< PreviousAugust-September 2020 · AVIATION BUSINESS 30 www.aviationbusinessme.com DXB AIRPOT Dubai Airports CEO Paul Griffi ths gives his predictions for tourism in the UAE as lockdown eases around the world and markets reopen. Dubai Airports’ CEO, Paul Griffi ths, expects to see a “rapid rebound” in passenger traffi c at one of the world’s busiest aviation hub once travel restrictions in Emirates’ key markets are eased. In just three days in March, Dubai International Airport (DXB) went from being the world’s busiest airport, operating 1,100 fl ights and processing 280,000 passengers per day to just 17 fl ights. Speaking at the AI Everything Summer Conference in Dubai in July, Griffi ths said that in May alone, DXB had 44,000 passenger through the airport, the same number as it would normally experience in four hours. “The dramatic impact on the airport has been quite astonishing,” he said. “The most important thing we’ve got to DXB SET FOR ‘RAPID REBOUND’31 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com DXB AIRPORT fl ying to 50 destinations although not at the same frequencies as before. We are trying to provide the service at a minimum cost on us and a minimum cost on passengers.” Griffiths is confident that people around the world will want to re- sume long-haul travel once lockdowns are lifted. “I think while we’re in the middle of the eye of the storm it’s very easy to be quite depressed about things but actu- ally I think that future, particularly for Dubai… with its focus on technology, its solid leadership and its compliant behaviour… I think all of those things have given us an excellent platform to spring into the future.” Addressing the future of airport de- sign, Griffi ths said he believes that gener- ally designs are “incredibly old fashioned and very legacy”, whereas what people really want is more personal experiences and better value for money. The lasting impact of Covid-19 on pas- senger sentiment, he said, would be a demand for more assurance about the quality and safety of the product. “I think airports in the future, will actually be much more personal experi- ences. And we will have to invest a huge amount of money in taking a lot of the legacy systems that exist in airports for the convenience of the airport operator, not for the convenience of the customer, and take those off -site where they can be done in homes and offi ces so you don’t Paul Griffi ths, CEO of Dubai Airports have to go to the airport except to get onto your plane,” Griffi ths said. “That will change in the future and I believe what we’ve been through over the last few months will accelerate that change. And I think rather than have operators sitting back and going back to the way they were, I think this is a great opportunity to transform the customer experience.” Recalling the immediate onset of travel restrictions, Griffi ths said the fi rst im- pact was on the airport’s liquidity and attempting to “stop the fl ow of cash out of the door”. “We had to take some very heavy steps to stop that happening and then man- age through a period of very diffi cult conditions, unprecedented conditions and manage quite an austere opera- tion. But what we must all remember is that this situation will pass and the opportunity to be bright again and to do all the ambitious things that Dubai has been famous for for decades, those opportunities will emerge. We have to maintain our capability and in fact increase our capability through the pandemic so that when we emerge the other end we’ve got a better product, a stronger reputation, a much better value for money proposition and every single person in the entire sector, from government, private sector, hospitality, tourism, is playing their part in putting Dubai on the map as a great opportunity to come and experience.” do is reassure everyone that Dubai is an incredibly safe and great place to be. The impact on the industry has been abso- lutely enormous. But thanks to the very quick decisions made by the government [and] the decisive leadership…I think we’re going to have a very rapid rebound as and when the world opens up.” Dubai, which is Emirates airline’s hub, is largely reliant on waiting for the rest of the world to ease travel restrictions before it starts to see traffi c normalising. As a long-haul airline with no domestic routes, Emirates will have to wait until its markets reopen before it can start to generate meaningful revenues. But Emirates currently is not focused on making money, according to the group’s divisional senior VP for corporate com- munications, marketing and brand, Boutros Boutros. “Emirates is not look at this stage at making money, we are looking at provid- ing a service,” he said. “One of Emirates’ main missions is to service Dubai and the UAE ad to keep it connected. We are August-September 2020 · AVIATION BUSINESS 32 www.aviationbusinessme.com MUNICH AIRPOT Markus Heinelt, director traffi c development cargo at Munich Airport, discusses the implications of DHL’s new freight facility at one of Europe’s largest air hubs. In what ways will the construction of DHL’s new cargo facility at Munich Airport impact on the airport’s cargo capacity and operations? With the construction of the new DHL cargo building, Munich will be enor- mously strengthened and upgraded as an air freight location. With the new facility, DHL expands its capacity at the Munich site six-fold. Apart from the gross fl oor area of more than 8,000 square meters, the entire area covers 20,000 square meters - including truck parking spaces, security gates, etc. What does Munich Airports’ decision to ramp up its cargo capabilities say about the current air freight market and the airport’s position within it? GATEWAY TO GERMANY33 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com MUNICH AIRPORT Markus Heinelt, director traffi c development cargo at Munich Airport excellent growth opportunities and are a reliable partner for logistics companies thanks to our shareholder system of city, federal and state government. And fur- ther, a personal contact from the traffi c development department coordinates and advises logistics companies and acts as an interface between all partners. How is Munich Airport adapting to freight companies’ increasing demands for sites that allow smooth digitalisation and effi cient operations? We are in constant exchange with the companies and respond to their needs. In the case of new buildings, we take into account the issue of digitalization and effi ciency from the very beginning. For example, we are currently planning a new 25,000 square meter truck park- ing lot, which will allow automated slot allocation via telematics control. This project will simplify processes, save time and provide more capacities through additional parking spaces. What is Munich Airport’s focus and priority when it comes to its profi le as a key logistics location in Europe? The fact that we can handle and serve all product categories and are one of the fastest cargo hubs distinguishes us as a major logistics location. For example, our subsidiaries aeroground and cargogate guarantee BUP handling from aircraft on block, unloaded, through the warehouse including customs procedures and loaded on truck within 210 minutes. What would your message be to air freight companies in the Middle East looking to secure a new European gateway? At our Munich location, we already have a strong focus on traffi c from the Gulf region with Oman Air, Etihad, Saudia, Emirates and Qatar Airways, which makes us very attractive for logistics companies from this region. Personal advice from one contact person, fast processes, a strong market, free capacity and growth opportunities make Munich Airport the perfect choice for logistics companies from the Middle East. The global air freight market has de- clined, but not as much as passenger traffic. Due to the cancellation of many long distance connections, there is still little, but growing belly capacity. Cargo traffic is currently concentrated more on cargo-only aircraft and has gained in importance. It is expected that the airfreight market will soon continue to grow. It remains uncertain whether the number of long-haul con- nections will return to the level before the Corona crisis. DHL will definitely strengthen Munich as a cargo location from 2022 onwards. DHL’s €70 million investment in Munich Airport is a signifi cant vote of confi dence in the airport. What makes Munich Airport an attractive place for logistics companies to set up bases? Munich Airport off ers a whole range of advantages for logistics companies. First of all, Munich counts as important economic and industrial location – 35 % of all German air freight comes from Southern Germany. Munich Airport is already a cargo hub with more than 100 logistics companies operating here. Short distances, extreme speed and only one location for air cargo are the outstanding features of Munich. In addition, we off er August-September 2020 · AVIATION BUSINESS 34 www.aviationbusinessme.com BAUER AVIATION Linus Benjamin Bauer, founder of recently launched consultancy fi rm, Bauer Aviation Advisory, provides his insight on the key discussions surrounding the airline industry’s recovery globally and in the Middle East. airline’s resources and competencies. Taking the inspiration more from how strategists’ thought processes work than from how the airline industry or busi- ness models are structured can help strategists make the creative leap beyond what already exists. It leads to inventing a genuinely new way of doing business in a post COVID-19 era. Simply waiting for any inspirations to strike is not the right answer during these challenging times and simply, a human crisis requires human-oriented solutions. Airlines with the highest levels of li- quidity tend to fare best during times of crisis. Can you see airline business models evolving in the coming years to prioritise liquidity and profi tability ahead of scaling up growth? Various full-service network carriers were profi table in pre-COVID-19 times. The cash reserves therefore are decent, Airlines are facing the biggest liquidity crisis in aviation history. Why is now a good time for airlines and airports to seek advice on and review their strategies and operations? It is a good time for airlines and airports to seek expert advice on operations be- cause a post-COVID-19 strategy needs a portion of creativity to pivot toward new avenues. In order to obtain that creativity during a crisis, you’ve to be able to think and look outside of the box and collect new fresh ideas from outside. With respect to the change in cus- tomer behaviours, network dynamics, and operational processes in the post COVID-19 era, airlines have to reshuffl e their strategies and business model by exploring new opportunities. The cri- sis has provided the foundations for a range of new blue ocean opportunities where airlines can create demand rather than fi ght over what exists already (red ocean). In other words, game-changing strategies are born of creative think- ing: a spark of intuition, a connection between diff erent ways of thinking, and a leap into the unexpected. These strategies will not only need to pursue a new angle to product diff erentiation or price leadership for a given market. They will also instill confi dence back into the base of airline passengers and stakeholders alike. In general, strategy is about fi nding various ways to create and claim value through diff erentiation. Applying de- sign-thinking methods and tools that can help identify surprising, creative breaks from conventional thinking are required. However, it also requires tools for analysing the competitive landscape of the airline industry, the dynamics threatening that landscape, and an THE ROUTE TO RECOVERY35 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com BAUER AVIATION however, the current operating model of various full-service network carriers could eat up the cash reserves quickly. Despite the cost advantages and the fl ex- ibility, life will be also hard for low-cost carriers after the crisis. Yes, their lower cost base means they can drop fares quickly to stimulate demand and they can fl y on new routes wherever they see a gap. But they are not getting the government money being doled out to national champions. The key characteristics of low-cost car- riers are also negatively aff ected by the crisis. For instance in Italy, a large low- cost market in Europe, the civil aviation authority prohibited the use of overhead lockers for baggage. Fast turnaround times at airports can’t be achieved either. The more health-conscious customer will also negatively aff ect the ancillary rev- enues of low-cost airlines with a decline in on-board sales of drinks and foods on short-haul fl ights. The hybrid business model will evolve in the coming years since now it is the right time to bring about structural re- forms in the aviation sector. Hybrid car- riers like Alaska Airlines or JetBlue have strong balance sheets. They are much more leisure and domestic focused in an environment where domestic and leisure travel will come back much faster than business travel. Especially for business travellers, it is all about safety fi rst. Alaska Airlines and JetBlue are hy- brid carriers and are also targeting the so-called growing ‘bleisure’ segmen, partly driven by the younger generations. During the pandemic, revenues were constrained and demand tight, but the lower costs will help them to grow in the recovery phase. Another advantage for them is the partnerships with inter- national airlines. Rather than building their own long-haul network to Asia or Europe and buying the wide-body jets associated with exponential fi nancial risks, they rely more on domestic and regional feeder services for the partners. The Middle East market is set up slightly diff erently to that of other regions. How well placed do you feel airlines and airports in the Gulf and surrounding region are for a full and relatively speedy recovery? For the Gulf carriers with a strong focus on their international hub model, long- haul travel will be more complex and limited than the domestic market where standardisation of processing is possible. Because every country across the globe has set up its own restart systems during and due to the large complexity, a slow and painful economic recovery will be expected in the air transport sector of the Gulf. The travel sector of countries in the Gulf that lack large domestic markets like in the US or Australia will recover more slowly and may open up fi rst to travellers from nearby countries in the Middle East and Indian Subcontinent. Having a large and diverse domestic market can be considered as one of the competitive advantages for carriers. In the post-COVID-19 era, an increase in demand for domestic feeder services for long-haul fl ights can be expected, driven by the fast-changing customer behaviour of health-conscious passengers and the economic advantages associated with fl ying effi cient, twin- engine long-range aircraft with lower cabin density. These August-September 2020 · AVIATION BUSINESS 36 www.aviationbusinessme.com BAUER AVIATION factors could open up new market op- portunities to Gulf carriers’ main com- petitors with a large domestic market. Gulf carriers’ reliance on international connectivity makes it diffi cult for super- connectors to keep such a scaled network system with the prospect of signifi cantly lower seat load factors on routes between key markets. Large markets for the Gulf carriers like Australia, China, the US and India do not expect a large amount of international fl ights in the foreseeable future. Therefore, the Gulf carriers have to fi nd the complex balance of global demand passing through their hubs because the weakness in each market ripples across the other markets. For instance, having fewer Perth passengers might negatively impact the profi tability of a connecting fl ight to Manchester, which at the same time impacts Delhi. In turn, it could reduce the viability of a Toronto fl ight. At the end of the day, the kick-off of regular long-haul services largely depends on travel bans and the restrictions and entry regulations im- posed by countries the Gulf carriers serve. Under these circumstances, Gulf car- riers like Emirates and Etihad Airways need to reshuffle their business mod- els and rethink their strategies for the post-COVID-19 era. The focus has to be shifted more towards bringing passengers into the UAE rather than relying heavily on the international connecting traffic via their hubs. It has to be done in close collaboration with the airports, stakeholders and the tourism sector. After about 15 years, the golden era of the successful Gulf-hub operating model is coming to an end. It worked very well in the past, but it is not going to work in the post-COVID-19 era. Deploying smaller aircraft is one of the essential steps to sustain long- term operating. In these challenging times, the main Gulf carriers have to reevaluate their existing network strategy by considering potential al- liances, partnerships and joint ven- tures in the near future in order to strengthen and maintain the position in different foreign markets including the key markets. Airlines across the market are faced with the diffi cult but necessary deci- sion of reducing workforces. Is the criticism carriers are receiving in the mainstream media for cutting jobs fair? In general, it is unfair to attack an air- line during its fi ght to survive. Even the ME3 carriers (Emirates, Etihad and Qatar Airways) are not able to survive this crisis without the fi nancial and non-fi nancial support from governments and the stakeholders. Apart from the essential close collaboration between airline and stakeholders, the downsizing of the company’s business is one of the keys to survive a crisis and such tough measures need to be handled sensitively and in a transparent way. If an airline does the opposite of that, then it would be highly likely to face backlash. In some countries, it could become very challenging for airlines to kick-start travel within a region or outside the region because of a few local govern- ments’ mishandling of the crisis. First, by delaying the initial COVID-19 response, 37 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com BAUER AVIATION SOUND ADVICE: BAUER AVIATION ADVISORY LAUNCHES Bauer Aviation Advisory (BAA) offi cially launched in June. A consultancy specialised in the airline and airport business, BAA was founded by Linus Benjamin Bauer. Bauer’s experience includes work in diff erent departments and positions within airline companies from Europe, the Middle East and Asia throughout all commercial-related areas of their business. In his previous consulting projects for airlines and investors, Bauer designed and implemented new strategies and business models, restructured existing models, realigned airline networks, improved the performance of routes, identifi ed new revenue opportunities, redesigned commercial airline processes or supported the launch of a new airline business. He holds a Master of Science degree in Air Transport Management from the City University of London. Additionally, he was awarded with the Outstanding Academic Achievement Award in Air Transport Management, presented by HH Sheikh Ahmed Bin Saeed Al Maktoum, chairman CEO of Emirates. Every single crisis leads to new op- portunities to improve things. What were viewed as the errors of the past can now be rectifi ed. After receiving a wake-up call from this crisis, much more attention will be paid to issues like sustainability and the environment, leading to higher operational effi ciency for the future. It is correct that there is a tendency for airlines to ditch ‘green projects’ for the short-term in order to focus on sur- vival. But the idea of ‘sustainability’ won‘t fade away and never return, no matter how long this crisis lasts. And the public’s attention towards such issues won’t disappear either. Few air- lines across the globe have shown their continuing commitment to such issues during these challenging times. For the medium- and long-term, we take a strong advocative position for sus- tainable business solutions. As such, our company logo itself is one that stands for green aviation, with an eye for pro- viding clients with the wings to gener- ate a simultaneously sustainable and profi table future. Moreover, in light of the unfolding situation with COVID-19, it must be recognised that there is an urgent and existential call for action across the entire value chain of the avia- tion sector, of which must be founded on strategic creativity, the prioritisation of human factors, empathy, pragmatism and secondly, by imposing a 14 day- quarantine on passengers. Governments’ lack of cooperation and commitment to the aviation sector during the crisis to date has led to airlines across the globe having to pull every single cost-cutting measure out from the drawers, at the cost of the employees. Criticising airlines has become a na- tional pastime for people and media across the globe. Of course, airlines need to respond to certain issues and take them seriously, for example sustain- ability. However, blasting the airlines for trying to prevent their own collapse is unfair and irresponsible. Various full- service network carriers are burning about $300-$600 million of cash every month and from a sustainable and eco- nomical point of view, countermeasures have to be taken immediately in order to save that airline from the collapse. The media’s and audience’s “lack of economic understanding” and man- agement’s lack of transparency also led to the ongoing toxic confl ict between the airline’s management and other parties like the union, lawmakers, and public. Even if bailouts and wage sub- sidies buy an airline time, they do not change the economics at the end of the day. Therefore, regrettably, job cuts are inevitable in every single crisis. The constant and sustainable safe- guarding for airlines should be top pri- ority for the employees, union, govern- ment and public. It should be in the interest of all stakeholders to sacrifi ce these measures in order to safeguard jobs in the long-term since the demand for travelling by plane will ultimately return to the long-term growth trajec- tory. A closer cooperation between the airline, the government and employees is essential in this case. It could even contribute to a reduction of the amount of upcoming redundancies because the longer these battles go on, the more jobs (direct and indirect) will be put at risk. There is a tendency for aviation fi rms to ditch ‘green projects’ in a time of crisis as they focus on survival. But what is the importance of incorporat- ing sustainability into your business strategy?August-September 2020 · AVIATION BUSINESS 38 www.aviationbusinessme.com BAUER AVIATION and optimism; all of which remain at the core of BAA’s virtues and values. Airlines have generally gone from pursuing individual goals to driving for one common destination – survival. Can you see carriers reverting back to pursuing their own goals once the pandemic subsides? The current industry structure is not a given, it can be shaped by airlines. For the survival during the pandemic and the post COVID-19 recovery, airlines need to change their strategic thinking and redefi ne their goals on a step-by-step basis. There is a need for developing step-by-step and contingency model- ling for airline strategy. We expect a locational shift in future demand and growth, both during and after COVID-19 recovery phase (Q3/2020 - 2023/2024). Competition should not occupy the center of the current and post-COVID-19 strate- gic thinking. Across the aviation sector, the COVID-19 outbreak has generated an unprecedented need for the airline industry to pursue, fi nd and explore for instance blue ocean and customer centricity strategies. Henry Ford once said: “When every- thing seems to be going against you, remember that the aeroplane takes off against the wind, not with it.” Are you currently seeing any airlines who are turning the Covid-19 crisis into an opportunity? The future of aviation would likely discourage large aviation hubs and there will be more point-to-point air travel between countries. Global hubs like Dubai could lose prominence in the post-pandemic era. Indian carriers have an opportunity to expand their international presence and draw traffi c from some of the large hubs in the Gulf. It could give IndiGo’s future long-haul plans a boost. The problem with the hubs in the Gulf and South East Asia lends various countries including Australia a strong position in the post-COVID-19 era because many of these neighbouring hubs are large, which leads them to be percevied as less safe transit points for health-conscious passengers. The COVID-19 crisis also has provided the foundations for a range of blue ocean opportunities for existing ultra-long- haul operators, such as Qantas. To this end, Ultra Long-Haul could become an emerging business model for full-service network carriers in the post-COVID-19 era. The economic and environmental advantages associated with fl ying effi - cient, twin-engine, and long-range air- craft further would mean fewer aircraft in the sky, leading to a reduction of the economics of hub-and-spoke operators at international hubs. Together with the need for two take-off s and land- ings, the implementation of additional health safety-related measures, such as the installation of health screening facilities in addition to existing safety checkpoints for connecting passengers, could cause larger complexity and thus increase costs for airports, airlines, and potentially passengers. In the next 24-36 months, the majority of health-conscious (premium) travel- lers will favour non-stop fl ights more than one-stops via Southeast Asia or the Gulf. This may lead to a possible higher willingness-to-pay in all cabin classes and thus an increase in demand for ad- ditional ultra-long-haul services. The COVID-19 crisis has also triggered the earlier-than-planned phase-out of many older and larger aircraft in favour of newer aircraft with longer-range capabilities, a lower cabin density, and much better fuel effi ciency. This could lead to new market opportunities for airlines, like British Airways, with its premium-heavy confi guration on its 787s to bypass hubs on key or thinner premium routes. It is not just the development of effi - cient aircraft with the right economics that enables thin routes to be profi table again. Future consolidation may also lead to a greater decentralisation of networks, a higher proportion of point-to-point traffi c, and an increase in domestic/ continental feeder traffi c. Having a large and diverse domestic market for instance is one of Qantas’ key competi- tive advantages on its competitors on the UK-Australia market. Alongside high- yielding routes, this would be driven by factors including change in customer behaviour, geographical location of cities, employment of highly effi cient aircraft with the right confi guration and last but not least, the ongoing travel restric- tions or the establishment of ‘air travel bubbles’ between countries. Although there are few golden opportunities out there for other airlines, the ultra-long- haul sector remains a niche market with limited realistic opportunities in the post-COVID-19 era. 39 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com STRATA MANUFACTURING Ismail Ali Abdulla, CEO of Strata Manufacturing, discusses the benefi ts and challenges of automation in aerospace manufacturing and how adopting automated processes is helping the UAE to achieve its ambition as a global aviation innovation hub. the wing to increase the wing’s surface during take-off and landing and im- prove stability during fl ight. Strata has moved from assembling to fabricating IBFs at its facility in the Nibras Al Ain Aerospace Park. “Strata’s eff orts towards automation re-enforces our capacity to continuously deliver high-quality components in chal- lenging timeframes, ensures better ef- fi ciencies and quality across our produc- tion lines and facilitates our evolution to manufacture more complex aircraft parts,” Abdulla says. “Automation also empowers us to strengthen our position in the global aerospace supply chain and further el- evate our status as a key player in a rapidly evolving and highly-competitive Mubadala Investment Company’s aerospace unit, Strata Manufacturing, is evolving. The consistency and quality brought by automated manufacturing processes is becoming increasingly attractive for airframers and Strata is one company capitalising on the trend. Since its inception in 2009, Strata has been incorporating some of the latest techniques in its operations and is today one of the go-to suppliers of advanced aircraft parts for OEMs including Airbus, Boeing, Leonardo and Pilatus. Ismail Ali Abdulla, CEO of Strata Manufacturing, explains that while the company’s fi rst decade of operations can be characterised by its expertise in manufacturing composite aero-structures components, the next decade will high- light how cutting-edge manufacturing technologies, including automation, will play a key role in advancing and expand- ing Strata’s manufacturing capabilities. “This is now evidenced by our adoption and deployment of Hot Drape Forming (HDF) and computer-controlled robotic Automated Tape Layup (ATL) machines, to fully-automate the assembly of A350- 900 Inboard Flaps (IBF) wing part for Airbus,” he comments. Strata recently delivered 100 shipsets of A350-900 Inboard Flaps (IBF) for Airbus. Designed to increase the total lift ca- pability of the wing of an aircraft, an IBF is mounted on the trailing edge of STRATA MANUFACTURING: AUTOMATION IN AEROSPACENext >