Expect more disruption….for a while
Executive Summary
Whether you’ve been traveling yourself, or waiting out the return to the airways at home and reading the news, you’ve seen it: airlines are struggling with meeting the demand for travel, and the results have been keenly frustrating. Delays and canceled flights have become routine enough that smart travelers have begun to simply plan ahead for them.
Working together in the “moving” business, air travel and the supply chain have a lot in common in terms of operational dynamics, and their demand-planning issues have begun to reflect one another. In this blog, we’ll discuss this idea and peer into the near future for both air travel and the supply chain. Then we’ll look at some of the airline’s advantages and best practices — and look at a few ideas supply chain might benefit from.
Supply chain thoughts from my own recent flight diary…
In the last six weeks, I’ve been on seven flights across the US and Europe. Five of them were delayed at least two hours — one was canceled, and I was lucky to book a hotel for the night. And, I was careful not to travel July 4th weekend, when airlines were emphatically asking people to change their plans. Unfortunately, my experiences are not at all an unusual set of experiences for travelers right now.
As a frequent traveler, I’ve always tried do my best to keep a peaceful, zen-like mental state while flying across the country. My mental model has been all about balance, and I’d chalk-up delays to a natural distribution of probabilities. For every flight that departed on-time, I felt I was increasing my chances for my next flight being delayed. So, when flights were delayed, I took a deep breath and reminded myself I was likely due for the next several flights to be on-time.
Pleasantly enough, for much of the last 18 months or so, I’ve been flying with very little downside on my personal ledger, and a record number of on-time flights. Of course, this wasn’t a coincidence. Due to covid, there were fewer travelers, so the flight-boarding crowds and standby lottery had disappeared. There were also fewer flights to gnarl up aviation systems or overtax pilot hours, and altogether, fewer planes in motion meant a manageable load for maintenance and repair.
Reverse all of those beneficial trends, and we have today’s situation. You’ve probably heard that air travel is back — with crowds of people rushing to airports to make up for postponed vacations, weddings, family reunions — you name it. Unfortunately, the infrastructure supporting air travel has not turned out to be as elastic as everyone thought (or at least, hoped). Snapping back into pre-covid shape has been anything but smooth. The newspaper articles, pictures of crowded gates, and flights arriving a day or two late have made that much crystal clear.
And if that pattern of events sounds all-too familiar — well, you might just be somebody who works on, or with, the global supply chain. There are certainly many parallels between the current chaos impacting air traffic, and the chaos that has upended supply chains for the last two-plus years.
Let’s take a closer look, and see what our experience with the supply chain might tell us about the next several months of air travel. We’ll also see where our analogy perhaps falls a bit short — and examine key ways airlines may actually be better off than the supply chain.
Airlines: More Than a Little Turbulence
As you might guess, the last few years have truly been a wild ride for air traffic volumes. As you can see in the chart below, 2020 was the real rollercoaster dip, with 2021 and 2022 following a more normal, if somewhat-exaggerated seasonal-fluctuation pattern.
A few highlights from the chart:
- From March 2020 to April 2020, global air travel plummeted to almost zero
- By the end of 2020, volumes were still 50% or less than usual
- Through 2021 volumes slowly but consistently recovered
- By July 2022, TSA reported nearly 2.5 million travelers, the most since February 2020
More demand is good — right?
No doubt, more demand certainly beats a prolonged case of less demand. And it’s certainly a good sign for an economy recovering from a pandemic that all but ravaged the airline industry. (Keep in mind that US airlines alone received a $54B government bailout just to help them stay solvent when that graph-line dipped below sea-level.) However, as we’ve seen, just because people are ready to travel again, doesn’t mean the system is ready to handle “the great return.” Like many inherently complex businesses, re-starting air travel services takes much more than just flicking a switch.
Here’s a high-level review of the current, top challenges to air travel elasticity:
Staffing issues. Many people left the airline industry during the big downturn — either through forced layoffs — or because they decided it wasn’t worth the risk, pre-vaccine availability. Staffing shortages remain, and according to the FAA, they’re impacting pilots, flight attendants, maintenance operators, and air traffic controllers.
Plane readiness. Many planes remained parked when volumes were low. Getting those planes back into active service is a lot more involved than turning the key on a Toyota that’s been sitting in your driveway. The size and variety of systems involved, and (of course) absolute minimum error-tolerance all make the re-commissioning of planes a labor-intensive task. Some of us are comfortable hitting the road with the “check engine” light on, but fortunately for all of us, the FAA requires a higher standard.
Travel mix. In an interesting twist, the very nature of travel demand has shifted — quite a bit. Business travel still remains below COVID levels, but personal travel has spiked to make up that difference. As a result, weekday volumes are lower, and weekend / holiday volumes have become problematically higher. This is creating new bottlenecks, even at airports where this has been a relatively rare phenomenon.
Covid. Despite all our best hopes, it’s not over, and the latest COVID waves are still creating problems with flight crews getting sick, a new and persistent source of last minute delays and cancellations.
You can see how these factors, most of which are represented in the “Air Carrier” line below, are driving the bulk of new delays:
“Like Deja Vu All Over Again”
For Supply Chain Managers, the pile-up of factors we’ve chronicled for airline industry may well bring to mind Yogi Berra’s immortal quote. And there’s no doubt about it: there are plentiful similarities between the current chaos in air traffic and the rampant supply chain disruption we saw in 2021.
In fact, for Supply Chain it’s almost a mirror image of the airlines’ jamming factors:
Demand cratered, but then bounced back. This happened quickly enough to severely test the elasticity of the whole system, and disrupt the flow of goods on a long-term basis.
Complex, interconnected systems were shut down. Factories, machines, and supply sub-chains are also not easy to just switch back “on,” and it took time to ramp back up to normal speed. There was also the complication of meeting new, higher states of demand — because:
Demand rebounded, but unpredictably. Demand planning was made more difficult by needs spiking in unique areas, like home furnishings and DIY projects — and supply lines for these were slow to respond.
The Great Resignation hit global supply chain just as hard, and manufacturers and carriers are still understaffed.
Ongoing waves of COVID are continuing to cause disruption. With each new wave — Delta, Omicron, and now BA.5 — the factors and impact have differed, but predictability has not been a feature.
What Can Airline Travelers Learn From Supply Chain?
Given the uncanny similarity of these two crises, is there anything airline travelers can learn from the supply chain crisis? First of all, we’d suggest, that for the foreseeable future, it’s probably a good idea to keep seatbelts fastened, because there’s still a lot of turbulence on the collective flight map. Just as we’re still seeing supply chain disruptions, we’re likely to continue seeing disruption and delays at airports all over the world. Given the complexity and interconnectedness of the problems with air travel, we would expect to continue seeing significant flight delays throughout calendar year 2022.
But here are three key ideas we’ve always emphasized for supply chain providers, that seem to us to have direct application for travelers who are trying to navigate the current airline situation:
Give yourself options. Multi-sourcing production and supply has been a main theme for us with supply chain, and it’s also a fit for travelers. If you can, try not to “single source.” Consider doing a little homework and scenario analysis ahead of time, and know your options. This way, you can be ready to change quickly if yours is delayed or canceled.
Give yourself lead time. Again if at all possible try to un-squeeze your travel schedule. Get in a day early if you can. This is a well-established strategy for effective supply chains. Another important idea to borrow: the more important the customer / event, the more lead time you should give yourself.
Communicate clearly, and early. Let everyone know when your flight is supposed to depart and arrive, and proactively communicate options if your flight ends up being delayed. When delays do come up, it will be that much easier to manage things on the receiving end.
What Can Supply Chain Learn From The Airlines?
Having noted the many similarities, we didn’t want to conclude our analysis without pointing out that it’s not all bad news for airlines when compared to supply chain. There are also some distinct advantages airlines have that supply chain might consider for “taking a page” from their playbook. And no, it’s not all black and white — so stick with us as we make our way through these important differences:
With airlines, consumers have fewer choices — airlines have made the most of that. There are only a handful of major airlines in the US, and choices are similarly constrained as one travels across the globe. When consumers encounter a package that’s late — they’ll quickly switch to another vendor (it’s so easy to find alternatives on Amazon these days). In contrast, travelers will be angry about a delayed flight, but they’re likely to stick with their preferred airline, and in this case, often as not despite repeated disruptions. Fewer choices work in the airlines favor, and their work to create loyalty benefits programs have helped them achieve that difference.
Pilots have a lot of power. In June, thousands of Delta pilots picketed at airports across the country to protest exhausting work schedules and salaries being eroded by inflation. Pilots at other airlines have been vocal in their complaints as well. It’s hard to find a group in supply chain with power that equals that wielded by pilots within their chosen airlines. It’s pretty simple: if the pilots don’t want to fly, the airlines have few alternatives. With this kind of power, pilots can force improvements much faster than supply chain managers have been able to.
Here again, surprising at it may sound, companies who have empowered their supply chain leaders have put themselves in a better position to respond to change. This is especially true when we look at how companies have empowered supply chain relative to other departments in the corporation. Companies with C level representation from the supply chain have fared better, and will continue to do so. You can read more about the importance of empowering supply chain in our recent white paper.
Airlines have successfully navigated digital transformation. For many years now, airlines have been investing in their reservation and ticketing systems. As much as any industry, they’ve led the conversion to a digital environment. (So much so, Progressive Insurance can run ads making fun of those who still cling to their paper tickets.) Even the phone has become old hat, as nearly 80% of air travel is now booked online. From airline websites to aggregators like Expedia and Kayak, the online booking experience has become familiar and seamless.
Without travelers even noticing it, ticketing also became a real-time proposition. At the same time, airlines have made major investments over the last decade to upgrade their scheduling and capacity planning tools. When disruptions occur, airlines have real-time information and automated systems to act quickly and effectively. This is an area where supply chain is clearly running behind.
Supply chain has been late to digital transformation. Amazingly enough, many global supply chains still run largely based on spreadsheets, emails, and phone calls. Just imagine trying to manage travel and ticketing changes via an Excel spreadsheet and a series of emails! But supply chain employees are forced to do the equivalent of that on a daily basis. The cascade of problems that result are frequently solved reactively: with stand-ups, war rooms, and all-hand-on-deck efforts.
Supply chain would do well to learn from their close cousins in the airline industry, and begin a much deeper investment in dedicated technology to increase visibility, automation, and insights. The supply chain digital transformation is, like so many things in the supply chain these days…long overdue.
Movers Need To Be Shakers
For supply chain, we think the big takeaways for this two-way discussion are all woven into the various ways airlines have made commitments to a higher standard of accountability. After all, their essential task: moving millions of individual people, daily, from place to place, has a high-touch, high-emotion register that isn’t really front and center for supply chain.
Perhaps that’s why they’ve been quicker to adopt digital capabilities that make management of their inevitable disruptions easier to mange (if not easier to take), and less mysterious overall. Supply chain has not had the same level of experience “in the spotlight,” so to speak — but there’s undoubtedly been a lot of catch-up in that regard of late.
We strongly believe that supply chain players who take a few notes from the airlines will come out ahead in the long run: lock in your loyal customers with preferential benefits whenever and however you can; invest in your best people, and assure that they’re represented in the leadership of your overall organization; empower them to shape company strategy; and finally, get started now on the work for making good on the digital transformation.
