Master’s Thesis Contributions for Operational Change for Airlines in a COVID-19 Context - Msc Supply Chain Management

Federico Leopardi - S4081161

supervisor: dr. N. B. Szirbik

co-assessor: dr. D. J. van der Zee

January 25, 2021

University of Groningen, Faculty of Economics and Business

1 Acknowledgements

Hereby I would like to sincerely thank my supervisor, Dr. Nick B. Szirbik, and the co- assessor, Dr D. J. van der Zee, for their willingness to help and guidance throughout this project. I would like to express my gratitude to my the interviewees who participated in this project and made possible the realisation of this contribution. A special thank goes to my friends and people from the University of Groningen. The stimulating and enriching environment pushed me to perform better and assisted me during my Master studies in a global pandemic. Last but not least, I would like to express special gratitude to my parents and friends who were always there, supporting me throughout writing this thesis and my studies.

2 Abstract

At the moment of finishing this study (January 2021) the picture of the airline indus- try is bleak. Airlines have grounded most of their planes since passengers were unable or unwilling to fly. The air cargo market has shrunk to some degree and thus there is a mismatch between air cargo supply and demand (demand is bigger). Currently, most of the air cargo is carried -in most cases- by empty passenger planes. The adaptation to this new market reality has been quick, but more measures must be taken fast. A forgotten imperative is to learn how these novel solutions can be implemented in a future similar event with starvation in passengers flow. The main conclusion of this study is that the use of easily convertible-to-freight planes is a critical aspect. One of the main lessons of the current crisis is that passenger planes can be easily converted into preighters. A passenger plane that when needed becomes an almost fully loaded freighter (partially using the passenger deck, only due to loading limitations on the pas- senger cabin floor) is an extremely versatile tool to restore the missing cargo capacity. Due to the novelty of the situation, current academic research material is not yet avail- able. This study is the first step in that direction, offering results of a research based on interviews. The main effort was to find guidelines and insights for airlines, which are grouped on three main operational horizons: short-, mid-, and long-term.

3 Contents

1 Introduction 9

2 Theoretical Background 11 2.1 History and Purposes of air cargo ...... 11 2.1.1 Preighters ...... 13 2.2 The aviation market ...... 14 2.3 Previous situation ...... 16 2.3.1 Covid-19 and its effect on planning schedule ...... 16 2.4 Present situation with Covid-19 ...... 17 2.4.1 Contingency planning and crisis management ...... 18

3 Methodology 21 3.1 Data collection and analysis ...... 22 3.2 Interviews ...... 23 3.2.1 Safety manager insights ...... 24 3.2.2 Hands-on from Alitalia perspective ...... 24 3.2.3 Aircraft manufacture point of view ...... 24 3.3 Research question ...... 26

4 Cases 28 4.0.1 Role of air carriers during the pandemic ...... 29 4.1 AirItaly ...... 31 4.2 Air carriers challenges ...... 32 4.2.1 Alitalia challenges ...... 33 4.2.2 Conversion B777-300ER ...... 33 4.2.3 Long-term perspectives of the conversion ...... 36 4.2.4 Preparation ...... 36 4.2.5 Capacity and limitations ...... 36 4.2.6 Transported Materials ...... 37 4.2.7 Loading and offloading times ...... 37 4.2.8 Crew training ...... 37

4 4.3 Aircraft manufacturer expert ...... 38 4.3.1 Aircraft manufacturers and their collaborations ...... 39 4.3.2 Recommendations ...... 40 4.3.3 Manufacturers role during the pandemic ...... 42

5 Findings of the Research 43 5.1 Short-, and mid-term solutions ...... 44 5.1.1 Latent agreement ...... 45 5.1.2 Contingency planning ...... 46 5.2 Long-term solutions ...... 46 5.2.1 Passengers’ perspective ...... 48

6 Discussion 51 6.1 Managerial contribution ...... 51 6.2 Limitations of the current research ...... 52 6.3 Avenues for future research ...... 53 6.3.1 Cargo door ...... 53 6.3.2 Hydrogen transition ...... 54

7 Conclusions 55

A Cargo analysis 59 A.0.1 Winter 2019-2020 ...... 59 A.0.2 December 2019 ...... 59 A.0.3 January 2020 ...... 60 A.0.4 February and March 2020 ...... 61 A.0.5 Spring and Summer 2020 analysis ...... 62

B A380F an unfeasible model and fall of big planes 65 B.0.1 The aviation future for lessors ...... 66

C Vaccine Covid-19 67

D Applied strategies 69 D.0.1 Marketing campaign ...... 69

5 E Labour market and Social crisis 71 E.1 Renewed Market ...... 72

6 List of Figures

2.1 A modern Boeing 747-400F of Singapore airlines ...... 12 2.2 KLM Boeing 747 ”Combi” configuration layout ...... 13 2.3 KLM Boeing 747 in Combi Configuration ...... 13 2.4 KLM Boeing 747 in only passenger Configuration ...... 14 2.5 B787 (after severe loss of metal debris over the nearby city) grounded waiting for spare parts shipped via air...... 15 2.6 Fuel prices over 2019 and 2020 ...... 17 2.7 Matching risk mitigation strategies to types of risk (Hopp, 2011) . . . . . 18 2.8 IATA Airport slots allocation ...... 19 3.1 Alitalia Airbus A330 now in storage at Rome Fiumicino Airport . . . . . 21 3.2 Alitalia 777-300ER converted into a Preighter ...... 25 3.3 A grounded Boeing 737-800 Max ...... 26 4.1 Allocation of in-cabin cargo in a KLM preighter ...... 28 4.2 In-cabin cargo on ground handling operations ...... 29 4.3 In-cabin cargo goods positioning ...... 30 4.4 Neos preparing for the in-cabin cargo transportation ...... 30 4.5 Comparison between air passenger traffic and air cargo traffic ...... 31 4.6 B787 Neos during loading operations ...... 32 4.7 Inside of the ”Magnifica” Business Class of the B777 converted into preighter 34 4.8 Two Alitalia aircraft, one of them is being converted to temporary cargo plane ...... 35 4.9 KLM Boeing 747-406M with registration PH-BFT in Combi freighter configuration during loading phases ...... 39 4.10 737-300 Combi ...... 40 4.11 Aibus tweet with solution proposal on how to use their aircraft models . 41 5.1 In-cabin cargo, boxes on seats ...... 47 5.2 Passengers ...... 48 6.1 Avio-pallet loader ...... 54 A.1 FTK Shares in over the region, starting to suffer the first hit of Covid-19 outbreak ...... 59

7 A.2 Changes in China’s economic importance ...... 60 A.3 Ilyushin Il-76 Grounded in Rome FCO after heavy goods transportation . 62 A.4 International cargo belly capacity ...... 64 B.1 HiFly noew retired A380 at Fiumicino Airport ...... 65 C.1 Pfizer operator storing the Covid-19 vaccine ...... 67 C.2 Pfizer operator storing the Covid-19 vaccine ...... 68 C.3 The Boeing 747-400F of Singapore airlines with the Vaccine shipment . . 69 D.1 The use of pre-departure covid tests to avoid quarantine as marketing campaign ...... 70

8 1 Introduction

”Aviation is an important engine of the world, and will play a critical role in lifting the world to recovery from Covid-19” Ant´onioGuterres Secretary-General, United Nations

This is how Ant´onioGuterres spotlight the aviation industry in a message to the United Nations. Air cargo services transport only 1% of the world tonnage but this percent represents more than one-third of the value transported by air (IATA, 2020a). Therefore, air cargo is very important to the world economy. The purpose of this research is to find novel recommended practices in the operational process during crises like the Covid-19 pandemic. When operating an airline, the man- agement can rely on the fact that cargo demand and passenger flows are predictable, and this allows airlines to efficiently allocate their resources to meet their demand. However, in the current Covid-19 pandemic situation the cargo demand is higher than the supply of capacity given the available fleets and flyable routes. The big plummet in passengers travelling and the consequent reduction of passenger plane belly capac- ity for cargo, caused by the grounding of entire fleets of passenger planes, made new approaches to flight and cargo operations a high priority. An immediate solution is to fly cargo on passenger planes. For example, the Finnish national airline (Finnair), was one of the first to transport some kinds of boxed goods on passengers seats - besides the normal cargo belly load, in order to meet the raising demand for specific air cargo, i.e. protective equipment used on a large scale during the pandemic. Later, passenger planes with removed seats were seen operating in-cabin cargo transportation. Relative to the novelty of this situation, the lack of academic research in the area of in-cabin cargo has raised issue of the availability of reliable literature. However, it was possible to identify a gap in the literature which allowed the author to make a research in the field of resilience in air cargo and passenger transportation. This research is built on the main concept that revolves around the conversion in cargo of passenger planes either permanently or temporary. The purpose of this research is to provide guidelines related to conversions, in order to improve robustness and resilience of airlines for pe-

9 riods of disruptions that entail a drastic reduction in passenger numbers, and conse- quently passenger flights. Airlines, since the beginning of the pandemic, try to rely on their built-in robustness - i.e. the ability to get revenue from cargo instead of passengers. In fact, in the past years the cargo sector - as the whole aviation sector - was growing and it was expected to grow even more and it was expected to grow in the next decade (chain minded edi- torial staff, 2020). Airlines may see an opportunity in the pandemic period in converting their planes in freighters. However, this is a weighty decision, because at this stage because the re-conversion to passengers is typically not possible. An alternative to this passen- ger plane to cargo plane conversion, an easily bi-directional convertible plane can be a valid alternative. In the jargon of the industry, this kind of plane was named recently as ”preighter”.

How airlines responded with their reactivity in a renewed market?

This research is based on interviews with experts from three different companies within the aviation industry. Based on the insights gleaned from this empirical research and from the air cargo literature until 2020, novel solutions are investigated and analysed. More specifically, the preighter concept is elaborated from technical and operational perspectives. The preighter concept is introduced as an element of increasing airline resilience, and the study proposes guidelines for the use of the preighter operations in future as a response to (any kind of) passenger demand fluctuations. The thesis starts with a foray into the main theoretical concepts from the literature about air cargo, followed by a short presentation of the situation of air cargo in the winter and the summer of 2020. Further, the argumentation related to the research question and the chosen methodology to answer this question is presented. This is fol- lowed by an analysis of the industry, based on empirical research (interviews) made with the help of three experts in the aviation industry coming from different areas of this field. Further, the aggregated findings are presented. Finally, a discussion with suggestions for future research and limitation of the current research will then be fol- lowed by the highlight of the main contribution to conclude the thesis.

10 2 Theoretical Background

This research has new knowledge as main outcome, therefore, providing some back- ground insight is needed. First, we analyse how the air cargo market was in the months preceding the pandemic, and how the situation evolved following the period of Covid- 19 global pandemic. It is also important to understand the key players of this pan- demic (a certain kind of passenger airlines) and how they have implemented measures to achieve resilience and robustness. By presenting these first, we prepare the ground for the insights provided by the interviewees and the analysis that follows. The back- ground chapter is divided into different sections, addressing the aviation market, the previous situation- prior Covid-19 - and the present situation. The aim of this chapter is to provide an adequate base knowledge of what happened during the pandemic, how airlines have reacted, and preparing the ground for the analysis.

2.1 History and Purposes of air cargo

The origin of air cargo can be dated back to the 1920s when European airlines began transporting mostly airmail and valuable freight consignments. After the second world conflict, in the mid-1960s onward, dedicated freighters were mostly used to connect manufacturing economies (Asia, Europe and North America). In the 1970s the intro- duction of larger jet plane (Boeing 747) airlines increased the frequency by which they carry cargo on their planes. The Boeing 747 was followed by its freighter variant with the option of a hinged nose to ease loading of out-sized cargo (see fig 2.1). Further- more, the B747 ”combi” was introduced, designed to serve passenger routes with a high demand for cargo.

Variant distinction At the beginning of the commercial civil aviation and the im- provements in the wide-body planes design - which included increased belly-capacity - jets started providing a cargo capacity surplus. The airfreight market evolved, the jet planes did too. Different configurations of the same model and various alternatives were proposed. Freighter planes, ”combi” planes, QC (quick change) aircraft. Also, specialised licensed companies started to emerge worldwide for the P2F (passenger- to-freighter) conversion (Budd and Ison, 2017). This was in response to air increasing

11 Figure 2.1: A modern Boeing 747-400F of Singapore airlines freight importance in terms of revenue for airlines. Therefore, Airlines can be distin- guished in combination carrier, those carriers which transport cargo as belly-freight, operates point-to-point freight services with their cargo divisions and fly passengers. Integrated carrier, mostly air cargo division of couriers (UPS, TNT, DHL etc.). Finally, cargo-only operators, operate contract service for air cargo (e.g., Air Bridge Cargo, Cargolux etc.) (Budd and Ison, 2017). Passenger airlines usually sell remaining space in their lower deck for cargo purposes and a variant may be useful for those airlines that intend to carry cargo and passengers in large quantities, the ”combi”. The ”combi” version of an aircraft is the one specifically designed to carry both passengers and large cargo. The history tells us that the name comes from the German word Kombination- skraftwagen (combination motor vehicle), also known as the famous Volkswagen Type 2 van (Cummins, 2020). However, there is a niche of routes that do not justify an entire cargo plane, and at the same time, it is needed more space than what is offered on con- vensional a passenger aircraft. A famous ”combi” variant is the Boeing 747-400(M) (see fig 2.2) (Cummins, 2020).

Use of combi planes A ”combi” plane can carry passengers and cargo at the same time but with a cargo door mounted at the passenger cabin level so that passengers and cargo fly one in front of the other (see fig 2.3), differently than a designed passen- ger plane with the classic first class, business and economy division of the cabin (see

12 Figure 2.2: KLM Boeing 747 ”Combi” configuration layout

fig 2.4) (Bailey, 2020). Cargo has always been fundamental for airlines, and now more

Figure 2.3: KLM Boeing 747 in Combi Configuration than ever airlines (forced) differentiation of their business is proved by the creation of preighters.

2.1.1 Preighters

In recent times, after the Covid-19 breakout, the sudden boost that cargo-only flights and in-cabin cargo have made, creating a new class of planes. The preighters. The term was first used by Lufthansa in May 2020. It refers to aircraft that have been converted to carry freight in the passenger cabin. This phenomenon became increasingly more common when approaching the pandemic peak in April since the coronavirus stopped

13 passengers from travelling. The preighters have enabled airlines to use their planes that would remain unused for months, and providing an increased cargo capacity (Hardi- man, 2020a) that otherwise would remain very low (see fig A.4).

Figure 2.4: KLM Boeing 747 in only passenger Configuration

2.2 The aviation market

There are distinctive features of the aviation market that are not comparable to regular business. The main feature lies in its fast-changing nature, mitigated by careful poli- cies and decision making. An example of this is the case of the aviation reaction after the Covid-19 outbreak. Airlines around the world did not have reliable know-how to manage this crisis, and the lack of previously similar experiences had a strong impact on decision making. At the time when the outbreak had its first relevant impact on the market, airlines’ decision-makers were disoriented (Subramanian, 2020). In the last decades, the aviation domain and more specifically its air cargo share needed to tackle various challenges. One of the main challenges is plane utilisation, related to the most expensive asset of the industry. Only when a plane or a fleet of planes are highly utilised an airline can make a profit. Another challenge, the cargo rates have fallen by 30% in the last 20 years (Brandt and Nickel, 2019). According to one of the most relevant aircraft manufacturer - Boeing - and the International Air Transport As- sociation, their forecast of 2018, predicted a doubling in the air cargo traffic in the fol- lowing two decades (chain minded editorial staff, 2020). In addition, the airlines sector and the market in which they operate is very competitive.

Airfreight priorities Air cargo transport is the fastest way to transport goods from one point to another, although, it is very expensive. Due to its nature only a few cate- gories fall into the air transport modality (Vega, 2008):

14 • AOG (aircraft on ground) or perishable goods (see Figure 2.5 of the plane that received spare during extraordinary maintenance)

• Valuable goods (the reason behind is that the already high value of the goods reduces to a small percentage the transportation costs)

• DGR (Dangerous goods or unstable. e.g., Radioactive, chemicals, pharmaceuti- cal))

• Urgent goods to be transported quick (e.g., Organs, blood, etc.)

”Airfreight shipment is used for perishable goods or for high-value goods which for those, the higher transportation cost does not influence much the final cost” (Budd and Ison, 2017).

Figure 2.5: B787 (after severe loss of metal debris over the nearby city) grounded wait- ing for spare parts shipped via air.

In the research, the aim is to analyse the responsiveness and the reactions of air carri- ers (national flag carriers, private owned and low-cost airlines). National airlines tend, by definition, to connect nations in their network. Long haul destinations, in the actual situation, are the most affected, afflicting carriers is such a way to make unpredictable how in the next decade the market will react and how it will recover. About the latter, interesting approaches have been suggested.

15 2.3 Previous situation

In a fast-paced economy, predictions are extremely vital, it is the same for airlines which relied on projections of passengers and cargo demand, so that they allocate the needed resources to different branches of the network, trying to meet the demand. Indeed, meeting the demand in this field is decisive, and the airline that is capable to do that achieve the highest revenue. When the demand and the supplies are not matched there is the so-called ”procedural defect” (an expression used during an informal talk with one of the interviewee).

2.3.1 Covid-19 and its effect on planning schedule

Therefore, planning is more than a strategic necessity, in order to acquire supremacy in the market and a competitive advantage over the other airlines concerning slot rights, and larger market shares. The size of the aircraft and the routes to serve are tailored to the customers’ demands, often the demand can be influenced. Optimising the re- sources in the long term, and yet remaining competitive on a daily basis can be com- plicated, for these reasons Airlines rely on seasonal and annual projection. Hence, it is possible to allocate in the wide-body plane models, and fill them up with 300 passen- gers and their respective luggage. The rest of belly capacity is used to transport cargo, usually palletised in avio-pallets. These flights which transport both passenger and cargo are called combined flights (Brandt and Nickel, 2019). At the moment on sale, offered by the most popular aircraft manufacturer, there is the Boeing 787 and Airbus A350 for long haul flights. These planes prefer to fly on a full load in order to maximise the profits and avoid the occurrence of losses. The current aviation crisis had food for thoughts giving new light to freighter and ”combi” planes (S.V. Gudmundsson and Re- dondi, 2020). These routing habits have been disrupted by the presence of Covid-19. Due to the grounding of entire fleets, cargo belly capacity has plummeted, since more that 50% of the air cargo is transported in passengers’ planes. Moreover with the cri- sis that Covid-19 has caused airlines are in severe troubles. The cargo service must be guaranteed since it is the world’s lifeline.

16 Faced problem Therefore, airlines are now forced to cut costs and be competitive by seeking for cheap alternative solutions to stay in the market. One of the options was to fly with only cargo in bellies halving the capacity. The reasons that allowed planes to fly half-empty during the peak of the pandemic was the fuel price (see fig 2.6). In fact, fuel price is the main variable when operating a flight, and having this variable very low allows airlines to foster new economy with fewer incomes (preighters that do not optimise at 100% the resources of the aviation asset).

Figure 2.6: Fuel prices over 2019 and 2020

In the Appendix A it is possible to find an extensive analysis of the air cargo market from end of 2019 until summer 2020. It is also provided year-to-year comparison for a better understanding of the situatio of airfreight during the pandemic peak.

2.4 Present situation with Covid-19

Previously, it had never happened that airlines needed to convert their planes. Other pandemics have happened before or they lasted for a very short period of times. It is necessary to think that the 2003 SARS did not last as long as the SARS-CoV-2, there- fore not as much as transmissible as the Covid-19 and not as dangerous as it is nowa- days. Therefore, by the time that airlines were arranging their new fleet asset, the virus would be eradicated. For this, reason just waiting was the best option. In supply chain management, often it is the case of waiting for the disruption to pass, or to make an actual example, 2003 SARS was not worth to start the bureaucratic machine and con- vert passenger planes into cargo. As also confirmed by our interviewee it is logical to

17 think that airlines have put in practice a crisis management plan (designing the plan only after the event took place).

2.4.1 Contingency planning and crisis management

Differently than the crisis management plan, the contingency planning design solutions for predictable events but unlike to happen (it is not possible to design a plan for any single event possible). Moreover, in this study, the author suggest solutions for a con- tingency plan based on the experience of the aviation industry and its experts have gained over 2020 (Hopp, 2011).

Figure 2.7: Matching risk mitigation strategies to types of risk (Hopp, 2011)

Immediate solutions back in winter 2019/2020 Originally, when Coronavirus was just in the early phase and agencies did not adequately update their regulations, airlines kept running their network since it was the only way to keep valid and ac- tive their slot. However, airports were closed, border closure was happening, and most countries have decided to establish a lockdown. For this reason, a new business model had to be thought, the crisis management plan started to be developed and airlines such as Finnair, KLM, British Airways, American Airlines, and United have announced to start cargo flights only with their passenger planes, the most preferred planes are the most fuel-efficient ones so that any wast could be reduced.

18 The European Union together with the IATA have removed any obligations regarding the slot regulation, this is only valid in these special circumstances. In fact, to keep the slot rights an airline has to fly at least 80% of their scheduled routes from and to a cer- tain airport. This rule is called ”use-it or lose-it”, in the way airlines must make wise use of their slots in order to ensure the ownership also for the years following (IATA, 2020c).

Figure 2.8: IATA Airport slots allocation

A new asset A renewed capacity to adapt the resources in a different way, the preighter. Preighter is a new ”practice” introduced by airlines. It focuses on the use of passenger planes to meet cargo demand, in this way airlines achieve different objectives.

1. Use of their planes that otherwise would be grounded and it translates in con- stant (preventive) maintenance

2. Cost reduction, their use of the plane can be a way to use resources that have already been invested such as cabin crew, airport landing slots, transportation agreements

3. A favour to the community and humanity

19 4. Being robust now might be translated in the future as a renewed market with less competition, however, this is not the focus of the study but has emerged from one of the interviews this can be one of the results of these times.

20 3 Methodology

At the moment of writing (November 2020) the Covid-19 pandemic is hitting Europe and the rest of the world with a second wave, the academic material and resources at our disposal are few and it is difficult to depict the situation as a whole. This research as a main focus analyses the consequences of Covid-19 pandemic on the strategic and operational asset of global airlines. Most of the released material is about the anal- ysis of the past situation, and not enough is known to make accurate predictions. In the next sections, it will be presented the reasons behind the decision of this research approach, its strengths, who was interviewed and how the information has been pro- cessed. There is not a specific focus on the case studies, this research is based on interviews which allowed to have a larger scope, and hence, the interviewees provided specific knowledge, which can be summarised by the three operational cases. Airitaly, an Ital- ian carrier which followed closely the Covid-19 first outbreak until the day it filed for bankruptcy. After the outbreak, the safety manager was interested in the developing situation in China since December 2019. Alitalia, the Italian national flag carrier which can be taken as a perfect example of a phoenix rising from flames. During this pandemic all the aviation industry has suf-

Figure 3.1: Alitalia Airbus A330 now in storage at Rome Fiumicino Airport

21 fered, all airlines have faced challenges (some of them went bankrupt due to the scale of these severe challenges) and Alitalia is no different converting its planes to adapt to the new market (see fig 3.1. Finally, an expert in aircraft manufacturing was inter- viewed. This gave to the research important insights and fundamental details that oth- erwise, it could not have been possible to gain from the scarce resources available at the moment this research is conducted. This study addresses issues for academics and practitioners, those professionals in the field, who have questions on how the entire avi- ation world reacted to the Covid-19 crisis, and how they can react in future in case of a heavy fluctuation in the number of passengers travelling, and all the resulting conse- quences. Through such a complex and extensive work of interviewing participants from different fields with one common interest (aviation), it was possible to widen the scope and reach areas that otherwise were not at hand. This is the strength of the research, gaining knowledge and insights from various persons with the ultimate goal of deliver- ing the most comprehensive research and answering the questions in the most extensive and complete manner possible. Moreover, this is the first time a study like this is con- ducted, hence, the approach that was used shall be considered valid and innovative as the challenges the industry is facing.

3.1 Data collection and analysis

It has been stressed multiple times that this research tackles a challenge that has been faced for the first time, it also opens the way for several future research. Most of the data was retrieved from:

• Direct and indirect interviews

• Specialised press

• Articles

• Agencies publications and reports

• DSR Report

Specialised press, articles and agencies publications are the first sources of data. How- ever, the ongoing state of the pandemic does not allow to have complete up-to-date

22 data at the moment of writing. The limited access to academic reports and publica- tions has undermined the capacity to have analysis from scholars. This could be grasped as a chance for future updates and direction for researches. The second source of data is what can be concluded by the interviews, the original approach of this research helped to tackle the difficulties of a wide spectrum of possibilities. The experts from the same playground but from different areas allowed the author to see the major impacts of Covid-19 on the aviation industry, in one case also a mention has been made on the economic and social impact of the pandemic on the industry, although it is not the scope of the research. Publications in this regard include the press releases, news articles, webinars, journals, and videos that are relevant to our research. These publications will form the bulk of our initial information and our main source of secondary data. The mutual collabora- tion between the author and Dr Szirbik has been important for the grounding of this research. with data retrieved from the interviews and his elaboration, it was possible to put a solid base for the upcoming studies study. Furthermore, with the interviews and the information that I collected, he was able to compute and elaborate everything translating the findings in an agglomerated paper.

3.2 Interviews

During the research, three main actors have been asked to participate in the research. Hereby, they are listed, presenting their position in the field and company (where possi- ble to mention). It is important that this research is considered as a pioneering study. This is the first time a pandemic has hit the aviation industry so dramatically. Grounded fleets, eco- nomic loss, as well as job loss. The growth that Boeing was forecasting for the next two decades has suddenly stopped (chain minded editorial staff, 2020). The pandemic has accelerated the retirement process of big and old aircraft such as Boeing 747 and 767. Although KLM has decided to finally retire their 747 by the end of 2021, the Covid-19 has sped up the schedule, sending 747s to bone-yards. Nonethe- less, KLM has also decided that its six 747 units will be put out of service by the end of March 2020, although, three planes were taken away from storage to deliver impor-

23 tant medical equipment for the fight against Covid-19. This shows the importance that these freighters can represent in disruptive times (Times, 2020). This decision taken by KLM is also justified by the prediction made by Boeing that more than 70% of the new factory-built aeroplanes scheduled to deliver between 2014 and 2033 are forecast to be large freighters, such as the 747-8 and 777.

3.2.1 Safety manager insights

For the dynamism which is intrinsic of the research, and the constant updates it was not possible to include each little piece of news delivered every day by the specialised press. Bearing this in mind, during interviews as much as possible of the aviation in- dustry during these disruptive times was covered. The former Airitaly safety manager could provide insights concerning the new economic asset of airlines and how they re- acted to the pandemic, in the first place he was a front-liner having initiated the first protocol for Covid tracing in Europe.

3.2.2 Hands-on from Alitalia perspective

The Alitalia manager delivered hands-on knowledge. The spokesperson was a front liner as well in Alitalia. The team studied and adapted a Boeing 777-300ER to the fight against Covid-19 (see fig 3.2), the conversion introduced the writer to a very close example of a Preighter which consist in the use of passenger aircraft to meet cargo de- mand. The interviewee provided technicalities and details that allowed to depicts in a very detailed manner a world that otherwise could not have been possible to explore through the mere yet great job of the specialised press.

3.2.3 Aircraft manufacture point of view

Finally, the expert in aircraft manufacturing helped in depicting what aircraft manufac- tures have done and are doing during the pandemic, and how they cooperated with air- lines around the world. The participation of such a person provided delightful knowl- edge that otherwise would have been obscured. As stated by Embraer CEO, Francisco Gomes Neto ”Since the pandemic began, Embraer’s main concern has always been the health of its employees and partners, as well as contributing to society to overcome the

24 Figure 3.2: Alitalia 777-300ER converted into a Preighter impacts of the crisis”. This shows the commitment and the tightly interwoven relation- ship between manufacturer, airline, flying personnel and transportation of goods.

Interviewees

• Airitaly former safety manager

The airline went bankrupt in February 2020, for this reason, all the provided in- formation can be traced back to that moment. Their contribution was vital in order to compare what they have done with other airlines’ decisions. Needed to know, AirItaly did not file for bankruptcy following the Covid crisis, it was al- ready in troubles after its three 737-800 Max were grounded (see fig 3.3), and the wrong routes scheduling management was the coup de grˆace.

• Indirect interview Alitalia manager

In this reported interview, a manager revealed the technique, the details of the aircraft transition from passenger to preighter, respecting the European Union Aviation Safety Agency (EASA) guidelines

• Expert in the aircraft manufacturing

25 During this interview, the confidentiality of the details and the identity of the person involved was kept reserved. Furthermore, the analysis of the market and the possible changes that will take place after Covid-19 course.

Figure 3.3: A grounded Boeing 737-800 Max

3.3 Research question

Airlines’ convenience in buying a new cargo plane, converting their plane in full cargo (P2F) or temporarily using passengers plane for in-cabin cargo (preighters), or more, the possibility to open a cargo division to face the lack of airfreight supply. The as- sumption that the aviation market will start from scratch is the mindset used to es- tablish a new line of reasoning. In addition, it will also be developed that the aviation market is solid with inner forces that impede fast-paced progress when it comes to big investments and little return of the investment. It is then introduced the research ques- tion which aims at depicting the effectiveness of applied strategies and fining alterna- tive valid procedures.

26 RQ0: How airlines responded with their reactivity in a renewed market?

Sub-research questions

1. To what extent temporary passenger aircraft re-conversion into freighter is effec- tive?

2. How airlines can improve their responsiveness?

3. Opening a new cargo division is a proper ”passenger-flow-starvation” response?

4. How will airlines adapt their business? (Within the contingency plan)

Nowadays, the aviation market seems to be stagnant and facing a plateau. What will be learned from this experience is the capability to react promptly and leaving little space to indecisiveness.

27 4 Cases

In this section, the three cases will be extensively explained. Their main purpose is to deliver experience from the field in which this research aims to bring clarification. To the best of the author’s knowledge, this is the first time a study like this is conducted. The case of Alitalia, which has made its return to the cargo transportation for an unde- termined time, marks a turning point in the Italian air cargo economy. Although, Ali- talia is experiencing a renovation of the management asset in the middle of a pandemic. In fact, the Italian carrier is changing the name, fleet and management, after failing to find a buyer. The new Alitalia will be named ITA (Italia Trasporto Aereo) and it will have a cargo division, independently by the actual situation of air cargo demand- supply mismatch. According to the CEO, the pandemic can be seen as an opportunity to start from zero with the project of the perfect airline that in 5 years will be serving the country (Pande, 2020b) (Italy, 2020b) (Italy, 2020a). The aircraft manufacturer expert was asked to think out of the box, looking at the pro- posed suggestions and providing feedback. This was on how much an added cargo door at the level of passengers’ floor, would ease the complex and time-consuming manual loading operations (see fig 4.1). This added device may ease the cumbersome boxes loading operations, but it has to take into consideration the sunk cost of installation, designing and maintenance of an added cargo door on a passenger plane and the pos- sibility to use an added adjustment any time soon. To operate an in-cabin cargo flight

Figure 4.1: Allocation of in-cabin cargo in a KLM preighter involves many complications. Firstly, the big avio-pallets must be disassembled (see fig

28 4.2) and locate the single items, one by one, in the cabin either on the seats or on the floor (see fig 4.3).

Figure 4.2: In-cabin cargo on ground handling operations

Finally, AirItaly, former second-largest Italian air carrier went bankrupt in February 2020. It has closely followed the development of the pandemic in the air transporta- tion field, meticulously adapting their protocols, with the most recent updates on the new Coronavirus. Moreover, the interviewee reported that the airline was a pioneer in tracing passengers from China with symptoms and introducing a Covid-19 protocol, it became then clear that airlines were the lifeline of the world.

4.0.1 Role of air carriers during the pandemic

It is widely known that national flag carriers have helped nations in completing the cargo network. In fact, thanks to national carriers it was possible to keep medical equip- ment supplies, it is then necessary to understand whether air carriers should be pro- vided with a cargo division to cope with air freight difficulties. In fact, in some cases, privately owned companies have been requested to operate emergency flights, as it is the case of Neos, an Italian airline that was asked to operate flights from Italy to China. China is the country where most of the Personal Protection Equipment (PPE) is produced, for this reason, it was crucial to establish a supply line between the two countries. Neos is the first Italian airline operated these supplying flights (see fig 4.4). Neos became the first Italian airline switching from passenger airline to cargo airline only for emergency purposes and therefore, converting its fleet in a preighter fleet. The

29 Figure 4.3: In-cabin cargo goods positioning

Figure 4.4: Neos preparing for the in-cabin cargo transportation

30 high infectiousness of the Coronavirus made vital the supply of personal protective equipment (PPE). The number of items needed to protect all the medic staff around the world was extremely high. The country where most of these protectors are pro- duced was also the first one to be affected. China, before the Covid-19 outbreak, used to produce half of the world capacity, afterwards, it would produce half of the original amount, hence, reducing the supplies for the world’s hospitals. At some point the PPE demand was so high that supplies were needed as soon as possible, this is translated into air cargo.

Figure 4.5: Comparison between air passenger traffic and air cargo traffic

4.1 AirItaly

AirItaly was an Italian passenger airline which served mostly North American and Ital- ian destinations from its hub in Milano Malpensa. In February 2020 the airline filed for bankruptcy and dissolved the company. In the early stage of the pandemic, no one was aware of the consequences that such an event would have had in the rest of the world. The first Airline to raise the awareness on the new Coronavirus was AirItaly which established a protocol on its flights to curb the spread of the virus on the plane. Fur- thermore, the passenger transiting on AirItaly’s connection flights coming from China would be tracked by asking via a form with general information, origin and destination.

31 Figure 4.6: B787 Neos during loading operations

The safety manager established a tight relationship with IATA, ICAO and WHO. In the following month the airline went bankrupt, however, it stays in the records that it was the first European airline to introduce a Covid-19 protocol on board and on the ground.

4.2 Air carriers challenges

Today’s economy is closely interwoven and consequently, airfreight is the bridge that connects countries. In normal conditions around 40-50% of the cargo is carried by pas- senger planes in their belly, and the plummet in air traffic after the coronavirus out- break brought out a lack of capacity. This supply-demand mismatch is not new to air- lines. In fact, airlines foster cargo demand matching by the constant research of the market, and where the demand cannot be matched by the mere use of passenger planes with cargo in the belly, specific routes are served by predisposed freighter planes. This is the example of only a few national carriers or airlines that have the passenger branch and the cargo branch (e.g. Lufthansa and Lufthansa Cargo, Korean Air and Korean Air cargo, Eva Air and Eva air cargo), most of the cargo airlines are only cargo air- lines (e.g. Cargolux, world Bridge, cargo, cargo Air Lines). The cargo-only airlines would not be able to satisfy the demand for cargo in case the passenger planes do not transport part of the goods in their bellies. For this reason, Covid-19 has brought many

32 challenges in matching the cargo demand due to many passenger planes grounded, es- pecially wide-body used for long-haul flights. Indeed, planes are an expensive asset, for this reason during the pandemic the empty planes sitting on the tarmac of many airports around the world only encountered losses. Hence, planes started to fly, half- empty, as much as possible to make a slight profit or reduce the losses, and this yields the creation of a new freighter made from a converted passenger plane, the preighter. According to our source of information in AirItaly, the highest money income for air- lines comes from long haul flights However, if on the one hand their large fleets and long haul network can be a disadvan- tage. On the other hand, their extended network is the key to resilience for the country and for the airline, for this reasons airlines started converting their planes to operate cargo only flights.

4.2.1 Alitalia challenges

Alitalia’s financial troubles are pre-covid, however, as already shown in the past the resilience that characterises the flag carrier brought another innovation in the Italian air cargo market, a Boeing 777-300ER preighter. At the moment (November 2020), Al- italia has converted one Boeing 777-300ER, the long haul plane will be used for the transport of medical equipment. Alitalia in the past years has seen many disruptions in its business. Besides the fact that the rumbling business failures put the Italian car- rier on the breadlines, by the CEO, Covid-19 has been seen as an opportunity. Dur- ing the big plateau that other companies have faced, Alitalia could not perform worse, hence the management change and the improved fleet perspectives gave to Alitalia a new look. In the following sections, the procedure and implications of the B777-300ER conversion will be explained, all the information and the insights are retrieved from the interview with an Alitalia maintenance manager who witnessed the conversion in the first person (see fig 4.7 for the conversion result).

4.2.2 Conversion B777-300ER

The adjustments to transport cargo in the passenger cabin were made with the only purpose to allocate non-dangerous goods (non-DGR). In this way, EASA guidelines

33 Figure 4.7: Inside of the ”Magnifica” Business Class of the B777 converted into preighter have been followed, and the adjustments introduced to the aircraft are listed below:

• No fuselage changes have been made. Therefore, only pallets and boxes that can pass through the door are allocated on the floor (this introduces us to one of the suggested solutions, the added cargo door)

• Passengers seats are removed, catering galleys left in their position without the trolleys which are not displaced

• Chemical oxygen generators are deactivated (these devices provide oxygen in case of depressurisation of the cabin in case of an emergency since there is a chemi- cal reaction during the oxygen production process, their presence on board could have been hazardous)

– No passengers allowed on board and hence, it is superfluous to keep them active

– The functioning of the devices could be a hazard for the goods on-board, highly inflammable goods, therefore, non-DGR was allowed in the cabin (EASA temporary regulations). When activated, the exothermic reaction could release heat and jeopardise the safety on board

– They are activated when the internal cabin altitude is above 14.000 ft, or manually activated by the crew in the cockpit (not the chemical reaction but the compartment opening), or manually by flight attendants. The chemical

34 reaction is activated once the oxygen mask is pulled and applied on the face, as showed during safety demonstration on boards.

• Flight attendants constantly carry a personal oxygen device to use in case of de- pressurisation (there are two different oxygen implants, one for the cabin and one for the flight crew, which placed beneath the cockpit, this is only for pilots, and it is kept active)

• The safety equipment is the same as a normal flight (e.g., the number of fire ex- tinguishers)

Figure 4.8: Two Alitalia aircraft, one of them is being converted to temporary cargo plane

Future of Alitalia’s preighter For how long these changes can be pursued is hard to tell, Alitalia has a long term perspective but nothing concrete on which is possible to base the pattern and future decisions, everything relies on the developing situation of Covid-19, this opens possibilities for future research, whether this business can be feasible on the long run.

35 4.2.3 Long-term perspectives of the conversion

The B777-300ER has been chosen due to its long-range and unnecessary passenger ca- pacity (400 seats, instead of the 270 of the B777-200). The higher cabin capacity can, therefore, transport more goods, respecting the Maximum Takeoff Weight (MTOW). When converted the plane, before it was in a long-term storage hangar in Rome Fiu- micino Airport. This condition made it suitable for the actual goal. It is not clear how long it will be used and if it will ever be returned to passenger configuration. There- fore, ITA is planning to enter the market after the harsh times of Covid-19 passed with a full cargo division, this leads us to another conclusion that preighters are a way to curb the temporary crisis, it is not a permanent solution, and the easy interchange- ability of its configuration make a preighter the perfect mid-term solution. However, if intended as a possible configuration that when it is needed it can be easily used, then the management can seriously include this option in the future contingency plan for a similar disruptive event. Further, considerations will be added in the discussion.

4.2.4 Preparation

Times to prepare the plane would have been very fast if it was only about seat removal, it is an easy operation that requires a few hours. However, whilst the seat removal was quick (one shift of 6/8 hours), the real time-consuming operation was the deactivation and removal of the chemical oxygen generators. Above each seat, there is an individual and independent oxygen generator. This made very time-consuming the operations. In the organisation of the cabin with cargo nets and also the crew ”training” and the loading operations can be included in the overall time to setup a preighter.

4.2.5 Capacity and limitations

The new plane’s configuration does not allow the carrier to allocate more weight than it is already allowed by the manufacturer in the normal passenger configuration. The transition process was made by Alitalia maintenance division, this part of the company is an excellence in the field. These limitations mostly lie in regulations constraints. In fact, preighters were unregulated until the first in-cabin cargo was made by Finnair. The real limitations of preighters are the time required to setup and the regulations.

36 4.2.6 Transported Materials

In Alitalia’s fleet, the 777-300ER is the only plane which has received a special authori- sation to have in-cabin cargo. Furthermore, the only allowed material is medical equip- ment (e.g. face masks, face shields, gloves, lab coats), no other type of goods are al- lowed in the cabin. At the moment these are the goods allowed, in future if preighters will be a daily reality, regulators should ease the certification process and allow airlines to transport miscellaneous types of goods, respecting updated safety standards.

4.2.7 Loading and offloading times

The loading times can vary a lot. The set-up time is reduced to the minimum due to the wide space provided by the absence of the passenger seats. Moreover, the trans- ported material (kind, weight and volume) heavily influence the loading times. All the materials are located in the cabin by manual operations. The interviewee could not provide a standard loading time for the B777-300ER for the in-cabin cargo loading op- erations, since they remarkably vary according to the workforce used and the number of goods allocated onboard. As a rule of thumb, the material transported should fit on the passenger seat and not heavier than 77Kg. Therefore, the loading and offloading operations are extremely time-consuming, the boxes handling is very laborious requir- ing a vast workforce. The loading would be executed via the normal passengers’ door, and allocating one by one each box on the seat, therefore, the door size imposes the di- mensions that the goods container can have. As it will be seen later on, by the analysis of the possibility of a cargo door mounted at the level of the passengers’ cabin so that the operations would be eased.

4.2.8 Crew training

The cabin crew did not need new major training, it was just needed a refreshment of the airline’s practices and safety procedures adjusted to the new configuration

• Pilots were already trained for the plane model, however, they had a brief course on Dangerous goods regulation (DGR)

• Flight attendants

37 – Two-days course on DGR and rules of conduct

– Refreshment on cabin management adapted to the absence of passengers and the surveillance of the goods

– The downsizing of the cabin crew to three members (AFT, MID, FWD). They check the entire cabin every 20 minutes to minimise any risk of smoke and fire.

4.3 Aircraft manufacturer expert

The person interviewed was asked to analyse the actual situation about airlines re- sponding to the crisis by the use of preighters. It was confirmed what the AirItaly safety manager told us: ”the use of cargo planes is valid, although, it can be just a con- tingent plan and for a permanent solution (full cargo) better data and analysis must be required”. The planes now flying have not been converted in cargo, they have been adapted to the in-cabin cargo transportation (preighters) which does not include DGR. A conversion into full cargo conversion would take months, even years to change the configuration and adapt a passenger plane to full cargo. Fire suppression systems are needed also in the upper deck, fire detectors, heat detectors and CO2 detectors, includ- ing the smoke detectors. All these devices have been temporarily substituted by the use of flight attendants or loadmasters - the people who take care of the proper loading and allocation of the goods on board - during the flight. Furthermore, in planes’ holds there are fire suppression systems which allow the cockpit crew to extinguish the fire in case it will happen to have it on board. The mere seat removal does not make a plane risk proof, for this reason, the European Union Aviation Safety Agency (EASA) gave a mere extension, to the regulations concerning cargo transportation. In this extension airlines are allowed to transport non-DGR goods in the cabin after the seat removal, for no longer than eight months, unless a major modification will be made. Moreover, the goods on board must not be for any lucrative scope (only PPE which of course cre- ate revenue but cannot be compared to the Mozzarella di Bufala campana IGP trans- portation). The EASA published guidelines on the modifications to be made in case the airline would need to transport in-cabin cargo, but still it only includes non-DGR and medical equipment mostly. Again we feel it is necessary to ease the regulation pro-

38 cess. Moreover, aircraft manufacturer support and supported airlines during the pan- demic, in this way they could provide actual help in the provisional new configuration.

4.3.1 Aircraft manufacturers and their collaborations

During the interview, the possibility of adding a cargo door at the cabin level has been analysed. One of the options which so far has been avoided is the use of an additional cargo door at the passenger cabin floor. Usually, passenger planes have section intended for specific jobs. The belly of the plane transports the passengers’ suitcases, and even- tually cargo when the holds capacity and/or the maximum take-off weight is not ex- ceeded. Moreover, at the passenger cabin level, it is allowed only the presence of the cabin crew, passengers (and their handbags) and in some cases (nowadays very rare cases) in the back of the plane there is additional cargo. The cargo door would require a broader action in terms of engineering operations and regulatory. This is something that must be planned.

Figure 4.9: KLM Boeing 747-406M with registration PH-BFT in Combi freighter con- figuration during loading phases

39 The cargo door The cargo door would be optional that airlines or lessors can re- quire at the moment of purchasing a new model. In the solutions proposed there is also increased cooperation between lessors, airlines, and manufacturer. This additional de- vice would ease the in-cabin cargo loading and transport operations that nowadays are complicated by many constraints. Therefore, the expert argued that yes, the door can be useful but the augmented weight, the higher initial purchasing cost, maintenance and all related expenses could con- tribute to not make the implementation worth. Although, easily convertible planes al- ready exist such as the Boeing 737-200QC with panels dividing the two compartments -passengers and cargo- on the same level. The principle of functioning is the same as the KLM Boeing 747-400M (see fig 4.10).

Figure 4.10: 737-300 Combi

4.3.2 Recommendations

This pandemic must be a red flag and help airlines to prepare better for another dis- ruptive event which severely influences passengers number across the continents, prepar- ing contingency plans, such as contracts with long-term parking, ready to be converted planes (into preighters), and for the more advanced phase when the recovery seems to

40 be in sight also marketing campaigns in which safe flying is promoted. All the tech- niques and innovative solutions are contingency measures that will be valid in the next similar event that will take place in other 50 or 70 years. Therefore, the investment might not be justified by the imminence of a disruptive event, despite being just a mat- ter of time when the next severe disruption will happen. A contingency plan takes into considerations possible disruptions in the supply chain -with a low likelihood of hap- pening but severe consequences- finding ways on how to acquire the required resources that are needed. On the other hand, many planes are either not being used or retired because of a demand lack. For this reason, says the interviewee, lessors could need an alternative use of passengers plane that will be returned to them or to the manufac- ture, or in the best-case scenario, at the end of the aircraft life cycle, to a boneyard for scrapping. Now airlines have learned the lesson and supposedly the next pandemic bringing turmoil in the industry might be partially contained by refined practices.

Figure 4.11: Aibus tweet with solution proposal on how to use their aircraft models

41 4.3.3 Manufacturers role during the pandemic

Aircraft manufacturers supplied to carriers and operators, different adaptions for their planes that could be made, without providing real manuals for the adjustments. A highly cooperative network has been established between lessors, manufacturers and airlines (see fig 4.11. Airlines place the order, lessors purchase and manufacturer pro- duce the aircraft that months or years after is delivered. The major aircraft manufac- turers (Boeing, Airbus, and Embraer) provided these suggestions, that considering the difficult times the entire aviation economy was facing, were provided with the only in- tention to help the recovery without any for-profit aim. It can be an exemplary exam- ple of Embraer that provided a guide on how to configure their aircraft and make easier the Covid-19 vaccine transportation. In the Appendix C, it is possible to see an analy- sis of the Covid-19 vaccine transportation (Curran, 2020). Furthermore, different classes of preighters have been described by the aircraft expert:

1. Simply allocating the cargo on the seats

2. Allocating the goods on the seats and in the overhead compartment

3. Removing the seats and allocating the goods on the floor

4. removing the seats and allocating the goods on a pallet positioned on the floor

5. removing the seats and allocating the goods on a pallet positioned on the floor and in the galley compartments

42 Short-Term Mid-Term Long-Term Cargo only flights Preighters (non-converted aircraft) Operations Charterisation of Flag carriers Airlines Lessors agreements Contingency Grounding Open cargo division Plan Parking areas pre-agreements Regulatory Facilitation Fly to keep licensed personnel HR Use of human personnel (Un)paid leave (Labour market/social crisis avoidance) Financial Aid Economics Marketing Campaign

Table 5.1: Airlines Contingency Plan, results from the info retrieved during the inter- views 5 Findings of the Research

The findings are here listed in form of a table as the result of interviewees’ insights (see 5.1). This is a research, based on interviews, and given its peculiar nature it can be considered as an added value, the possibility to have a different point of views from different perspectives, on the same matter. The findings are divided into three main categories: short-, mid-, and long-term. In these categories there are also sub-categories (Operations, HR, Economics), here we posit a suggestion for future research, to study on these sub-categories. The main scope of this research is to analyse and find a solution and provide opera- tional suggestions to be best prepared after 2020. It is only a matter of time that an- other disruption is at the horizon, concerning starvation of the passenger flows. What emerged from the interviews and from the table 5.1 airlines have exploited prac- tices, that together with air carriers responsiveness helped answering RQ0, here are listed the way on ”how airlines responded with their reactivity in the new market” (generated by Covid-19:

• Operations

– Preighters

– Charterisation of flag carriers

43 – Latent pre-agreements (parking zones, lessors and manufacturers)

– Grounding

– Cargo only flights

• HR

– Regulatory facilitation

– Fly to keep licensed personnel

– Use of human personnel

– Financial Help and (un)paid leave

• Economics

– Financial aid

– Marketing Campaign

5.1 Short-, and mid-term solutions

During one of the interviews, the following statement was declared:

”The constant attempt to prove resiliency does not pay, it is rather a tortured way of fostering it and a weighted decision must be taken regarding planes conversion”

After the disruption, an immediate response can be the grounding of the fleet, this is what emerges from the interview and according to the author’s knowledge, this can be the first attempt to curb losses. However, it must be preceded by deregulation of slot rights. The temporary aircraft conversion in preighter is a mid-term perspective (or long-term as well if included in the option of opening a cargo division). The for- mer safety manager declared that since the beginning of aviation, due to its nature, air transportation of passenger and goods requires a careful optimisation and allocation of resources. Placing goods on the floor or on the seats (see fig. 5.1) can temporarily solve the market contraction and eventual disruptions in the network and supply chain. It is a superb resilience demonstration, however, the plane would remain partially empty and this does not lead to good use of resources. It would then be reasonable to start a

44 heavier conversion, with major adjustments and changes. This may be intrusive, and a better option would be to use already designed freighter (or preighter, but this concerns future adjustments that airlines and manufacturer have to make in their network). It is then possible to answer to RQ1 reported here:

To what extent temporary passenger aircraft re-conversion into freighter is effective?

When the Coronavirusrus first appeared the aviation industry was left alone without any background preparation (since it has been stressed that this was the first time such a disruption appeared). A first proper reaction is grounding, followed by a slow in- crease in cargo-only flights and then a subsequent conversion. This conversion that in future will be made earlier and in a faster way is due to agreements with manufactur- ers.

5.1.1 Latent agreement

In future, when a similar disruption will appear airlines could easily convert their planes if properly designed for that. In fact, if in future airlines and manufacturer will already have a plane that is easily convertible a short-term solution could be the transition (such as faster oxygen generator removal process), however, due to the complicated relationship between supplier and buyer this new design would be realised in a long- term perspective, as a latent project that will be rolled out when needed. Nonetheless, it must be taken into consideration the various implications that such an investment would bring at the management level. It is possible to partially answer to RQ2, reported here:

How airlines can improve their responsiveness?

Only if a tightly interwoven and committed relationship between airlines and manu- facturer is pursued and careful planning is performed, it then is possible to react nim- bly when disruptions occur. Long-term storage areas can seal agreements which could guarantee space for the airline that reserved in advance.

45 5.1.2 Contingency planning

Flexibility is everything when it comes to contingency planning and application of the plan itself. During the interview of the former safety manager of Airitaly, it has been asked what are the options for airlines to tackle disruptions in these difficult times and to show robustness. One solution is to reduce to the minimum the loss and strive to survive (grounding and waiting for the storm to pass) exploiting the market (using pas- senger planes with their bellies filled or ”preighters”) which in this case would include the transportation of medical equipment. Although it could be even reasonable to cease all the operation and store planes in the long-term storage (the entire fleet) waiting for better times in order to suspend the money outflow, this might be in contrast with local laws and personnel licensing. Local jurisdiction and law in force should be considered. Since in the case of forced minimum salary payment, it would then be more reasonable to fly the plane, having as only vari- able the fuel price. In addition, another issue that can be related to the Covid-19 and the consequent grounding of most of the fleet is the personnel licensing. Flight crews are not only in charge of flying the plane, they also need to keep their license valid, and to do so they need to fly. With a grounded fleet and fewer planes flying, many pilots and flight attendants cannot renovate their licenses. The use of flight simulators is the main help that can effectively help airlines. Because a well trained and certified work- force result in lower costs once the operations will return to normality ((Subramanian, 2020), (Szirbik, 2020)). A consideration regarding this short- and mid-term solutions: airlines that decide to operate in-cabin cargo while waiting for the demand to rise again can pursue that only when the fuel price is low. As already said in the background In fact, from February to May the fuel Jet A-1 price dropped and hit the dip in April (see fig 2.6). The op- erations were enabled by the extremely low fuel price, which otherwise would inhibit airlines’ fantasy

5.2 Long-term solutions

”If so many cargo airlines were needed we would have seen them a while ago”

In a long-term perspective it must be taken into account that simply transporting goods

46 Figure 5.1: In-cabin cargo, boxes on seats

(e.g. face masks, mozzarelle di bufala campana IGP, face shields, etc.) is not being a cargo airline. In fact, before making a cargo airline it is necessary to set up the infras- tructure and the skeleton structure of the company, this is what emerged from one of the interviews. If there is a room of expansion and eventually, a steady growth then it would make sense to lease or buy a freighter, instead of passing through the process of conversion from passenger to cargo, (unless the plane is fully owned). For conver- sion from passenger to cargo it is intended the process by which the plane is perma- nently made a freighter, this can be done by major changes almost irreversible. How- ever, it would take weeks, even months to complete one conversion and it has to be well planned in order to make profitable such a change because the pandemic is transient and for this reason, it is difficult to make projections in the long-term. It is possible to answer to RQ3, reported here:

Opening a new cargo division is a proper ”passenger-flow-starvation” response?

It has been declared by the interviewee that extravagant solutions such as big changes in the fleet are a mere trial of demonstration of their resilience, which nowadays with

47 the current situation cannot be done. Airlines have to focus on their core business, and different activities such as in-cabin cargo transportation are just an attempt for passing the moment.

Long-term definition Therefore, for long-term solutions, it is intended by the au- thor, the moment of writing, where airlines are now facing the plateau after the small relief of summer 2020 (see fig 5.2) - during the summer airlines could have a break from the Covid-19 regression and flew almost freely around Europe - it is necessary to wait for the last phases before the pandemic fades away. The roll-out of the Covid-19 vac- cine is the light at the end of the tunnel and airlines are already planning the schedule for summer 2021.

Figure 5.2: Passengers

5.2.1 Passengers’ perspective

One of the possible scenarios could be seen as a change in passenger travelling habits, in two ways. Firstly, it leads the market to a recession, with a strong reduction of business travellers. The safety manager, who also worked as a flight attendant, revealed that business trav- ellers are the ones who make profitable the plane ticket, and are the ones who sustain

48 the conventional airlines’ business models. During the pandemic, we all realised that it is not always necessary to travel, especially when it is possible to have a meeting on virtual meeting platforms (e.g., Google meet). On the other hand, people might be more than willing to travel, after all the constraints that have been put to tourism travelling.

Airlines Charterisation

”After Covid-19, charter flights will be back to the splendour of the 1980s and 1990s. Planes loaded with passengers craving to travel”

It will be possible to see charter flights going to attractive destinations as it was pop- ular in the 80s and 90s. Compared to normal times, this unusual moment has seen the advent of Covid-19 which followed by a drop of 80% the number of passengers. The remaining percentage of people willing or needing to fly have different necessities see fig 5.2). Airlines around the world had to fly in order to bring citizens in their coun- tries, it happens to destinations where airlines have never flown before or with an un- usual plane for the route. Alitalia started its repatriation flights going to London with a B777 usually used for long haul flights, at that time (March 2020) in service for a short-/medium-haul flight. KLM flew to Sydney which had been visited by KLM 20 years prior to the crisis. The imminent phenomena that are taking shape can be de- fined as a re-discovered charter service. It is possible to answer to RQ4, reported here:

How will airlines adapt their business?

Airlines besides scheduling their flights to popular destination, they would aggregate the demand on certain days, flying there if the demand is high enough and passengers can be influenced to change their preferences on a flying day. On the other hand, it is time-consuming too and extremely resources demanding on the planner side but ex- tremely efficient for the use of planes and crews.

Effect on passengers During pandemic times the implementation of charters re- quires constant updates about schedules and routes changes, taking into account the

49 demand aggregation and their needs. However, it has to be considered the psychologi- cal side effect of this pandemic, tourists would feel as ”pioneers” of travelling and this could lead to a contraction on the tourism sector. In fact, as revealed during one of the interviews:”just the fear of being locked in a country or the difficulties of returning to the home country could discourage travellers from moving”. In the appendix applied an analysis conducted together with the former safety manager has been reported.

50 6 Discussion

To the best of the author’s knowledge, this research is the first attempt of studying the Covid-19 impact on the aviation industry from a cargo perspective, involving the analy- sis of different areas of the same field. Contribution to the literature, managerial impli- cations and limitations, and suggestions for future research are discussed below.

6.1 Managerial contribution

This research is an aggregation of information from different sources, trying to arise an innovative point of view based on the 2020 main takeaway lessons. Considering the novelty of practices that this field has seen and how airlines were totally unprepared for this to happen, in this research focused is mostly on the newly introduced preighter, how most airlines adopted this variant and the problems of it. However, various aspects of the aviation industry have been analysed. Therefore, we can state that airlines, like any other economic activity, cannot change their core business.

Cargo and charterisation of flights Although, airlines have added a wider range of arrows in their quiver. Answering to RQ4, some airlines ceased completely classic liner passenger operation, aiming at charter operations (relying on the demand ag- gregation, and in most cases forced by the necessity of repatriation flights) and goods transportation. Other airlines, by the use of a cargo division, are trying to pass the mo- ment. But it might be useful to quote the interviewee who said that ”If so many cargo airlines were needed we would have seen them a while ago”. Opening a cargo division requires more than mere freighters, therefore, it is discouraged the initiation of a new cargo division (RQ3).

Preighter implementation

”Airlines have to wait for the disruption to pass, and in the long run they can just apply a contingency plan which does not involve investments for a future that will be different from the actual present”

The manufacturers’ inclination to design naturally-born preighters, would provide an increased operational advantage, otherwise dismissed by the cumbersome and time-

51 consuming procedures that nowadays characterises the preighter aviation market (slow loading times, slow conversion times). Agreements with manufacturers are necessary to develop together the ”perfect” preighter based on the necessities that airlines and lessors have (RQ2). The use of preighter designed on the already existing models is a mid- and long-term solution which can be put in practice. Although, airlines must be aware that preighters are not freighters and those variants must not substitute a cargo division. Therefore, airlines need to survive, in the short-term, and to apply strategies that will allow enable them to last longer such as preighter, but not as a permanent solution (RQ1).

Strategic takeaway Last-minute confidential information (January 2021) has re- vealed the Alitalia intends to further adapt to the market, with the actual conversion of more wide-body aircraft. Although the Italian carrier is getting ready in the per- spective of a long disruption, it has been excluded as a feasible option to foster a per- manent P2F conversion based on the actual cargo supply-demand mismatch. In fact, in future, when passenger airlines will not be able to satisfy the demand a temporary solution can be the conversion in preighters of their planes. Recently, cargo revenue has gone up over 100% for some airlines as many convert their passenger planes into cargo ones. Carrying freight has been the difference between survival and bankruptcy for many airlines, with demand for freight increasing this year (Pande, 2020a).

6.2 Limitations of the current research

This research was aimed at summarising the various trial and error steps that airlines have faced in 2020, especially at the beginning of the Covid-19 experience, and suggest- ing innovative solutions. Given the broad scope of the research, given the delicacy of the matter, and the still ongoing situation, this research has several limitations which can be developed in future research. First, access to companies’ data was limited. It would be interesting to investigate more in-depth into airlines documentation and data in order to provide a better implementation of the preighter. Second, if on the one hand, the strength of the research was to have a wider scope, fu- ture research can focus on the single topics that have been proposed all over this paper.

52 Furthermore, conducting a case study, supposedly interviewing several people from dif- ferent airlines. Third, a very reduced engineering background was deployed due to the author’s knowl- edge who mostly focuses on supply chain management. The hybrid study design (op- erational and engineering) allowed the author to investigate a very technical operation that this preighter operation is.

6.3 Avenues for future research

Once the problem of the supply and demand mismatch, a solution is proposed, the preighter configuration - more specifically a naturally designed preighter - but this in- novative solution involves several limitations. In the preighter configuration, the pas- senger door is a bottleneck which slows down the operations and it is also resource consuming (in term of the workforce). Possible solutions to this inconvenience are here proposed:

• A cargo door mounted at the cabin passenger level which can be tackled from an engineering perspective

• The implementation of innovative machinery during handling operations

• Hydrogen transition

6.3.1 Cargo door

Firstly, here the author states that those preighter operations heavily depend on the handling machinery and the design of future preighter, based on already existing mod- els. Current literature does not mention this field. On the long-term, it could be anal- ysed how to implement this solution without making it costly. A few options are pro- posed: a cargo door in the front part (similarly to comb planes), reinforcement on the passengers’ floor should not be needed (otherwise increased weight), easily installed/already installed fire and smoke prevention systems, easy to release the airworthiness, low price of this variant, operating costs should be as close as possible to the passenger variant”.

53 Innovative machinery The second proposed solution can be the adoption of inno- vative machinery which does not require any major adjustment on the plane to perform loading operations. Either an improved conveyor belt to load boxes or a ”door loader” with the same operating principle of conventional loaders (see fig 6.1).

Figure 6.1: Avio-pallet loader

6.3.2 Hydrogen transition

Lastly, the implementation of an APU (auxiliary power unit) powered by Hydrogen. Instead of the classic APU, powered by Jet-Fuel A-1 (the same as the engine), it could be substituted with a modular Hydrogen based implant, which could be installed through the new (eventual) developed door. This solution will reduce the use of Jet-Fuel A-1, and divert extra energy from the engines to the electric implant during the flight, and consequent reduction of air pollution. This can be the first step of transition from clas- sic fossil fuel to greener solution, reducing the footprint of the air transport (Taylor, 1997). Furthermore, the author posits a research question for the future: ”On the long run, how can passenger airlines remain efficient keeping in their fleet planes that are easily convertible? (P2F, Preighters etc.)”

54 7 Conclusions

The purpose of this study was to analyse and evaluate the feasibility of airlines opera- tional decisions during the current COVID pandemic and suggest operational improve- ments in the passenger, cargo, and the new ”preighter” based air carrier industry. By conducting research based on interviews it was possible to fill the current gap in the academic literature that given the circumstances (being early in the crisis) was not yet sufficient. Plotting the results in a table and dividing the solutions into three macro-category al- lowed the identification of the proper response based on the right timing. The solution presented by this study proposes the implementation of some short-term solution as a way to curb the contingent crisis. Based on these findings, if tight relationships with aircraft manufacturers are pursued, when Covid-19 similar event arises, leading to a starvation of the passenger flows, flag carrier airlines can immediately adapt by intro- ducing the ideas and guidelines proposed by this research. The most interesting idea is converting their passenger planes to preighters, and if the future development will allow it, using instead ”naturally-born” preighters as a temporary solution. To conclude, this paper comes at the right moment, when a pandemic is hitting the aviation industry, and when it will happen again, practitioners who want to understand more can read some of the main takeaway insights. Furthermore, it prepares the foun- dations for future research in the field, concentrating on an engineering domain or from an in-depth economical perspective, to avoid economic starvation.

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58 Appendix A Cargo analysis

A.0.1 Winter 2019-2020

A.0.2 December 2019

In December 2019 IATA released the Air Freight Market Analysis, for the first time since 2012 the air freight volume went down of 3.3%. There was a contraction in the market decreasing the volume, and with the weakest outcome since the Global Finan- cial Crisis in 2009 (GFC 2009). If we look back at the situation in December 2019, it was possible to observe a worldwide increasing tension. After three days from the new year’s eve, an American Unmanned Aerial Vehicle bombed the supreme Iranian leader, wreaking havoc in the international politics. In the year-to-year comparison, the fright tonnes kilometres contracted by 2,7%. Moreover, plummeting in volumes can be a con- sequence of the global trade war, impacting significantly trades around the world, with a slight improvement by a subdued 0,9% from 2018 to 2019. 2019 has closed in nega- tive, in addition at that time the recent outbreak of the Coronavirus in China has been foreseen to influence the data and the economic growth, what it was not known was the scale that such a virus would have had globally (see fig A.1 for the global performance trend in Flight tons kilometres)

Figure A.1: FTK Shares in over the region, starting to suffer the first hit of Covid-19 outbreak

59 A.0.3 January 2020

January 2020 has seen a slowing down of the operations, airlines and air freighter were seeking for reliable data in order to predict what it would be the market in February 2020. The rapid spread from China to the rest of the globe of Coronavirus has pushed governments to close borders and rise restrictions in order to curb the pandemic. It was the beginning of what nowadays we know as the Coronavirus pandemic, but already in the first month of 2020, the virus has caused many disruptions. When the disease hit China it was the Chinese new year holidays, when offices and factories are closed, helping to limit the spread. However, when the outbreak took place, China shared 5% of the global trade and 10% of the global manufacturing sector. This new virus was already seen as a potential disaster for the entire world (see fig A.2 China shares and remarkable importance in the global economy) China shutting down factories had

Figure A.2: Changes in China’s economic importance been weighing on the entire world’s economy, affecting the automotive industry, lux- ury goods and other products that are typically shipped by air. The Wuhan virus, as named in the IATA report, was expected to negatively affect air cargo developments. In Asia, the market was expected to be particularly exposed. In the rest of the world (Latin America and Africa) the cargo sector seemed to remain steady, nonetheless, a general downward trend has been recorded in the last weeks of January 2020.

60 A.0.4 February and March 2020

February 2020 has seen an intensification of the Covid-19 spread. A few bottlenecks and supply chain closure in Asia was soon followed by a global spread in the rest of the world. Passenger flights cancellation in Asia and then in other continents made the world’s economy real difficult to run. Large economies have recorded clusters of infec- tion such as South Korea, Japan and Italy. The goods production collapsed in China, while in Europe the pandemic was starting to damage the first countries. Together with the cancellation of passenger flights from and to China markets were heavily im- pacted. Already in February, some airlines have started operating cargo only passen- ger aircraft flights such as Neos air, the need was to move goods after that the belly- hold capacity plummeted without aircraft flying. Supply chains of the entire world had started to slow down, supplier delivery times were increased and orders lowered the ex- port volumes. These numbers reached lower values that the GFC in 2009. In March 2020 the year-to-year comparison showed a contraction of the volume by 15.2%, driven and aggravated by the weaker demand all over the global regions, as Covid-19 escalated becoming a global pandemic. As it will be seen later in the study, we contributed with some novel ideas, and proposing options to deal with the evident declined cargo capacity of the industry. Comparing the data of March 2019 and 2020, the cargo capacity declined by 22.7%. This decline was due to passenger fleet increasingly grounded. Indeed, the Covid-19 ef- fects in March have started to be perceived. Despite a steady contraction of air cargo volumes since November 2018, due to trade wars, the Covid-19 outbreak was the fi- nal blow. The Covid-19 outbreak continued to test the supply chain robustness and resilience. Companies closure and border restrictions, transportation interruptions in the network caused delays. Delays, in normal times, could be seen as a positive indica- tor. Increasing waiting times and lengthening supplier delivery times would mean that the demand is robust. However, global cargo capacity just dropped and it is disrupted as well as the entire supply chain. The spread of Covid-19 was slower towards North America and Africa, making steady the numbers until the end of March for the two continents. Passenger flights cancellation inevitably affected international belly cargo capacity, es-

61 pecially in March 2020, when the pandemic was reaching its peak. The conversion that some airlines have adopted of their passenger aircraft helped to reduce the loss of ca- pacity, nonetheless, the international belly cargo capacity declined by 43.7% comparing the data of March 2020 with March 2019. Dedicated freighter helped to increase the capacity, however, as a result, a great loss was recorded at the end of March 2020.

A.0.5 Spring and Summer 2020 analysis

In April 2020 the decline of the industry accelerated, in March 2020 it was of ”only” 14.7%, but in the fourth month of the year the fall was of 27.7%. This slow down was due to disruptions in manufacturing activities as Covid-19 reached any corner of the world. The cargo capacity kept decreasing steadily having a total capacity loss of -42%, against the 43.7% of March. Covid-19 seemed to have reached any part of the globe, with it all the restrictions, travel bans and a lockdown in any country was common by April 2020. This was even amplified by bureaucracy inefficiency goods arriving from countries with travel ban were unable to be disembarked and delivered to the needed centres. Planes were grounded, waiting for papers approval, despite being sent with supplies to help the situation in the ground (see figure A.3, a cargo plane was waiting for papers approval)

Figure A.3: Ilyushin Il-76 Grounded in Rome FCO after heavy goods transportation

62 It is known that goods and services do not always move freely among countries, even within the boundaries of good agreements between the head of the states. Most of the time countries raise walls on trade according to a different logic. It might be to protect the intrusion of foreign companies in the market and protect from competition. Or to protect the final user of the product form using dangerous materials or not certified. Other can be when it is unintended, it might be the case of complex customs proce- dures. This is what happened during the first wave of the Covid-19 pandemic, in April 2020 goods around the world were locked in airports, where all the effort put in place by airlines and logistics providers were nullified by extensive bureaucratic procedures. In the USA, as reported by the Wall Street Journal (Kate O’Keeffe and Xiao, 2020)

Chinese restrictions The Chinese export restriction affected considerably the speed at which paperwork would be elaborated. Moreover, the medical personnel had a lack of Personal Protective Equipment. This phenomenon was not experienced only in the USA but also in Europe, a perfect example can be Italy, where travelling was prohib- ited, and goods coming from foreigner countries have experienced longer waiting times due to even more complicated bureaucracy due to new Covid-19 regulations. In this way, policies aiming at contrasting Covid-19 were the cause of any delays in transportation shipments handling. In addition to that, the lack of air cargo capac- ity leads to extremely high air cargo rates and load factors. However, in May 2020 a few improvements and recovery under the aspects of cargo belly capacity, shipments handling and economic recover. Nonetheless, supply chains remained disrupted. The slight recovery could be due stabilising of manufacturing output and new export orders, whereas low available capacity levels, low cargo load factors and a slight improvement in cargo capacity increased in May 2020. For supply chains, it was difficult to recover. Lockdowns and restrictions continued to create difficulties in supply chains. Interna- tional belly cargo and freighter have seen a growth. However, there was still insufficient capacity to meet the remaining demand.

Summer 2020 Over summer 2020, the international belly cargo and freighter capac- ity had remained steady (see fig A.4). From May to June a slight downward trend was recorded, however, in August, the value returned almost at the same of April. In June

63 and July, the cargo tonne-kilometres recovered slightly, a small improvement in declin- ing speed, the slowest from February 2020. Over summer 2020 cases around the world were increasing and Covid-19 was preparing to return at the initial stage of Febru- ary/March. However, economic activity has been able to restart, with retail sales and industrial production demonstrating robustness and resilience in many countries. De- spite the slow down in the loss of cargo capacity, freighters are insufficient. In August, air cargo continued to slowly improve. The tonne-kilometre transported was down of 14.4% in July whilst in august was 12.6%, improving modestly but evenly. In August Covid-19 cases kept rising but global manufacturing and small business gained more confidence and economy continued to recover. Despite those positive signs, improve- ments in air cargo growth have been slow since May. The recent launch of the iPhone 5G and PlayStation 5 and the Vaccine, contributed to a stronger end to the year and a faster recovery but also exhausting the already fatigued air cargo supply chain.

Figure A.4: International cargo belly capacity

64 Appendix B A380F an unfeasible model and fall of big planes

Nowadays, planes are being grounded and entire fleets are still waiting to fly. Airlines are cancelling orders or delaying them, in this regard even the Arabic mammoth can- celled an order of 5 airbus A380 (?). In prevision of a bleak future for the aviation, the A380 was the model that was hit the most during the pandemic. Following the general trend of converting passenger air- craft into preighter, the aircraft manufacturer expert revealed during the interview that ”The efficiency of the Airbus A380 is already compromised by its humongous size (the biggest passenger plane), but converting it as a complete freighter is not feasible due to its body structure. The double decked airbus plane is not designed to transport cargo on the upper deck and using only the lower deck would lead to a waste of available space”. This statement confirm what airlines have been doing doing in recent times, sending to retirement the biggest and less efficient planes in their fleets. Airbus just followed the trend ending its A380 program in February 2019, with the type considered obsolete considering the airline industry’s contemporary demands (Hardiman, 2020b)

Figure B.1: HiFly noew retired A380 at Fiumicino Airport

The Covid-19 has only sped up the retirement process of big and old planes, in the first

65 category are included the Boeing 747 and Airbus A380, while in the latter category can be included all planes no more efficient and in line with more environmental concerns (Boeing 757, 767, Airbus A340). Hence, Covid-19 did not kill the A380, it just decreed its premature end. It seems as though COVID has killed the Hi Fly Airbus A380 as the airline stated the decision not to renew its contract was a direct result of the cur- rent pandemic. The demand for enormous aircraft is currently non-existent. Hi Fly will replace the A380 with an A330. The carrier says that these are smaller and more ade- quate for current market conditions (Boon, 2020).

B.0.1 The aviation future for lessors

Old retired planes have fulfilled their tasks and now they are discharged from any duty. However, younger passenger planes could be permanently converted into full freighters, as it happened to many Boeing 747 and DC-10 when the retirement age as passenger planes came. Their conversion takes months and is very expensive, it is a solution that has to be planned and with demand projections that justify such operation. Conse- quently, it cannot be done in case of a possible disruption nor in prevision of an un- lucky to happen in the near future pandemic. On the other hand, a softer operation such as the transformation of planes into preighter can turn to be useful to lessors. Contracts between lessors and airlines involve the return of planes in the same condi- tions that have been provided when the leasing started (configuration, model, type and optional). Nonetheless, in the optic that Lessors could still lease those planes as pas- sengers and convert them in case of necessity when a pandemic hits, can result to be economically convenient. So far there are not examples of so flexible lessors. As men- tioned, interviewees are sceptical that such an event will return again (soon), and by then airlines can just replicate the scheme seen in 2020 with the only difference that this time long term storage fields and operation planning will be refined, with an im- proved responsiveness through a trial and error process, ending with tested practices in case of another pandemic.

66 Appendix C Vaccine Covid-19

At the moment of writing the situation is still very critical and the operations are pro- ceeding frenetically. KLM is one of the European mammoths, and it is expecting to see passing through its hub in Amsterdam Schipol around 15 million Covid-19 vaccine doses. In normal times it would not be difficult to transport temperature-sensitive ma- terials, but the mammoth task of delivering the Covid-19 vaccine is not a simple duty. In preparing to do so it is needed to adjust KLM logistics of the operations, in fact, the vaccine requires a handling temperature of -70/80°C. KLM appears to be ready for the high volumes that in the next months will transit through Schipol Airport, it is indeed remarkable that this airport is the major hub for medic transport in Europe.

Figure C.1: Pfizer operator storing the Covid-19 vaccine

Airlines in the vaccine distribution The group KLM-Air France is expecting to transport 20% for the aggregate European vaccine demand, moreover, KLM is the first biggest airline to be fully certified for medical handling. In addition to the regular goods that airlines usually transport there will be added a new challenge. The vaccine transportation at an extreme low temperature, and the already limited cargo belly ca- pacity might undermine the efficiency of one of the most difficult logistics operations of the century. It will be needed a full cooperation between parties such as humanitar- ian organisations, pharmaceutical manufacturers and governments, including partners in supply chains. IATA has shared a guide for vaccine distribution and pharmaceuti-

67 cal logistics. The guidance has to be interpreted as a planning preparation taking into consideration the cargo effort during the peak of Covid-19 pandemic.

Figure C.2: Pfizer operator storing the Covid-19 vaccine

Furthermore, In the cargo hold it is possible to keep a temperature (the lowest) of 2/8°C, when specific handling temperature is required as it is in the case of the Pfizer- BioNTech vaccine, special containers are used. The active containers keep goods electri- cally at a low temperature by the use of embedded batteries, otherwise passive contain- ers and peculiar packaging are applied, together with the use of dry ice which consist of CO2 at solidified form, it freezes at -80°C This section has to be interpreted as an addendum, at the moment of writing (Novem- ber and December 2020) the news concerning the Covid-19 vaccine and its distribution is thrilling. On a daily base airlines join the vaccine distribution network. Singapore airlines at the end of December 2020 joined the list of airlines who will transport the vaccine. A first shipment was delivered from Brussels to Singapore on a Boeing 747- 400F, this operation was executed through a magisterial end-to-end cold chain ”Safely delivering COVID-19 vaccines will be the mission of the century for the global air cargo industry. But it won’t happen without careful advance planning. And the time for that is now. We urge governments to take the lead in facilitating cooperation across the logistics chain so that the facilities, security arrangements, and border pro- cesses are ready for the mammoth and complex task ahead” says IATA’s Director Gen- eral and CEO, Alexandre de Juniac (IATA, 2020b)

68 Figure C.3: The Boeing 747-400F of Singapore airlines with the Vaccine shipment

Appendix D Applied strategies

D.0.1 Marketing campaign

The Covid-19 pandemic is challenging air transport as it faced the difficult and still un- predictable effects of an unprecedented crisis. Many instruments have been put in place to curb the risk of contagion, such as the flow control of passengers boarding and dis- embarking, swab test, organisational measures to reduce the risk of crowding, manda- tory replacement of masks, thermal scanners, introduction of procedures of continuous sanitation. Despite this, travelling by plane is feared by tourists, even when there are no travel bans. The risk, or rather the perception of it, plays a key role. In fact, when the anxiety of limitations does not arise, airlines are faced with the problem of individ- uals’ ticket cancellations, and therefore travel reduction volumes.

Risk perception Each individual is exposed to information of different nature and, through the cognitive process, the individual processing of this information translates to the passengers’ representation of reality. In a nutshell, it happens that people - as in this case - sometimes fear activities that are not really dangerous, hence, they are not afraid of activities that could have very dramatic consequences. Risk is a quantifi- able concept; it is calculated by the objective probability of occurrence, and the mag- nitude, (i.e., the impact of the consequences). These aspects begin to be considered by

69 the communication of air transport, to reassure potential passengers, intervening on their perception of risk, through the communication of preventive strategies in order to promote safe travelling and higher transportation demand.

Covid-free flights Based on these analysis, on November 26th Neos made the first international Covid-free flight, connecting Italy and China (MALPENSA, 2020). Also Alitalia started the first Covid-free flights connecting national destinations (firstly Rome- Milan route) and then it continued to international flight, this trend widespread around the world, helping airlines to recover and keeping people flying safely. This is the per- fect representation of new tools that airlines can use in order to restore the air trans- port market and foster a renewed willingness to travel. Once the cargo market has healed and travelling people resume flying. Persecuting this way would be fundamental for airlines to achieve, since a perceived safety is an added value to the aviation indus- try which recently has suffered of many disruptions. Finding innovative ways to show resilience can be the linchpin to achieve success and incentive passengers to travel.

Figure D.1: The use of pre-departure covid tests to avoid quarantine as marketing cam- paign

Here we posit a further suggestion for future research concerning marketing campaigns to incentive travelling under the point of view of safety.

• Covid-free flights

70 • Repatriation flights in any case, whether a positive or negative result, for citizens returning to their homes

Passenger would not fear to be locked abroad, with the necessity to look for an accommodation and a place to stay.

Appendix E Labour market and Social crisis

When considering the implementation of innovative solutions in the aviation industry, it must be taken into account the consequences that this can have on the society. Con- sidering the example of the introduction of preighters, in which a perfect development would see the easy implementation of fire and smoke detector in cabin. Airlines employ many workers around the world, and the introduction of new technologies destabilise the actual balance, so do the implementation of devices in the cabin in order to main- tain hazard proof the passenger cabin during in-cargo flights to reduce the workforce on board.

Necessity of human capital In fact, if during a commercial flight, flight attendants would monitor the cabin in order to check for potential hazards, during an in-cabin cargo flights flight attendants would be needed only to detect smoke, fire or other dan- gerous situations. For this reason it might be thought to be useful to use smoke detec- tors, fire detectors and suppressor of various kinds in order to reduce the workforce and make the flight more price competitive on the market. As revealed from the interview with an AirItaly manager, such a solution would cause an enormous job loss, which momentarily could be seen as a competitive move (given the current situation with grounded fleet and the need to cut costs) but later it would develop into a social catas- trophe. If airlines fly to keep the crew licensing, they can fly also to maintain steady their workers. If introducing unmanned devices can reduce the contingent costs, and would certainly optimise the resources distribution, however, it would trigger an un- precedented social crisis. It can be seen as the example of Alitalia, a company in con- stant loss which keeps running because firing all those people would mean an increase of unemployment rate. The use of technology might compromise the job of flight at- tendants, not in normal times rather than in disruptive times where in addition to the

71 difficulties of payment reduction (flight attendant salary is based on the flying hours) they might experience job loss. The application of flight attendants for cabin surveil- lance during an in-cabin cargo can contain partially this crisis.

Airlines’ role in society airlines despite being seen as companies that have to ful- fil social obligations, airlines are for profit organisations and this means that they need to optimise their resources. However, as emerged from the interview with the former Airitaly manager we could analyse that airlines strive for keeping employees with them, trying to avoid a social crisis. It is the case of Skymark that reduces employee work week, following the contraction in passenger travelling demand, to keep people em- ployed. In fact, the low-cost Japanese carrier - which operates domestic flights- has planned to introduce a four-day workweek for the employees in the headquarter, trying to maintain low the downsizing in response to the recent downturn in travel demand, this action will be implemented by spring 2021 (Loh, 2020). This is a response that an airline has taken, and many others will follow. Concerns about the airlines capacity to survive these tough times arise, and a new market with fewer competitors is in sight. ”The airline that survive now will have a clear path in future”.

E.1 Renewed Market

Now airlines are in trouble with extreme low profits and difficulties in lowering their costs. As of December 2020, new enters in the market might find lower entering barri- ers than those ”Goliath” that are already in the market. Many lessors have seen their planes sitting on the tarmac of graveyards for long-term storage, making planes unprof- itable. Hence, new actors joining the market or willing to join can find low prices for leased planes. It leads to the newcomer’s economy where the low competition creates the field for an oligopoly led market. A few airlines are benefiting from this situation and who survives this period of time will have a vast market to grow in. The logic behind this is very basic, surviving the contingent crisis will mean wide operational space. Nowadays the airlines which are suffering the most are the ones that operate long-haul flights, this will be the sector that to recover will take the most. This open a new chapter in the marketing field,

72 it would be too broad to tackle also this issue, it is not in the intention of this study to be presumptuous and cover at 360° this crisis. Being the first time such an issue is faced (although it is similar to the aviation crisis that followed the 9/11 and the Sars in 2003, in these proportions such an event has been disruptive) it is difficult to concen- trate the focus on one specific aspect, since all of the facets are strictly related to the crisis that the aviation is passing through.

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