This week, why the future of aviation is looking brighter after a punishing year. Plus, building affordable housing in Indonesia, and an expert who works with young people on what makes an effective mentor. |
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As spring blooms for many of us, thoughts turn to spring and summer getaways, whether near or far. And the travel industry will be thrilled to accommodate you: more than a year into the COVID-19 pandemic, the industry has been affected in profound ways—perhaps none more so than airlines, which saw 2020 revenues total just 40 percent of the previous year's take. As we look ahead to the sector's recovery, here are some noteworthy developments influencing the future of air travel. |
Leisure or business? Despite a recent uptick in flying demand and news that the European Union will welcome vaccinated American tourists this summer, airlines are still operating from a deficit. Last August, the global volume of air passengers declined by more than 60 percent compared with the same period in 2019. Additionally, with companies tightening their budgets, we project that business travel will rebound to only about 80 percent of precrisis levels by 2024. Since leisure travel will likely make a faster recovery, airlines should reexamine pricing and operations, particularly for long-haul flights. One example is to potentially narrow the gap between premium pricing for nonstop flights and flights with layovers, since vacationers tend to be more price sensitive. |
Staggering sums. According to the International Air Transport Association, the industry took on more than $180 billion in debt in 2020. By 2024, our analysis reveals, industry debt could actually exceed revenue. Recouping losses will likely lead to ticket-price increases—probably on the order of about 3 percent. Moreover, as governments have stepped in to offer help in the form of bailouts, airline executives should expect to work more closely with government officials. A collaborative mindset will help airline leaders shape the future of the sector. |
Fuels of the future. In addition, airlines face longer-term change due to demand shocks, industry consolidation, and other factors. This presents an opportunity for forward-thinking airlines to lead the way toward a low-carbon future. With mounting pressure from the flying public and investors, some carriers are investing billions of dollars to increase fuel efficiency by modernizing fleets through the use of lighter-weight materials. Sustainable aviation fuel (SAF) also holds promise for a greener future, cutting carbon emissions by 70 percent to nearly 100 percent when compared with kerosene. Targeted investments and purchase commitments could increase demand for SAF use while keeping costs down. |
Big market, big test. In China, where airfares have nearly rebounded to precrisis prices, our latest survey of travel sentiment indicates that while confidence is generally high, the Chinese travel industry is experiencing an uneven recovery. This year, China's air traffic declined 45 percent compared with the year prior, and flights were, on average, only about 60 percent full. And while domestic travel recovered more than 80 percent in late 2020, demand for international travel remained low and stagnant for most of the year. |
Cautious optimism. Despite these challenges, some optimism is returning to the airline industry as more people are vaccinated and travel increases. Its path to recovery is not likely to be a straightforward one but rather a story of continued change and disruption. The way forward will be smoother for those who pursue operational efficiency while working with critical stakeholders and responding nimbly to consumer trends. |
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INTERVIEW |
In Indonesia, making homes affordable for all |
Pahala Mansury, Indonesia's deputy minister of state-owned enterprises, recently spoke to McKinsey about his work making home financing more accessible to low-income earners at BTN, where he formerly served as a president director. The Indonesian bank played a critical role in increasing homeownership in the country; in 2015, the government's “One Million Houses” initiative resulted in the construction of more than three million housing units by 2019. “Other countries realize that housing is a form of wealth distribution,” Mansury told us. “When people can own a house, they are participants in a very important asset class,” he added. |
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FOUR QUESTIONS FOR |
Carlos Lejnieks |
As a leader of the Newark, New Jersey-based chapter of Big Brothers Big Sisters of America, Carlos Lejnieks oversees an organization whose adult staff and volunteers support more than a thousand school-aged children, nearly all of whom are from low-income backgrounds. He spoke to McKinsey about the many ways that mentoring matters.
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As an organization, how do you frame the mentor's role? |
This is a life thing, not a job thing. Kids need critical supports—school-based supports, family supports, social supports—that go beyond the classroom. Nationally, Big Brothers Big Sisters has been a component of that for a hundred years. We're not a silver bullet but part of a solution. We try to provide more stability in our kids' lives. Many have the benefit of strong parents, strong guardians, strong family members. We try to support them in school, at home, and in the delta between the two. If there's an x-factor in that equation, a variable—maybe it's some personal trauma or the temptation of joining a gang that could derail them—we try to redirect it by having a regular, stable, committed, positive adult present. |
What can the kids' backgrounds teach leaders about mentoring? |
People, if they are honest, vulnerable, and self-reflective, know they've felt what our children feel. At some point, they weren't college graduates, they weren't career professionals. At some point, they've looked to their right and left and said, “I don't know if I belong here.” There's an empathetic line that cuts through it all and where a mentor can have an enormous impact. You count your blessings when you've overcome all that and blossomed and manifested your potential, but if you look back, we've all had that feeling. That's where our kids are. |
What lessons for business leaders come from these exchanges? |
Our [adult volunteers and the kids they work with] test truisms for leaders in corporate settings every day: the value of empathetic listening, of commitment to growth and development. Research shows that nearly half of millennials who describe themselves as disengaged at work strongly agree that they will change jobs if the job market improves in the next 12 months. The churn has a cost: constant training, onboarding, departing, repeating. Their decision about where to go, or whether to stay, is often driven by how they view a company's corporate social responsibility. Mentoring facilitates really good dialogue. Managers who get that will keep their teams for longer, increasing employee tenure and productivity and building a more diverse talent pipeline. So mentoring is a noble cause, but it's also a business imperative. Younger employees demand it. |
What should a good mentor focus on? |
Care is the biggest thing, but the through line is commitment, consistency, and communication. There's a commitment to honoring the child, or honoring your staff, and committing to building a relationship. If [an adult volunteer] has to cancel a meeting with their [mentee] because something in life happened, that's OK; but the commitment to meet again is important. The communication must be done in a way that's caring and that makes that child feel valued, not undervalued, and that they are not lesser in this relationship. That matters in any human exchange. You can only pull being the boss so many times before you lose the troops. |
— Edited by Belinda Yu |
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BACKTALK |
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