a smaller industry to survive. Higher fares may be inevitable anyway as the cost of everything appears to be increasing but its essential to remember that without the attendant wage rises, the industry will continue to suffer.
This is likely to result in less choice, higher fares, and continued disruption for the travelling public in the short term. They will inevitably and rightly continue to express their views and dissatisfaction, and the industry must listen.
Squaring this circle is complex and not without huge issues.
The industry caused it; therefore, the industry must fix it.
We should be careful what we wish for.