We sat down with Mark Hurst, Group CEO of Solenta Aviation to talk about the company and how Covid-19 has impacted the industry. We gained some great insights from across the sector as Solenta offers both cargo, charter and airline services, as well as pilot and engineer training.
Can you tell us a little about how Solenta started?
Solenta Aviation started off in late 1998, early 1999 as a DHL supplier of C208B cargo capacity in West Africa under an Aircraft, Crew, Maintenance and Insurance (ACMI) lease arrangement. DHL covered the other operating costs such as fuel and airport fees.
Over the first few years, Solenta added the ATR42 freighter for DHL too, and then two B1900D passenger aircraft for the International Committee of the Red Cross (ICRC) in West Africa.
From your original business model, which was solely based on the cargo sector, how have you branched out into different areas?
As Solenta grew in its early years, both DHL and the Solenta shareholders wanted to diversify the business away from being totally dependent on DHL. This led to our entry into the B1900D passenger segment, and we registered for work with both the ICRC and the World Food Programme (WFP). This move was the start of our passenger operations.
A few years later, we were approached to start oil and gas ACMI work for Air Express Algeria. This started with three additional B1900Ds and, at its peak, included 11 B1900Ds.
Today, Solenta’s core focus remains operating ACMI or full charter solutions for DHL, the ICRC, the World Food Programme and the oil & gas industry, as well as limited passenger and airline operations.
What are your thoughts on the state of aviation today? Prior to the pandemic, how positive did the future look for the industry?
Prior to Covid-19, the industry was robust but had crew supply constraints in the previous few years. This drove all crew salaries up significantly as more and more airlines worldwide competed for experienced crews to fly airliners for big players including the likes of Emirates, Qatar, SAA and Cathay Pacific.
In addition, aircraft manufacturers were producing large quantities of new aircraft and delivering these to airlines worldwide, pushing the costs of the leased or owned assets upwards too.
What Covid-19 has radically and very quickly done is eliminate these two main cost drivers. Today, most airlines worldwide have far too many crews, and have retrenched these and/or restructured their salaries significantly. This has reduced crew costs by probably 25% to 50%.
In addition, the . With the significant downturn in global travel, several airlines have also failed to make the necessary payments required and have had to return their aircraft to banks or lessors.
Those that managed to keep their fleets are all actively trying to reduce and renegotiate the aircraft lease costs. These factors have left aircraft manufacturers, owners and lessors, as well as financiers and banks under huge financial pressure.
What weaknesses in operations and supply chain were exposed or exacerbated by the pandemic?
A significant portion of the worldwide air cargo carriage was traditionally undertaken in the belly space of routine passenger airlines. Due to the Covid-19 pandemic, most airlines were forced to ground their operations entirely. This meant that the majority of the global cargo capacity supply also stopped.
Traditional cargo airliners had to pick up 100% of the cargo carriage initially. This drove their rates and yields up, and overall cargo carriage became much more expensive for the average consumer.
In the first few months of the pandemic, transport of PPE and test equipment was prioritised over routine daily cargo.
Due to the Covid-19 pandemic, most airlines were forced to ground their operations entirely. This meant that the majority of the global cargo capacity supply also stopped.
The first few months of the pandemic were very tough, and keeping Solenta’s operational fleet flying became increasingly challenging due to widespread logistical delays.
Fortunately, we didn’t have too many issues with getting access to parts. As most of Solenta’s ACMI work is remote, we normally hold several months’ worth of spare parts and consumables on site and traditionally restock these in batches. This allowed the overall operation to continue uninterrupted for the most part.
With regards to training and trainee pilots before the pandemic, were there many job opportunities or was the market saturated?
Prior to Covid-19, there was a global shortage of experienced pilots, which was forecast to worsen every year. This meant that demand for new, trainee pilots was high. Generally, any pilot who could pay for their own training (PPL, CPL, ATPL) would virtually be guaranteed a job in the future, with very good salaries in time.
Today, and probably for the next three to five years at least, the world will probably have an excess of trained pilots. This will, however, lead to early retirements of more senior pilots, or changed career paths as pilots are forced to adapt to the new demand cycle for crews worldwide.
Thousands of pilots across the world were retrenched last year as airlines struggled to stay in the black. Do you think this is a temporary situation or will the aviation industry remain cautious?
I think that in 2021 and 2022 most airlines will remain cautious and regrow their fleet very cautiously. Many airlines will need to recapitalise their balance sheets and cash flows and this too will lead to caution rather than expansionary behaviour. However, this statement is on a worldwide perspective, viewing the situation on a macro level.
In certain areas and countries where air carriage is a necessity, such as islands and remote areas, the situation will improve faster.
The general sentiment is that we will not see pre-Covid19 aviation levels in the next few years, and probably only from 2024 onwards.
What would your advice be to those who want to become pilots or aircraft engineers in this economy?
I think that newcomers and young people who want to become pilots and engineers in this economy should continue.
“New pilots should use this depressed time to continue and complete their training.”
It takes up to 10 years to achieve the right levels of training and to gain adequate experience required by airlines and bigger operators. New pilots should use this depressed time to continue and complete their training.
In the early stages of their careers, their salaries are limited, pandemic or not, and this shouldn’t change materially for most newcomers. New pilots and engineers will therefore not be any worse off.
What are your feelings about the short and long-term future of aviation in South Africa?
I think this disruption will be felt for a long time in the industry across the world. I think a few key airlines will still fail but, at the same time, newcomers and start-ups will feel that it’s a good time to start an airline. LIFT Airlines is a good example of this.
I don’t believe the industry will be back to normal until probably 2024 or thereabouts.
During 2021, I believe that newcomers and start-ups will further disrupt the industry, which is damaged and under pressure financially. This will create more failures.
I think the true survivors will emerge only in mid-2022. The next 18 months will remain very difficult and tough for everyone.
Airlines are offering greater flexibility with regards to ticket bookings and discounts on prices. How do you think this will affect the expectations of customers going forward? Could it make returning to ‘regular’ rates and terms and conditions at a later time more difficult?
I think all your statements and observations in this question are 100% correct and will occur. Customers will expect the total flexibility to remain available, and until real, strong demand returns, airlines will have to keep offering this to keep customers on board and loyal. The only ones to gain anything from Covid-19’s impact on aviation will probably be the customers.
Your footprint extends across Africa – what are your thoughts on how the pandemic has affected aviation on a regional level?
Our business is not a typical airline model, and we offer our customers an in-house customised airline, under our ACMI contracts, because routine airlines never flew to their locations or worked reliably.
I think our footprint will be affected by new operators targeting our existing contracts, They may have cheaper pilots and cheaper aircraft that we might not be able to secure. This is because our current employment and aircraft lease contracts were negotiated and agreed pre-Covid-19. The more expensive pricing was driven by the demand at the time.
However, I believe that in Africa, the stronger airlines will become stronger and expand their networks, filling the void left by smaller or weaker airlines that failed.
Finally, can you share what you think are the biggest lessons the aviation industry should take away from all this?
It’s difficult to say what the biggest lessons are because normally lessons are learnt when you perform badly or deploy a business wrongly, causing losses or failings. Covid-19 was totally different as it disrupted everything worldwide, and immediately. This was unprecedented.
That said, it has shown most businesses that they should not over-borrow for growth, and that they need to keep a strong balance sheet, with strong cash holdings for rainy days. This generally was not happening, as shareholders wanted returns and continual growth. Seeking new opportunities forced businesses to deploy excess cash or borrow more from financiers.
Going forward, I think businesses will build stronger balance sheets, take more calculated risks, and also try to not “over-compete” at all costs. Initially, less will be more.
The hopes for 2021 are that the vaccine is distributed quickly worldwide, that raw global business re-emerges and remains stable, and for growth to restart. The world economy needs this – in every sector. People need jobs, and businesses need to be open and operating again.