Master's Thesis Contributions for Operational Change for Airlines in A

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 industry 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 passenger 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 available. 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" AntónioGuterres Secretary-General, United Nations This is how AntónioGuterres 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 management 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 capacity 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.

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