Globe's largest airlines fire consultants amid Coronavirus

17 March 2020 4 min. read
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The UK’s consulting market could be about to feel the impact of economic turbulence in the aviation sector, with airlines plotting to stabilise their bottom-lines weighing a cull of their external advisors. As Coronavirus and a potential economic downturn push a growing number of airlines toward administration, some are already looking to tighten their belts by scrapping their expensive consulting contracts.

The last two years have been filled with highs and lows for the airline industry. Some established players like Delta Air Lines and United Airlines have seen strong growth, customer loyalty, and new opportunities, while some budget airlines like Norwegian Air have also seen headwinds die down, stabilised finances, and put an end to a variety of maintenance debacles. At the same time, for the industry as a whole, it has been something of a bloodbath.

Following the now infamous collapse of Monarch in later 2017 – which necessitated the largest peacetime repatriation in British history of an estimated 110,000 customers left stranded overseas – however, the situation once more seems to have commenced a nose-dive in the following year. 15 airlines failed in 2018, and the crisis deepened over 2019, with the likes of Flymbi and Thomas Cook (which took Monarch’s unwanted crown for repatriation, having left 600,000 travellers marooned overseas) seeing 33 carriers fail over the course of the year – as reported by AllPlane.TV.

Global number of airlines to have failed since 2005

Administrations caused by flawed business models, bad management, and unexpected costs piled up to make the last two years a miserable affair for the aviation sector – and as none of those problems have gone away in 2020, the outbreak of Coronavirus could not have come at a worse time for many airlines. It now looks likely that there will be a sizeable cull of the sector in the coming months, with Flybe the first of what will likely be many organisations in the industry to cite Covid-19 as having played a role in its downfall.  

The UK airline operated about 75 aircraft and served more than 80 airports across Britain and Europe, but had been struggling with a decline in bookings for some time. The additional dent in bookings relating to the global Coronavirus outbreak seems to be the straw which broke the camel’s back, according to the firm’s leadership. A letter to staff from Flybe CEO Mark Anderson stated that the Coronavirus had impacted “both our shareholders and ourselves” and put additional pressure on “an already difficult situation.”

Flybe is unlikely to be the last airline pushed to breaking point by the Covid-19 pandemic. Across Europe, many players are approaching their own crisis, with Coronavirus forcing EasyJet, British Airways, Norwegian and Virgin to ground their planes, and some have already temporarily laid off staff as a result. Controversially, this has seen the private industry turning cap-in-hand to governments for aid, with many calling for public funds to bail out their mismanagement. In the UK, for example, the sector is expected to ask Boris Johnson for immediate aid of up to £7.5 billion to prevent its wipe-out.

Beyond spending public funds to resuscitate the industry, however, firms are also turning to internal cost cutting drives for salvation – and the consulting industry looks set to fall foul of this first. This is exemplified by a letter to Air France management from CFO Steven Zaat, published by Les Echo. Amid a period of sustained financial stress for the company, it announced a tightening of “discretionary” expenses such as travel and receptions, while limiting hiring and the use of consultants. Similar plans have also been announced by Delta Airways, KLM and Virgin Australia.

While advisory services usually see a brief bounce in uptake when a downturn occurs – as in anticipation of a slump many businesses engage consultants to help them find efficiency savings by downsizing staff, improving productivity, or selling off property – clients soon tighten their belts in terms of their consulting spend to further consolidate their bottom line. As the situation continues to develop, it is therefore unlikely that this will be the last hit consulting revenue takes relating to the Coronavirus, or the economic crisis it looks increasingly likely to hasten.