Traditional procedures adopted by airline ticketing agencies to upgrade their business would not be gaining any meaningful advantage in this present period, not only for the high-end, but even medium-sized travel agencies in Sri Lanka operating in the current adverse economic environment.
There are many reasons for today’s air shuttle ticketing companies to re-strategize their presence in the industry. They need to evolve to stay relevant and revivify its acceleration to a money-spinning entity once more. Passengers of today are not naïve when it comes to allocating the right pricing for their desired destination-based trip, being sensible enough to resource the best deals since the traveller of today is not short of options.
Innovative approaches have paved the way for Acorn Group, a market leader in the local travel and connected industries to retain its top positioning through strategies, to ipso facto be a market leader. Acorn Group operates in a competitive industry, but is a standout, where it operates without undercutting its business rivals.
Greater traveller independence along with price transparency without excluding or decreasing passenger loyalty perks will savvy the way towards profitability to the local travel industry without leaving airline agencies in the lurch functioning in a perplexing environment.
BMD in this connection interviewed Malinga Arsakularatne, Co-Owner/CEO Acorn Group as to how enterprises in the local travel and its allied trades can create a trend to be stable rather than abandoning the industry altogether because of trying circumstances.
The Acorn Group is a leisure, travel and aviation conglomerate having its operations in Sri Lanka, Maldives, Thailand and UAE, while ipso facto being headquartered in the island. Its core business portfolio comprises aviation services, destination management, travel services and hotel & villa management. Acorn also has business interests in freight & logistics, business management services and education.
Q: The airline sector had to look beyond the pandemic to grapple at innovative realities. What sort of strategies were adapted at first?
The pandemic led to the most unprecedented and challenging era we have seen in our lifetime for many of the industries globally. The travel & aviation industry was one of the hardest-hit due to the general fear and reluctance to travel and border closures & travel restrictions, resulting in minimum international passenger travel over the past two and a half years. The industry had to take drastic measures to ensure its survival. Whilst cost-saving measures were inevitable, the aviation industry had to also look at different ways of generating revenues to ensure its long-term sustainability.
Airlines focused on the movement of cargo due to the minimum movement of passengers and went to the extent of using passenger cabins to load cargo. For many airlines, this was a first and the other players in the industry supported this initiative by sourcing charter flights to move air cargo, thereby increasing airfreight capacity which had significantly reduced due to the suspension or reduction of flights by airlines.
Flag carriers also catered to their stranded expatriate citizens by operating charter and repatriation flights to and from countries that had total border closures resulting in many businesses downsizing or temporarily ceasing businesses resulting in a requirement to retrench their employees.
Q: The aviation industry, financial woes aside, is once more emerging, specially with higher pricing of airline tickets. How is this having an impact as agents operating under such circumstances?
Airline ticket prices have soared in the recent past internationally and in Sri Lanka in particular. Prices have increased in US dollar terms mainly owing to high jet fuel prices, whilst the Sri Lankan market faces a double blow with a highly depreciated rupee.
With air ticket prices which are now quoted by airlines in US dollars increasing three to four-fold as a result, it is not realistic for travel agents to maintain the historical percentages they enjoyed as profit margins.
Profit margins of agents in percentage terms have reduced significantly and passenger volumes are low compared to pre-COVID levels. This results in lower profitability levels for the agent despite higher revenues coming from increased air ticket prices. The response of Acorn Travels (the Sri Lankan outbound travel arm of Acorn Group) to this scenario is to keep focusing on consistent service excellence to ensure that we deliver superior value to all our customers and thereby continue on the lines to build and grow our loyal customer base.
Q: As per previous statistics, it’s been proven that leisure trips and air trips made to visit family and friends aided the airline business to rebound. Would you too agree that if leisure trips increase this would outpace anticipated recovery numbers?
As per market sentiments, it seems to be a pent-up demand, particularly for leisure travel into and out of Sri Lanka, as well as globally. The travel advisories on Sri Lanka imposed by many countries are gradually being eased. Whilst a steep drop in dollar remittances and the jet fuel shortage are key constraints faced by airlines in operating flights into Sri Lanka, a quick resolution to these issues will undoubtedly result in a much faster recovery with more airlines operating and increasing frequencies to Sri Lanka, spurring leisure travel.
Q: How is our island nation handling these negative externalities?
Industry bodies from the aviation, tourism and travel sectors have identified those external issues and are taking numerous initiatives to address them. Those industry bodies are discussing key issues, especially the issues of jet fuel shortage and the dollar shortage with the relevant ministries and authorities of the government. Having said that; an overall macroeconomic solution eventually leading to healthy foreign exchange reserves would resolve most of the externalities faced by our industries.
Q: What sort of strategic groundwork sustainability is suggested by you for air connectivity which would ensure that societies will surely reap the benefits?
At present, our air cargo movements are largely focused on the US, Europe and the Far East along with high levels of transshipment cargo. Whilst near-term tactics based on existing passenger and cargo movements to and from Sri Lanka could be adopted to improve our air connectivity in the short term, a more sustainable strategy should be developed within the context of a long-term macroeconomic policy.
Such a policy would entail which industries would be prioritized for development, what would be our export and import strategy, etc. Aviation and tourism industries would play a key role within such a policy framework and in this context a strategic approach could be adopted when developing our air connectivity with different countries.
In developing such a policy, industry strategies of aviation and tourism should be aligned with each other for faster growth and more sustainable development. Mutually aligned industry strategies would encourage more inbound and outbound travel to and from Sri Lanka whilst ensuring that many sections of the society reap the benefits of economic development.
Q: Creating a sufficient pipeline undoubtedly will certainly aim to continue exploring the opportunities such as multimodality along with a greater number of passengers by introducing innovative boons to many travellers. Do you share an opinion with regard to the same?
With international travel previously being constrained for an extended period of time, we can expect an increase in demand, especially for leisure travel, over the coming months. However, the excessively high air ticket prices compared to pre-COVID levels are certainly a dampener to demand growth.
In this context, the industry could offer various incentives and promotions to encourage further travel. Whilst there are common incentives such as freebies (e.g. free stays, free meals, free excursions, etc.), bundled with holiday packages, easy payment schemes, early bird discounts, volume discounts, etc., more novel offers with high value in the eyes of the traveller such as bidding for business class upgrades, hotel room auctions, etc., would definitely encourage people to consider travel more favourably.
Q: With your expertise in this industry, where is the airline industry heading from this point onwards and how would this industry rebound, what sort of predictions do you have? Would you elaborate?
In spite of the challenges faced during the pandemic, the airlines industry has proven to be versatile. This was evident when many airlines shifted their focus from passenger transport to the transportation of air cargo when passenger travel was almost nonexistent during the peak of the pandemic. Whilst some of the travel constraints and inconveniences due to the pandemic might continue into the future, I would expect to see a strong recovery in the airline industry in the foreseeable future on the back of higher anticipated demand for business & leisure travel as well as due to the versatility of airlines which survived the pandemic with leaner and more cost-efficient operations.
Q: There are new and ambitious competitors who have entered the field. What sort of measures should be strategically relooked at maintaining market position, the potentiality of new operational models while at the same time winning shareholder and management approval?
The travel and aviation industry is driven by digital and technological innovation. Staying relevant and growing in such a dynamic industry requires us to evolve with our customers and with the external environment.
This entails not only being savvy on the digital and tech front but also being exceptional in operational excellence and customer intimacy. Thus, we focus on executing an operating model that is people-centric and supported by digital technology to deliver the best value to our customers.
The key success factors of this model would be to build a capable & engaged team and to empower our customer-facing frontline staff to create personalized experiences for our travellers. Executing this model efficiently and effectively would help us build and grow a passionate customer base for our travel and tourism services as well as the airlines we represent while remaining profitable as an organization. BMD