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WHY NOW IS THE RIGHT TIME TO BE INVESTING IN THE AVIATION INDUSTRY

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By Bhanu Choudhrie, Founder and Executive Director of Alpha Aviation Group

 

Air travel has been one of the hardest-hit industries during the Covid-19 pandemic and the IATA has estimated that airlines globally will lose more than $300 billion due to the outbreak.

As a result, many carriers have had to make dramatic spending cuts over the past year and the economic impact has put a significant strain on the liquidity buffers of airline companies.

On top of this, it will come as no surprise that successive travel bans and nationwide lockdowns acted as a deterrent for investors – with 2020 going down in the history books as one of the air transport industry’s most turbulent years to date.

However, with the aviation industry now looking to re-build as international air travel begins to re-open, it’s imperative that we see a shift in this narrative and a return to capital investment drives, so that the sector can come back stronger.

So why, despite the ongoing global economic uncertainty, is now the right time to be investing in the aviation industry?

 

Inter-industry linkages

Whilst air transport only accounts for a small share of GDP, it has strong inter-industry linkages with upstream and downstream sectors – making it a crucial part of the economy that cannot continue to be left on pause.

Without a doubt, mobility is at the core of our socio-economic fabric – it supports social connections and enables access to goods and services. Whilst there are numerous pillars of transport, the aviation industry provides an unrivalled global transportation network, creating jobs, economic growth and facilitating international trade.

In the UK alone, the ongoing crisis has resulted in a £271 billion hole in the nations finances, plunging the country into one of the worst economic recessions in recorded history. And it is by no means an exception.

The aviation industry is a crucial facilitator of much broader economic activity, and so, if we are to start to pave a way out of this unprecedented crisis, it’s crucial that the sector has the investment and support it needs to be back up and running as soon as possible.

 

New market optimism

With the vaccine roll out gaining momentum, we are already seeing airlines adding new routes, hiring new pilots and taking delivery of new aircraft. For example, just last month, JetBlue announced a new service from London to New York, PSA Airlines and Frontier Airlines are just two groups that have resumed pilot hiring, and Boeing has unveiled plans to ship half of its undelivered aircraft by the end of this year.

On top of this, domestic market activity is booming. In India, activity has come back to 85 percent and China’s domestic aviation market has rebounded following strict lockdowns early last year. With the Asian middle class predicted to increase to around 3.5 billion by 2032, this region is set to become extremely important and there will be new demands to meet.

Whilst the pandemic has thrown the aviation industry into turmoil, it has also created the opportunity for new market players to emerge by taking advantage of the voids left by their competitors. Against this backdrop, it will be the airlines and companies that invest in these future market opportunities now, that will be the ones who benefit in the long run.

 

Mitigating future pilot shortage issues

While the number of active pilots decreased significantly during 2020, according to the 2020-2029 CAE Pilot Demand Outlook, growing consumer demand and the ongoing challenge of age-based retirement are expected to drive a resurgence in demand for pilots. In fact, the report suggests that the global civil aviation industry will still require 264,000 new pilots over the coming decade.

On top of this, pilots are still required to clock up over 1,500 flying hours to receive their ATP certificate. With flight routes still restricted and numerous planes grounded, airlines and cargo operators need to re-think their pilot training strategy and innovate to ensure that they can meet the demand for new cohorts of pilots who strive to excel.

Amid this backdrop, investing in appropriate simulator training facilities and e-learning solutions has become pivotal. For example, online solutions have helped to ensure that cadet classes have stayed on track and enabled them to progress and train remotely. Moreover, by adapting to a simulator model, pilots have been able to keep on top of the legal requirements and proficiency needed to be ready to return to the sky as soon as the opportunity arises.

Whilst these tech solutions have been propelled to the forefront over the past twelve months, the market is still growing and therefore ripe for investment. Airline groups and training facilities are already working with the regulators to ensure that these training methods continue as we emerge into a post-covid era. With the digital transition only gaining pace, now is the time to invest to ensure the industry can build back better.

 

Opportunities for all

Without a doubt, 2020 was a turbulent period for airline stocks. In fact, the NYSE Arca Global Airlines Index lost more than 31 percent over the 12 month period as record industry losses were reported by several carriers. However, for an investor, this means that industry stocks are at a discount.

Looking ahead throughout 2021 and market growth is optimistic. For example, China’s aviation industry is set to recover the quickest among G-20 nations and the county’s passenger volume is estimated to reach 90 percent of pre-Covid levels by as soon as the end of July. In addition, low-cost carriers in India are suggesting that consumer demand for travel will return to pre-pandemic levels by the end of the year.

With the market now on an upward trajectory, stock prices are set to gain momentum again. So now may be the time to invest ahead of an anticipated industry boom.

 

Looking ahead

The aviation industry has taken a significant hit amid the Covid pandemic and, whilst signs of a recovery are starting to emerge, commercial aviation will still have some challenging times ahead. However, with a path out of this turbulent period in sight, it’s imperative we start planning ahead for the future and investing in the new market developments and technological advancements that will enable the industry to meet new supply and demand scenarios as they emerge. There are plenty of opportunities coming to market, now we just need to be bold and seize them.

 

Finance

WHY PEOPLE ANALYTICS WILL PLAY A PIVOTAL ROLE IN SOLVING THE FINANCIAL SERVICES INDUSTRY’S SKILLS CRISIS

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Daniel Mason, Vice President EMEA, Visier

 

Successfully guiding teams of employees through the post-pandemic landscape will not be easy for any business, but nowhere is this more apparent than in the financial services sector. Here, leaders face the formidable challenge of rebuilding working environments against the backdrop of huge industry uncertainty, caused by the most turbulent 18 months in living memory, as well as an increasingly concerning global skills gap.

In order to succeed, not only do they need to create highly compelling environments that entice new and existing employees alike, they must also work to proactively identify areas where additional improvements need to be made. Doing so will enable swift and decisive action to be taken before seemingly small issues start to have a major impact on overall business performance or staff retention.

 

Storm clouds are gathering on the horizon

It’s safe to say the financial services industry garners more media attention than most when it comes to working conditions. With well over a million people employed in the UK alone, scrutiny into key areas such as work-life balance, job pressures and pay is near constant.

In order to gain better insight into current job satisfaction within the sector, Visier recently conducted a new study focussing on how both UK employees and HR leaders feel their businesses are managing during this difficult time, and how it is affecting both current performance and future prospects. The research revealed some worrying statistics that point towards a potential avalanche of resignations in the near future, unless something is done to prevent it.

Why is this? Put simply, too many financial services organisations don’t appear to know their employees are unhappy and of those that do, most don’t fully understand the reasons behind it, meaning they can’t effectively tackle them. This article will discuss these findings and their implications in more detail, before exploring how people analytics can be used to spot key trends – both positive and negative – early, and boost employee experience/morale at this crucial time.

 

Learning new skills is increasingly important to both employees and businesses

According to Visier’s study, over half (52%) of employees in the financial services industry expect to actively look for a new job outside of their current company in the next 12 months, with almost a quarter (24%) already doing so. In light of these alarming figures, you’d be forgiven for assuming financial services organisations have failed to adapt to Covid-enforced ways of working. However, this isn’t the case at all, with the vast majority of those surveyed reporting that their companies have reacted impressively to the pandemic.

There are, of course, multiple reasons why workers may feel compelled to move on, even if they have a positive overall connection with their current employer. While each case is unique, the three most common reasons cited in the study were, perhaps unsurprisingly, ‘poor work-life balance’ (43%), ‘salary’ (33%) and ‘feeling undervalued’ (25%).

Following closely behind in fourth place was ‘not being encouraged to learn new skills’ (19%). However, there’s a growing school of thought that this has a much bigger influence on employee satisfaction than the raw data might suggest. Work-life balance and salary have always been major drivers of change, and learning new skills can go a long way towards helping workers address these by improving the value they bring, as well as boosting their overall day-to-day efficiency. The findings backed this up, with over half (55%) of employees admitting they are worried that failure to develop new skills will lead to their careers stalling.

The study also uncovered a strong feeling amongst both financial services employees and HR leaders that learning new skills is a crucial factor in the future competitiveness of their organisations.  Just 59% of employees felt confident their employer was bringing in the right people to keep pace with clients’ expectations for digital services. Meanwhile, over two-thirds of HR leaders believe that the sector’s lack of available candidates is holding back their company’s digital transformation strategy. As such, not only do employees see a lack of skills training and opportunities as a blocker to their own progression, it also presents an existential threat to the organisations they work for.

 

People analytics is playing an increasingly pivotal role

As financial services organisations continue to work through the disruption caused over the past 18 months, they need to be conscious of key factors impacting employee retention, as well as address any skills gaps acting as barriers to effective digital transformation. Investing in the right new learning opportunities and upskilling current employees will be crucial in reducing unwanted churn and ultimately boosting long-term competitiveness.

People analytics tools give businesses – in financial services and beyond – the real-time intelligence they need to achieve this, enabling them to grow and thrive regardless of what’s put in their path. Not only can people analytics help identify worrying employee trends such as disenchantment about skills training early, it also provides the insights needed to fix issues before they can significantly impact operational effectiveness.

As the data shows, employee satisfaction isn’t the only factor at play. Job happiness is also tied to whether employees believe the business is making the right decisions for their future. However, without the right tools in place leaders must operating on gut feel alone, which is rarely a good formula for success.

Every day, a growing number of decision-makers are using people analytics to uncover the key insights needed to make informed decisions regarding who to hire, who to reskill and who to promote. This is no coincidence. The move towards people analytics at scale is not a passing craze, but the acceleration of a powerful trend that’s been gathering momentum for almost twenty years. Maybe it’s time your business sees what all the fuss is about?

 

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BECOMING THE CEO: THIS IS HOW CFOS CAN SECURE THE TOP JOB

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Mark Freebairn, Partner and Head of the Board and CFO Practices at Odgers Berndtson, explains what CFOs need to do if they want to become CEOs 

 

For some time now, there’s been a very clear trend in CFOs progressing onto CEOs. It’s a trend that should come as no surprise to executive leaders. With more CEOs under increasing pressure, many CFOs have become the nominal second in command, often taking non-finance related responsibilities off their CEO’s plate.

As result, CFOs have begun playing a more strategic and commercial role which has inevitably broadened their remits beyond the finance function. With many CFOs breaking out of the traditional financial management confines, executive teams and boards have begun to realise that finance and general management are more closely aligned than they previously thought. This has given CFOs more opportunities to gain experience relevant for the CEO position. From owning P&L business units to engaging with external investors, the CFO’s evolving remit is making them likely candidates for the top job.

That’s not to say it’s a done deal for anyone who is currently a CFO. The CEO jobs market is comparatively small, CEO turnover is typically slow, and competition is intense. So below, I’ve outlined the key areas CFOs should gain experience in and the opportunities they should capitalise on if they want to compete for the CEO positions out there.

 

Mark Freebairn

Take responsibility for P&L business units 

Overseeing specific business units is a natural extension of the CFO’s responsibilities. It provides experience of managing products, costs, and revenue generation – all of which are staple requirements for the CEO role. But it also provides operational credibility internally, which will prove advantageous for any CFOs lining themselves up as a succession candidate to their own CEOs.

If possible, CFOs should take on responsibility for turning around a failing business unit. This is the fastest way of gaining commercial experience relevant for a CEO role. Particularly as economies emerge from the pandemic, boards will be looking for leaders who can demonstrate an ability to drive growth and new business despite significant internal and external challenges.

Likewise, CFOs should involve themselves in other business functions. Whether it’s procurement and the supply chain, or facilities and security, CFOs should play a role outside of the finance function in order to gain broader business experience.

 

Build a highly-autonomous finance team 

The CFO’s role within organisations and their ability to easily expose themselves to other P&L units makes them suitable candidates for CEOs. However, CFOs are only as good as the team around them. Building a high-performing finance team that can drive the day-to-day operations of the function will have several outcomes. Firstly, it will free up a CFO to take on more responsibility around the business and gain more time with their CEO. Secondly, it’s a valuable proof point that CFOs can use in any interview to demonstrate their ability to build strong teams – as a CEO, building a strong cadre of trusted executives is crucial for success.

This should be a team that can be trusted to perform autonomously, with a strong second in command that the CFO can rely upon.

 

Take on a non-executive director (NED) role 

While financial management is central to any successful organisation, CFOs still need to develop expertise outside of the function if they are to step up as CEOs. Taking responsibility for P&L business units will provide this, however it won’t provide a CFO with the same board-level perspective that a NED role will.

Taking on a NED role will not only help CFOs to understand what boards expect of CEOs but it will also provide experience of a different kind of leadership; one that is less hands on and more about guidance and mentorship.  Within the commercial sector, there are board roles among smaller quoted companies, those backed by private equity, or family owned businesses. Advisory boards and subsidiary boards are also a good option.

On the public sector side, board roles exist within organisations owned by or reporting to government. These include major infrastructure operators, the NHS, regulators, museums and other arts institutions. Likewise, a charity trustee role (while unpaid) is similar and will help to develop both a CFOs network and board skills.

Auditing, budgetary reviewing and balance sheet responsibilities are often sought after skills in non-executive directors, making CFOs ideal for these positions.

 

Take on internal leadership positions 

These types of leadership positions should be separate to the finance function and can include things like internal workstreams, strategic initiatives such as I&D and sustainability, or CSR projects. The benefit of taking on this responsibility is two-fold. It helps build necessary leadership skills and provides leadership experience. But it also showcases a CFO within the business in a leadership capacity outside of finance. The later will be beneficial for any CFOs looking at internal progression onto the CEO position.

Mentoring achieves similar outcomes. This helps build leadership skills and can lead to greater exposure around the business. What’s more, any mentee may later become a useful contact in a CFOs network.

 

Network outside of the organisation 

CFOs often underestimate the power of a personal network. Building relationships with other senior leaders will enable a CFO to generate career opportunities that can lead onto CEO appointments. While professional networks within the CFO community are valuable, networking outside of these types of environments is likely to be the most profitable for career advancement.

Any CFO looking to make the jump to CEO should build relationships with a variety of third parties. These include shareholders and brokers, investors, M&A specialists, bankers, and even lawyers. A CFOs experience and perspective can be incredibly valuable to these types of professionals so getting on their radar shouldn’t be difficult. Making the effort to build a relationship with them will pay dividends in the long run, and may lead to hearing about, or if you’re good enough, even being recommended for a CEO position.

 

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