What comes next after recession?

e Airline industry scenarios

and potential end games
Markus Franke a,*, Florian John b
a Franke Aviation and Transportation Consulting, Düsseldorf, Germany
b Oliver Wyman’s Global Aviation, Aerosapce & Defense Practice, Frankfurt, Germany
Abstract
While airline managers learned lessons from the 2001/2003 “double dip”
economic crisis, the post 2008downturn has been more extreme. Airlines
reacted quickly in 2008 and adjusted capacities and cost levels but
recovery in profits has been slow for many airlines. The dynamics of the
downturn has enlarged the gap between successful and less successful
business models, and fostered shakeouts of the latter. Furthermore, the
occurrence of new business models has accelerated. In 2001, it was the
European continental low cost model; this time, we may see new
attempts to change the rules of the game in international long-haul
traffic. Long-term non-cyclical trends such as deregulation or
consolidation will also shape potential end game scenarios, We briefly
examine the differences between the last (2001/03) and the recent
(2008/09) aviation crises, and evaluate the impact on different types of
The TCRC Report on
The Impact of Economic Downturn in the Flight Catering Industry
2009
The Travel Catering Research Centre (TCRC)
Novie Johan and Prof. Peter Jones

EXECUTIVE SUMMARY
During the ITCA Trade Show and Conference in Barcelona, Spain February 11-13,
2009, TCRC conducted 90 face-to-face interviews with attending practitioners from all over the
world (Europe, 57%; North America, 15%; Asia, 15%; Middle East, 10%; Latin
America, 2%; and Africa, 1%). The respondents are also representations of all sectors of the
travel catering industry: Operators (Airlines 22%; Rail, 4%), Caterers (19%), and Suppliers
(Food, 27%; Non-food, 28%). This report identifies these respondents’ opinion on the impacts of
the economic downturn in the travel catering industry.
Overall Impacts. The number of passengers is visibly reduced, causing flight cancellations and
reductions, creating pressure on fares and leading to major cost cutting. Passengers confidence
(e.g. mainly due to unemployment rate and media exposure) isreported to be the main factor for
the reduced passenger numbers. Customers changed their consumption habit by switching to
cheaper alternatives and demanding more value for money. Therefore, companies are forced to
reduce cost while maintaining the standard. Furthermore, re-organisation, re-grouping and other
relationship and partnership efforts currently take place within the industry. Within the supply-
chain, there is a major change in purchasing attitudes. This mainly is in finding cheaper solutions
to reduce cost. Finally, respondents pointed out the significant impact of currency exchange in
their operations.
Impacts within Sectors. Some of the respondents believe that all sectors are equally
affected by the current downturn, whereas some of the respondents suggested that the
impact felt by various sectors are different. Nevertheless, the impacts felt are likely to be
chain reactions among the operators – caterers - suppliers. Scheduled airlines are reported to be
impacted the most due to the decrease of the business class passengers.
Impacts within Regions. All regions of the world are impacted by the economic
downturn, although different regions are likely to have different degrees and dimensions of
impacts. The respondents suggested that America, followed by Western Europe are the regions
affected the most, whereas Asia, Middle East and Latin America also receive slight impact in
which their growth has also slowed down. In general, the respondents believe that the impact of
the economic downturn is felt by globally as ripple effects and indeed is part of globalisation.
Timing of the Impacts. More than half of respondents believe that the impact of the
economic downturn will have a short term impact, and expected that recovery will take
place in less than two years. Meanwhile, about a quarter of the respondents foresee that the
current situation will last between 2-5 years. Nevertheless, nearly all respondents agreed that this
year – the year of 2009- will be a year of wait and see for what is to come.
Suggested Solutions by the Respondents. Five themes of solutions have emerged
from the respondents suggestions: Innovation, Client Relationships, Revised Marketing
Strategy, Rethinking Business Practice, and Balancing Cost and Quality. Despite the current
challenge, most respondents were optimistic and believe that the current crisis is of a cyclical
nature and is mainly due to the external circumstance outside of the industry. They suggested
that it is a learning process, a time for opportunity and time for correction to evaluate one’s
system (i.e. business model/concept), plan and strategies.
carriers.