Airlines during COVID: SATA's link to the Azores

The current pandemic has troubled many hospitality businesses around the world. Unarguably the most affected entities by the COVID pandemic are based in the aviation sector. Business travels were suspended by all companies in March 2020 and leisure travellers had to spend their time in lockdown rather than on beaches and in cities around the world. Travel restrictions and quarantine measures let the global RPK (revenue passenger kilometre – a metric to define productivity of airlines) plummet by 66%, according to IATA. Or let us put it in terms of passengers: in 2020 1.8 billion passengers boarded a flight, compared to an astounding 4.5 billion the year before.

To mitigate the immediate effects on the airlines' financials, governments provided airlines with over 200 billion $ in state aid. Also, the Portuguese aviation sector was majorly hit by the pandemic, as the country is an important incoming market and heavily reliant on passengers travelling to Portugal. Portuguese officials reported a 70% drop in passengers flying to and from the country, higher than the global average. The two biggest commercially operating airlines in Portugal, TAP and SATA Air Açores, received governmental rescue funds in the amount of 1.2 billion € for TAP and 133 m € for SATA, to sustain their operation and keep on flying.

Nova Hospitality Club wanted to find out how a regional airline is sustaining during the pandemic and how important airlines can be for far-off locations like the Açores islands. We, therefore, talked to Luis Rodrigues, CEO of SATA Air Açores, and asked him why he believes his airline is providing crucial infrastructure for the Açores, how the airline performed in the pandemic and how his airline is planning to ramp up its operations after the pandemic.

SATA Air Açores is a regional airline based in Ponta Delgada, the capital of the Açores on the island of São Miguel, Portugal. The main business, as Luis Rodrigues told us, consists of three pillars divided into one subsidiary each. The first one, SATA Air Açores, is operating inter-island flights with regional aircraft. Those flights are mainly flown under a so-called PSO, public service obligation, agreements which are subsidised by the government of the Açores to ensure the connection between the islands. Second, Air Azores, the international subsidiary, is equipped with a modern Airbus fleet flying to mainland Portugal, Europe, and the U.S. east coast. In Pre-Covid times, the Air Azores was the connection to the world and bringing in tourists to the islands. Third, a company operating and managing five of the airports on the Açores.

Before the pandemic, both airlines operated a fleet of 13 aircraft and transported 1.7 million passengers. While many airlines entered a difficult situation due to the COVID-19 pandemic, SATA found itself in technical bankruptcy right before the virus spread around the globe, showing negative equity. Despite the absence of traffic, 2020, which was also marked as the year of takeover by Mr. Rodrigues, turned out not to go as badly as expected. After receiving financial aid from the European Commission, SATA´s employees managed to keep the firm afloat, as the pandemic made a shift in mentality possible among the airline´s staff.

The company was operating in a highly inefficient way, letting a lot of money go for, for example, planes that were too large for the number of customers available and that never made it to be of any use for the airline. By implementing several initiatives on high and low levels, SATA surprisingly obtained better results in the last quarter of 2020 that was reported in the year before, prior to COVID-19 disrupting the complete industry at a global scale. Most remarkably, SATA’s management did not need to fire a single employee.

And how was this made possible? SATA fully focused on the passenger’s convenience. It wanted to get rid of its poor reputation and sought to avoid stocks of complaints at all costs. All employees were working from home and answering their telephones from there as well – “We want to answer each customer within two hours after their complaint. Not to charge for change of dates and granting passengers the flexibility they need during these times is essential to gain their trust”, says Rodrigues. Further, ad-hoc charter flights from Madagascar, China, or Ghana were made possible during the pandemic and showed the immense flexibility of the company. Even the longest recorded flight of an A321LR was performed by SATA just recently.

Air Azores Airbus A321LR

And how does SATA plan to come back after COVID? Luis Rodrigues believes that it will be hard for SATA to be financially independent, but also points out the importance of air links to the Açores. He is hoping for more financial considerations awareness of the Açores islands officials. As of now, most islands want to have a direct flight to the mainland, which is operationally and economically not sustainable and, in the end, hurts the airline's financials with no real value for the inhabitants. For his airline, he is looking forward to tourists coming back, although new routes are not to commence any time soon. The airline plans to start the customer experience of the Açores already in the aircraft, remodeling on-board service to bring Azorean food, water, cheese, and bread to the passengers before even touching the islands’ ground.

Alexander Trinkler.

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