For the past 50 years or so, all passenger aviation has been concentrated in huge hubs. The solution to the extended traveling salesman problem on the airport graph showed that it was cheaper to fly from a small town to the center, and then from the center to another small town. So it was all over the world, until suddenly new planes began to appear that broke the usual economy. Just before the crisis, we communicated with AirBaltic, for example, which had made a bet on the new Airbus, which changed the picture. Everything went to the fact that flights would be cheaper all over the world, low-cost airlines would win, and in general aviation would be available to everyone. This is important: the share of low-cost airlines grew very strongly before the crisis, and even those who previously could not afford to travel began to board planes. In general, a bright future loomed somewhere nearby.
But then one hungry Chinese hard worker made some adjustments to the financial planning of airlines.
In addition to the expected loss of approximately 46 million jobs (of which only 3.5 million are in aviation, and the rest are dominoes in manufacturing, services, tourism, and so on), we have some rather strange events.
First, Russia and China differ from other countries in that they very quickly restored the air communication network. If you think that everything is bad in Russian passenger aviation right now, no, it is still good by world standards.
Secondly, Pobeda turned out to be an airline that suddenly gained a lot in this crisis due to a very correct decision-making strategy.
Thirdly, now you can see the cheapest tickets over the past few decades (if you count with inflation). This is because the airlines managed to push the season closer to autumn due to discounts and received some liquidity. In six months, prices will probably rise back, and some companies will leave the market, but such is life.
Let's figure out what happened and why.
What happened
April - a sharp decline began, it reached the point that 10% of flights remained in May. The depth of booking dropped to 3 days, that is, even the business travelers did not know if they could go. By September, tickets began to be bought 15-20 days before the trip.
At the end of July, growth began, and the recovery was around 85% compared to last year, which is very uncharacteristic against the background of other countries.
Before the pandemic began, aviation was growing by about 7% per year in terms of traffic, but the cost of the ticket was constantly falling:
According to IATA
As I said, in the dock world, one of the main trends was the reduction in the cost of flights. The new generation of engines and new aircraft made it possible to move away from the scheme of large airports-hubs. If earlier it was cheaper to move a person to a large hub on a light plane, and then transfer to a huge liner and carry him in it, now the situation has changed. There are now cheap ways to carry fairly long distances with fairly economical ships. This automatically meant that the role of hubs would decline and low-cost airlines would begin to develop. The last couple of years, low-cost airlines have begun to gnaw off a huge chunk of the market from "normal" airlines. Another thing is that in 1995 there were only 10 thousand pairs of cities for transportation, and now there are about 22 thousand. Many classic companies have gone hybrid.
Low-cost airlines suddenly became not just separate companies that make money on flights, but strategic players for the economy of a number of countries where tourism was an important part of GDP. For example, Iceland has made the wildest leap in tourism in recent years (from 200-250 thousand tourists a year to millions) precisely due to cooperation with low-cost airlines. Over the past 7 years (8 years ago, WOW Air appeared), KEF airport traffic has grown by 4 times, tourism has grown by 4.5 times, and GDP has grown from 12 to 26 billion dollars. The effect was noticeable in Spain, Thailand and a bunch of other countries, but tourism there did not have such a huge impact on the country's GDP.
With the beginning of the lifting of restrictions in August, there were stories about the fact that low-cost airlines had a serious problem with the Italian government: Rome wanted tourists, and low-cost airlines wanted to cancel restrictions on transportation and refused to carry people in the direction.
We are discussing the creation of new low-cost airlines, here's the significant news .
CAPA reported in September that in July, only Pobeda of European companies managed to increase traffic compared to last year . S7 also grew in August and September. General Director of "Pobeda" Andrei Kalmykov in an interview with "Vedomosti"said that the main reason is a complete stop of flights in April-May. Let me remind you that then "Pobeda" stopped all its flights. The rest flew in the negative, because the passenger compartment load dropped dramatically. Estimate - $ 10 million savings. If the crisis had been short, Pobeda might have lost part of the market, but due to the correct understanding of the situation, they have grown very much - much more than other airlines and much faster than the market. The risks were in the loss of qualifications by the pilots and in equipment failure from downtime (there is such a topic in aviation).
When the flights resumed, kerosene fell in price for a short time (because oil dropped to negative values). The cost of Pobeda was already minimal, so it was also, and so they were able to further reduce prices and fill the planes. Apparently, they also used this pause to refactor their internal systems, which also provides a good base for a breakthrough.
Global trends
In addition to the story with low-cost airlines, there was another important trend - the reduction in ticket prices. The airlines tried to make money not on the ticket itself, but on luggage and other additional services. The story of the separation of ticket and baggage continued: if in the last economic crisis it was a necessary measure for people to somehow continue to travel, now this feature has been fully adjusted. Let me remind you that the story with the allocation of baggage as an additional service is an example of price differentiation. If you are not ready to pay a lot for a ticket, then pay a little, but fly with inconvenience. And if you are ready to pay enough, then fly as usual and pay a little extra for the first audience.
But the profitability of additional services (food, seat selection, fast passage at the airport, etc.) is growing, according to IdeaWorksCompany and CarTrawler
. Additional services included luggage, carry-on luggage, animals, sports equipment, additional seats nearby, redemption of “tasty” places, redemption seats in the middle so that no one gets there, fast boarding, fast track, business lounge, VIP lounge, food on the plane, alcohol, food before the flight, duty-free, Wi-Fi on board, aeroexpress, train / metro in city, transfer, car rental, luggage storage, parking, hotel overnight, accommodation, adventure and entertainment, local guides, in-flight insurance, visa, luggage, no-departure, support, concierge service and so on.
At the end of the year, it became clear that there would be a second wave. Against the background of vaccination, we expected a recovery by January, but it is already clear that the recovery will now be no earlier than May - if we do not take into account the new, more infectious strains from England and South Africa.
On the railways, about the same picture was observed in terms of loading, except that the traffic did not fall so much: after all, it is by trains that a lot of business travelers, in particular, shift workers, travel.
The recovery in Russia and China to about 80% of the previous level of domestic traffic occurred quickly. If it will take several years around the world to start traveling again with the same force, then with us and among the brotherly people, it seems that internal logistics plays a completely different role, different from that typical for Europe.
All of this greatly affects ticket prices. Right now they have fallen because people have less money, planes need to be filled somehow, airlines are lowering prices. There is a possibility that in half a year, upon recovery, the airlines will raise prices back, and there is a risk of bankruptcy.
On the railroad, the main trend is that the number of seats sold is increasing, while the number of coupe sales is decreasing. Swallows and other express trains are growing in the long term. Reservation cards seem to be short-term, since this whole year there has been a trend towards savings and a decrease in real incomes of the population. The coupe is now for the rich. Well, people began to refuse long trips, but on short ones, you can be patient.
How it all looked from our side
Let me remind you that at first the situation was similar to "something is happening in China, probably, there is no need to fly there." Then - "wow, now also to Europe." Let's go closing directions. By the time of the quarantine, the railway was working almost normally (some trains were later removed), but in aviation there were a lot of canceled flights. The first conflicts arose: when the flight is canceled due to the fault of the airline, passengers are refunded. When there is quarantine in the country of destination and the passenger does not want to fly there because it is dangerous, it is considered that he did not appear for the flight voluntarily. There were similar situations within the country. Passengers did not want to fly to cities where quarantine is mandatory for 14 days.
The airlines realized that it smelled like fried and there was simply no money for refunds - because the crisis had already begun to break all historical records, including the fear of flying after the 9/11 attacks in the United States and the interruption of flights due to the eruption of Eyjafjallajökull combined. The airlines were supposed to return the money, but in parallel there was a story about the legislative possibility of returning by points (vouchers). Some of them considered tickets exactly until the corresponding decree of the Government of the Russian Federation dated 06.07.2020 No. 991. The choice was between the fact that the state would demand refunds in full in a short time and we would be left without air carriers, or such a measure would be introduced. An alternative could be subsidizing or concessional lending to airlines for the amount of refunds, but it so happened that someone at the top decidedthat passengers will be indirectly crediting carriers.
During the same period, our call center was on fire. At first it was a wave of ticket cancellations, which we more or less coped with. Refunds are partially hand made. Partially, this is about 98% of operator consoles, just like in the good old days of teleprinters. Well, or with beautiful GUIs that are built on top of the same consoles, in any case, the operator is almost always present. And it remains a bottleneck. The airlines themselves have slightly better automation, but they do not expose their APIs. We understood that the automation of CC does not help much commercially, but we felt that living without it in the 21st century was somehow strange. And they began to do it. At the time of the crisis, automation only concerned some locks and covered about 15% of the work. Prod teams switched from the current selling features to call centers, and after 3 weeks, the automation of the sales center reached about 30%.At the same time, full shifts of operators were working in the battle. There were days when there were more tickets than could be cleared: it's still good that we are the largest travel service in Russia and we had these capacities. Airline and OTA call centers just crashed under pressure.
Then there was a wave of wild misunderstanding on the part of ticket buyers. According to the law, only a direct agreement between airlines and an individual is possible for the carriage of passengers by air. This is Article 103 of the RF VLC. The same air carriage agreement is concluded between the passenger and the carrier (airline). In principle, there are no other options in Russia. That is, whoever you buy a ticket from, in any case, an agreement was created between you and the airline, and only and exclusively the airline is responsible for it. This feature of the legislation at normal times protects you from the ruin of tour operators, but in a pandemic it did not work as it should. In any case, this means that only the air carrier can return the money to the passenger, and the tour operator, we or another aggregator can only send its own claims to his address.
Attempts to somehow get liquid funds looked very interesting. For example, Ural Airlines have made a promotion with discounts on flights to Europe.
From that moment on, the history of the most accurate information about what was happening began: at first, we maintained accurate data on open and closed flights, began to monitor quarantines and restrictions and warn passengers about them when buying tickets. We also monitored which flights were more likely to fly and would not be canceled. And that's what the shopping tips were based on. That is, immediately after the opening of the borders, we recommended not buying any tickets for two weeks - and on the whole we were not mistaken with the forecast.
At the moment, there are three main stories - monitoring regions by restrictions (again, certificates are needed or there may be quarantines), a similar story by country and a separate page about open directions with all the details of what is happening there and how.
The first line of the CC is outsourced to two partners. We did our best to make buttons for our personal account, all passengers of the canceled trains were sent an SMS with a link on what to do. To whom they managed to do it automatically (where the cancellation is without options), they instead sent an SMS with a refund. Several other important things happened along the way. The complete operator training cycle took about a couple of weeks. We needed a lot of second line operators capable of returning tickets, but they were needed not in 2-3 weeks, but right at the moment. Firstly, we managed to shift some of the functions of the second line to the first - but this did not save for long. Secondly, instead of full training, we started teaching operators in modules: the first group worked with one GDS, the second with another GDS, the third with the air carrier consoles, the fourth with the inventory systems of other air carriers, and so on.It was possible to greatly speed up the commissioning of operators.
Last year, the percentage of claims was 0.5% of the total flow, and these were cases like “documents were not sent to the post office,” “the airline is delaying the flight,” “I got nasty at the check-in counter,” and so on. This year it is already 2%, and all of them "return the money." Operators began to burn out from the number of calls and from the general negative attitude - since the money for the flight was not from us, but from the airline (remember, this is the law on a direct contract for transportation), and passengers bought from us, this situation was quite difficult to explain. They yelled at the operators. We launched a project of psychologists at the CC in order not to burn out: looking back at the situation now, we can say that it was one of the best ideas. Psychologists held closed webinars with analysis of how to behave, plus they helped specific people.
Further transportation fell by about 70%. Even later, they will fall at a minimum of 85-90%.
In July, normalization began: they opened Tanzania (then no one knew where Zanzibar was), Turkey and England (with quarantine). There is a large direct and delayed demand for Turkey. Transportation within the country has partially recovered. In August, we saw 78% of the 2019 load in our sales (but overall the market was lower, we outperformed the market due to the correct information about what was happening). In September, it was as much as 112% in a number of aviation areas (domestic resorts), but even here we were slightly above the market.
In October, it became clear that there was a second wave. Here it must be said that just as in April no one believed us that this bagpipe was somewhere before May (then this thought seemed blasphemous), so in September no one really believed in the second wave. In the first case, together with ODS, we made a model and realized that this whole story would take a long time. But no one really understood what this model meant, how to use it, and so on. Instead of preparing for a long crisis, as we began to do, many believed that it was necessary to wait a little. In October, the second decline in traffic began.
We connected electronic train tickets - 17 years and it took a pandemic for this to happen, because it was necessary to unload the crowds from the queues at the stations. Right here more details about the crutches of this process.
What has changed within the company
First, we switched to remote web a couple of weeks before the official transition. Here is a story about it . The flight is normal, the overall efficiency has not decreased, but a lot of teams still want to return to the office. After discussions and polls, we consider the model of part-time, when a person works for 3 days in the office, 2 days at a distance.
Secondly, historically we, as a company, have worked separately along the verticals: railways, aviation, tours, and so on. With the crisis, very large blocks began to appear that link all this together. We were not sharpened for this organizationally, there were no team forces. This partially changed the design approach. While we are still absorbing the rake, it is too early to talk about the useful experience.
In the spring, we analyzed the Chinese recovery a lot and assumed that we would have something similar. In China, the trend from long trips to weekend trips broke down very quickly, and we launched the development of short trips - something like weekend tours based on our base of author tours : this was very useful in October and November. In general, there were few electric trains in May (which is generally uncharacteristic, this is a seasonal peak), but in the summer the number of requests for the schedule has grown a lot. In May, the share of iOS passengers of electric trains fell sharply (perhaps this is the consequence of remote control).
Taking advantage of the reduced load, it was possible to redesign the geo-distribution in the data centers. We had a bias towards 3 out of 5 data centers, we balanced everything in such a way that the failure of any of the nodes would not drop the services, and the exit 3 of 5 would not drop critical services. In the monitoring, not only the current utilization of data center resources appeared, but also a forecast in case of failure of one of 5 with load redistribution - for example, 69% now and 81% in case of failure of a neighboring data center. This made it possible to plan well the hardware. The Control Cluster for Openshift has become distributed over three data centers, the fall of the data center does not block the work of laying out, updating, working with updates, which is also distributed.
What's next for the market?
The main trends that we saw this year will develop. Aviation ticket prices dropped very sharply, plus they did not rise sharply in recent days. There were days at the peak of the crisis, when the depth of travel planning dropped from the usual months to 2-3 days. Most likely, next year it will grow to weeks, but not fully recover. Carriers, on the other hand, are doing everything to make it more profitable to buy in advance, since it gives money here and now.
Alas, there was a strong decrease in the mobility of the population along with a decrease in income. This means the development of low-cost airlines on the one hand - and sadness for the entire tourism segment as a whole. True, things are not so bad in Russia: next year domestic tourism will be one of the main trends. The geography of travel is expanding, there is a request for customized rest: small groups, author's approach, interesting distant places. There are long distances in Russia, and it is easier to travel them not by your own car, but by train or plane.
Another important trend of the crisis is the trend of extending business trips. This is when a couple of days of rest is added to a business trip. According to Russian law, by the way, in such a situation the employer pays for a return ticket, but personal income tax is withheld from him, that is, it is quite humane.
The complete recovery of the industry will take several years. And this will not be undo, but a completely new model of travel and travel: it is already clear that people have begun to plan trips and act differently in them. There will be more independent trips, the share of excursion tours will increase, rather than beach-vegetative ones, the flows will be more evenly distributed throughout the country.
January 2021 turned out to be quite positive: it can be seen that the world is recovering, people are starting to travel, the planning depth has shifted to still small by the standards of the normal world, but very long by the standards of a pandemic, 25-30 days. The distribution according to the distance of travel is already usual, typical for pre-quarantine days. So people begin to behave as if there is no COVID-19, but at the same time they are afraid of new closures and quarantines that are now emerging in Europe due to new strains of the virus, so the depth of planning does not grow until the same May holidays.