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Managing Routes in a Downturn

Wayne Pearce
Former Chief Strategy and Planning Officer at Etihad Airways

Learning outcomes

  • How airlines think about changing routes and capacity to match demand in downturns
  • Outlook on short and long-haul travel
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Executive Bio

Wayne Pearce

Former Chief Strategy and Planning Officer at Etihad Airways

Wayne has over 40 years working in the airline industry. He spent over 27 years working for Qantas Airways, Australia’s flagship carrier, where he worked his way up as a leading revenue management executive. He then led a turnaround at online travel company Gold Medal Group in the UK before joining Etihad as Chief Strategy and Planning Officer where he was responsible for pricing, capacity and fleet management for the group. In 2012, Wayne joined as CEO of Oman’s flagship carrier before moving on to advise the CEO of Thai Airways on a turnaround plan. Read more

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Interview Transcript

How do you think consumer behavior will change for travel, in the next five years?

It all depends on whether or not there is a solution. Is there a vaccine or not? If there’s no vaccine, you’re only going to get the bravest people or those with the greatest need to travel and everybody else is going to be very conservative. We can already see, in society, that there are people who are willing to take a lot more risks than others, but the great bulk of the population is following the government’s restriction. So if there’s no vaccine and we don’t get a breakthrough on what happens when you get sick, you’ve got to think that people are going to go a lot more local. You’re probably going to start to get a lot more travel around the UK, if you’re a resident there, or the US, if you’re a resident there.

But I tend to think a lot of the more exotic destinations, like going to Africa, Far East, long-haul travel, even going to Australia, even though it’s safe, people will always be afraid, in case something happens and they can’t get back quickly.

Can you elaborate on that strategic decision. You’re at Etihad; you’re managing the network, you see travel and demand change, in routes and across the network, how do you think about managing that hub and spoke network, during that tough time?

When you’re looking at that issue, you can see that certain travel did hold up. Some of the business travel sectors, on the big blue-ribbon routes, were still okay. When you got to routes that you were trying to stimulate business traffic to and it was leisure travel buying up, that tended to fall away, because people really wanted to go for price. Everyone became extremely cost conscious.

So what happened in that situation is, to get the traffic, you had to drop your price. We were in a position that we could, in that with a big hub and spoke network, you can look for wherever the traffic is willing to come from and to and go to that market, but we did discount a lot. It really was terrifically bad, from a profitability point of view. The impact rolled on for about two years. From Lehman Brothers, a bit less than a year. It was pretty bad. But once you got through that, it did come out a lot more quickly than I thought, after about nine months, actually.

With the hub and spoke model, if you do lose a slot or a route, does that multiply the impact on your network, because you’ve reduced the number of connections?

Yes.

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