The Year ofDisruption

Air Travel Disruptions
Reached All-Time
High In 2016

A conservative estimate of 3 million minutes of delay for air travel in the United States and Europe crowned 2016 as “the year of disruption.”

We’ve heard it all too often: Computer systems go down for a brief period causing thousands of cancellations and taking days to recover. In addition, air traffic control (ATC) strikes, unexpected weather systems, maintenance delays that go on for hours, acts of terrorism and the occasional unruly passenger who causes flight diversions all impact travel. Air travel disruption, for numerous reasons, is an inescapable, growing problem taking place on a global basis.

Looking at disruption numbers, 2016 may go down as the year of air travel disruption. More than a million minutes of delay and over 4,000 canceled flights were recorded in Europe alone due to ATC strikes. Furthermore, in the United States, network outages at two major airlines resulted in more than 4,000 canceled flights, stranding passengers worldwide. In October, hurricane Matthew resulted in airlines cancelling around 3,800 flights. Assuming the same delay ratio as in Europe, this equates to 2 million minutes of delay in the United States and a total of at least 3 million minutes for the two continents combined.

The consequences of disruptions are unsettling: wasted productivity, disrupted businesses, missed meetings, holiday plans canceled and a loss of consumer confidence.

For airlines, there is a lot at stake as well. In terms of inclement weather and strikes, this may mean picking up the pieces of a broken network that has been scattered by disruptions. Planes are in different locations than planned, crews are no longer able to fly because they have exceeded crew-rest limits. Long hours translate into paying employees overtime rates. Frustrated customers may need to be reaccommodated, rebooked, lodged, fed and compensated. Add to this the likely tarnished airline reputations and consequences of passenger rights legislation, all resulting in higher costs, and potential of foregone future business as unhappy customers search elsewhere to meet their travel needs.

Investors have shown their dissatisfaction as well. After learning the financial impact of the outage, an analyst on an earnings call at Southwest Airlines stated, “…your priorities at the moment might be somewhat out of order. The impression is that passengers come first.”

In reply to the analyst, Southwest Chief Executive Officer Gary Kelly said, “We care about our people and then, in turn, we care about our customers. To say we’re only going to focus on the shareholders doesn’t work. It’s not sustainable. That’s who we are, and we’re just not going to apologize for that.”

How hard is it to recover from these mega-disruptions? It took four days for Delta Air Lines to get back on track after its 6-hour power outage on Aug. 8, 2016. It took three days for Southwest Airlines to recover after a faulty router and failure of a backup system caused a 12-hour system-wide outage in July. Hurricane Matthew was less disruptive as airlines were able to move airplanes elsewhere and cancel flights in advance.

Ongoing Frustrations In Europe

According to a study commissioned by A4E (Airlines for Europe), from 2010 to 2015, there was one ATC strike-disrupted day every 13 days. In total, there were 213 disrupted days during this period if taking into account the days before and after an ATC strike as flights had to be cancelled proactively in advance and accumulated delays spilt over to the next day. This resulted in 30,000 cancellations and more than 6 million minutes of delay among A4E airlines.

Taking into account reduced tourism spending, lost productivity and lower revenues, the economic impact over the six years was estimated to be €9.5 billion (US$16.6 billion), associated with 131,000 jobs, according to A4E. Unfortunately, 2016 continued this trend. The tally through September was 3,000 flight cancellations and more than a million minutes of delay.

ATC strikes in Greece, Italy, Belgium and France since March 2016 caused more than 4,000 cancellations among A4E members and far more than one million minutes of delay (more than 16,000 hours) across all airlines operating in European airspace.

Singing The Blues In France

In France alone, there were 14 ATC strikes through September 2016. The root cause of these ATC strikes were long-running disputes between the French government and ATC unions over staffing and pay, as well as general labor reforms forced on French workers. ATC unions have argued reducing the number of ATC employees risks putting the public in danger. They also claim that outdated equipment has affected their ability to meet performance targets.

On top of the ATC strikes, Air France incurred its own pilot strike for four days in June during the first days of the Euro 2016 football tournament. The strike impacted 150,000 passengers. Air France canceled 900 flights and estimated the cost at US$45 million. At the heart of the strike was pilot opposition to a restructuring plan to cut costs to help the airline compete with Europe’s low-cost carriers and other competitors.

There are numerous causes for airline disruptions, many of which are out of an airline’s control, such as air traffic control strikes, inclement weather at airports and long maintenance delays. However, most disruptions can be managed with modern technology that can significantly lessen the impact of unexpected airline events.

Terrorism

In January 2016, Air France-KLM indicated the Paris terrorist attacks that took place in November 2015 cost US$76 million in lost revenue. The airline experienced a sharp decline in air travel and hotel bookings in the aftermath of the Nov. 13 attacks in Paris.

Those attacks hit many European airlines hard, amid a tightening of security measures across the continent.

Later, following the July 2016 terrorist attack in Nice, Air France-KLM laid out a dire assessment of its business environment, warning of geopolitical and economic threats, stating that it was concerned about the “high level of geopolitical and economic uncertainty, increasing pressure on unit revenues and special concern about France as a destination.”

The high-profile bombing in Istanbul’s Ataturk Airport in June and the failed coup in July 2016 had a strong impact on Turkey’s air traffic and tourism. According to estimates by the Association of Turkish Travel Agencies (Türsab), Turkey was projected to lose between US$2.5 billion and US$3 billion in tourism revenue in 2016. Turkish Airlines showed a US$591 million year-over-year third-quarter decline in revenues, excluding load factor and currency exchange, compared to the same period a year earlier. In a statement, the airline blamed political and economic instability in Europe and the Middle East, as well as the increased perception of global and regional risks, which caused negative impact on aviation demand and placed pressure on yields. In November, the airline also grounded 30 airplanes.

Managing Disruptions

Today, most passengers have smartphones that they use to keep tabs on their flights. In addition to instant knowledge of disruptions, these tech-savvy passengers readily share their travel problems through social media.

Examples of bad travel experiences can quickly spread. As a result, airlines have learned they must be completely transparent in their communication and approach to customer service and stay on top of social media as well.

This includes investing in systems that allow airlines to provide customers with insight and assistance via mobile platforms as soon as a problem is identified, as well as self-service tools to enable passengers to effectively overcome these problems. In addition, airlines are expected to provide customers with services they expect to receive if they are disrupted, such as rebooking on the next flight, accommodation, compensation, meal vouchers and mileage credits.

When disruptions create logistical challenges, airlines need to adopt operations research-based technical solutions, such as Sabre AirCentre Recovery Manager, to help restore their networks as quickly as possible.

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