Aviation industry reinvents itself and generates new businesses

• At the 18th edition of ALTA’s Annual General Meeting and Leaders Forum, the CEOs of Iberia, GOL, and Azul, highlighted the growth of passenger demand in the region in this new stage after COVID and the strength demonstrated by the management teams of Latin American airlines, despite the lack of government subsidies

The recovery of passenger demand in Latin America, the consolidation of some airlines in the United States and Europe, as well as challenges that need to be overcome in the post-pandemic era, were topics addressed by the panel “Aviation growth in the face of new challenges,” within the framework of the 18th edition of ALTA’s Annual General Meeting and Leaders Forum, held in Buenos Aires, Argentina.

In the panel, moderated by Alex De Gunten, Business Development Officer – HEICO Aerospace, the CEOs of Iberia, Javier Sanchez-Prieto; GOL, Celso Ferrer and AZUL, John Rodgerson, they shared their companies’ experiences in overcoming the pandemic, and the actions they consider should be taken by the industry and governments.

Javier Sanchez-Prieto, CEO of Iberia, stressed that the industry has been able to recover in many aspects, despite the current uncertainty, which is not new, as aviation has had to face other challenges before COVID-19, such as recessions and high fuel prices, which the industry has been able to overcome.

“The good thing is that we turned the page and came back. The demand came back, and there are many problems, but we are doing well in some respects. We see more in some sectors and more growth. We failed in the predictions regarding pricing and how we are recovering from the crisis. We are also seeing a much stronger recovery in corporate traffic, which is good news. I think this is the starting point. We know that we must live now with a certain degree of uncertainty, but that is what we have in this industry,” said Sánchez-Prieto.

He mentioned three challenges facing aviation: making the industry work (recovery has to do with not having long lines at each airport, which is not good, nor the different regulations); understanding that the industry is instrumental for social and economic development, and not seeing sustainability as a threat, but as a challenge.

Iberia’s CEO also stressed that there is a connection that must be continued, and that has to do with the customer. “This is something we must invest in if we want to protect our industry.”

Celso Ferrer, CEO of GOL, also sees an optimistic scenario. “I see a better outlook. We faced a massive crisis, and we are getting to the post-crisis scenario. It will take at least two years to reduce the industry’s backwardness or lethargy somehow.”

He pointed to the actions they are taking after the pandemic, which is to go back to basics: bring back all the aircraft and handle the current budget. “We reduced the network from 800 daily departures to 50 daily departures, we were seeing during the crisis a work about day-to-day management, and in this post-crisis moment, we can combine a long-term vision with a medium-term vision, which is where we are today.”

He added, “despite fuel costs, we see less volatility, which is good. We are adjusting to being able to stimulate the business and get the company back to growth. Today we are flying more or less 90% of our pre-pandemic flights, and the idea is that in December of this year, we will reach 100% of pre-pandemic flights”.

After the Covid-19 crisis, GOL made crucial decisions: the integration of the frequent flyer program, which has been growing very fast (passengers are adding miles and want to travel much more); fleet renewal (they incorporated more than 35 aircraft in 18 months) and the integration of a new platform to offer a better digital customer experience.

The industry in Latin America was strengthened

John Rodgerson, CEO of AZUL, said that the recovery of airlines in Latin America, despite not having received subsidies like in other countries, demonstrates the strength of management teams in the region.

He indicated that demand in Brazil is currently at an all-time high, despite problems such as a 30% currency devaluation since 2018 and a doubling in fuel costs. “The demand for flights is very high. We can go through the war in Ukraine, Covid, and all the problems that arise if demand continues to increase. The problem is that the Brazilian government did not give money to the airlines. Still, the regulator did meet with us every week to see how it could support us. Some days we had negative sales because people were asking for refunds, there were many things, and there are many things that governments can do to help and support the airlines”.

He added that with actions such as the transportation of vaccines, people understand how vital air transportation is for the economy. “This industry generates much value for tourism, for everything, it is essential that we think about this.”

Consolidations that generate growth

Another aspect addressed was the issue of consolidations by some airlines from America and Europe. In this regard, the CEO of GOL (the company that will consolidate with Avianca) considers that Avianca should maintain the current business model. “Each airline has its strong point, its local possibility to deal with the situation and the local geography. In Latin America, everything is very different. Brazil is very different from Argentina and Colombia, and that is the beauty of this concept we are considering because we want to keep the best of each airline, and this is a new model.”

Azul’s CEO, for his part, believes that this is a healthy trend for the industry that should be analyzed. “We want to generate more solid airlines in Latin America that generate jobs, that pay taxes; it seems that this is the natural path. I do not know if it is going to happen or not. It seems that it is complex and difficult to achieve. Still, it is healthy for the industry to see that this is happening and what was seen in the United States is interesting. It was not that consolidation took place, and then there was a contraction. There was a consolidation that generated growth. The same thing happened in Europe; consolidation led to growth. So, if you achieve consolidation that generates growth, I think that’s good for everyone everywhere,” Rodgerson said.