Airline industry trends

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Competitive Landscape.Occasional recessions and market crashes notwithstanding, there is little doubt that living standards for the majority of people around the world have improved steadily in recent decades.

One consequence of this improvement in living standards is that products and services that were previously the province of the rich or upper-middle-class are now available to the hoi polloi. In this regard, no industry better exemplifies the democratization of a previously-exclusive service than the airline sector, driven primarily by the rise of the low-cost carrier LCC.

Read on for an analysis of how the LCC airline industry works and how it differs from its higher-priced peers, the "legacy" airlines. In the "old days," when airlines primarily catered to affluent and business travelers, flying was an experience in itself. Airline travelers were a pampered lot, plied with food and wine by nubile stewardesses on flights that were seldom full, which frequently allowed one to stretch out on the adjacent empty seat and enjoy forty winks in the hushed passenger cabin.

While some of those benefits are still available to the relatively few who travel business or first-class, such amenities and service quality are a pipe dream for the vast majority of travelers who go economy or "cattle class". For these travelers, flying has become an experience that has to be endured, on par perhaps with a visit to the dentist's office. Air travel nowadays is characterized by overcrowded flights, inevitable delays, lengthy security procedures, noisy cabins and few freebies in the food and entertainment category.

But while many bemoan the deterioration in the quality of air travel, the number of complaints is not especially high in relation to the exponentially greater number of people who are now regular air travelers.

This is because air fares have dropped very substantially on an inflation-adjusted basis, and consumers are well aware that you get what you pay for.

airline industry trends

The tradeoff for no-frills air travel in exchange for cheap fares is one that has been widely accepted by the majority of air travelers, and for those who pine for the glamor days of flying, there's always first-class.

While the commoditization of air travel was ushered in by pioneers such as Southwest Airlines Co. LUV in the U. The Airline Deregulation Act partly shifted control over air travel from the government to the private sector and led to the termination of the all-powerful Civil Aeronautics Board CAB in December The CAB previously had an iron grip on most key aspects of the U.

The liberalization of the airline industry has yielded spectacular results.

Continuous constant

As a Bloomberg article notes, bythe number of U. The LCC revolution has spread worldwide over the past three decades, to Europe in the s and Asia in the s. The national airlines that are the flagship carriers for most countries still exist and are a significant presence in numerous European and Asian markets.

However, their decreasing clout in the face of heightened competition and the growing reach of the LCCs may make national airlines a relic of the past in the years to come. The point-to-point system, on the other hand, connects each origin and destination via non-stop flights. This provides substantial cost savings by eliminating the intermediate stop at the hub, which means the huge upfront cost in hub development can be avoided.

The major constraint of the point-to-point model is its limited geographical reach, since there are only a finite number of city-pairs for which direct flights are economically viable.

The biggest U. LCC airlines are listed below. Southwest Airlines Co. LUV : Dallas-based Southwest has been in operation sinceand operates a network of 97 destinations in the U.

It is the largest U.

Seven Trends That Will Reshape the Airline Industry

JetBlue Airways Corp. It operates from six focus cities in some of the largest U. JetBlue differentiates itself by offering the most legroom in coach class, as well as free TV, snacks and broadband Internet service on its flights.

airline industry trends

Spirit Airlines Inc. The airline's strategy is to offer an unbundled, stripped-down "Bare Fare" and make customers pay for options like baggage, seat assignments and refreshments. Allegiant Travel Co. Allegiant focuses on the U. Over this period, Southwest and JetBlue have generated total annual returns of Southwest's profitability in was hindered by the fact that it had hedged fuel costs at higher prices.

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Legacy airlines such as Delta Air Lines Inc. DAL haven't lagged either in terms of market performance in recent years.This article is a guest post contributed by one of our talented guest authors. All opinions presented in this article belong to the author alone and do not represent those of Aeronautics Online. The past ten years have seen a host of changes in the aviation industry, from airline bankruptcies to volatile fuel prices to the rise of low-cost airlines.

As the priorities and expectations of travelers and consumers begin to shift, so too will the industry. Here are only a few of the changes we can expect to see in the coming years in aeronautics and aviation, and what these changes could bring to the industry at large. Thus, more creative solutions in training and attracting new pilots have become necessary.

Bloomberg has reported that an increasing number of airlines are offering travelers premium economy seats, an option that gives passengers more legroom, better meal service, and bigger video screens. More and more passengers are willing to shell out a little more for options above economy, and premium economy offers a solution to that without incurring too much cost. While the average traveler may not be willing to shell out for a first class or business seat, the demand for better service is certainly increasing, and airlines would do well to keep their fingers on the pulse.

This growth in air passenger numbers could support over million jobs globally, from aircraft mechanics to pilots to airline executives. However, IATA warns that governments and airlines should work hand in hand to ensure the development of proper infrastructure in order to support this boom in air travel. According to the E conomistnearly one in ten international tourists is Chinese, and with the growing middle class in the region those numbers will only increase.

The IATA foresees a growth of 1 billion new passengers from China, million new passengers from India, million new passengers from Indonesia, and million new passengers from Thailand in the years leading up to Featured image courtesy of Pixabay.

Interested in submitting a guest article to Aeronautics Online?

Trends In The Airline Industry

Send an email to zanderson aeronauticsonline. Search for:. Changing Passenger Priorities Bloomberg has reported that an increasing number of airlines are offering travelers premium economy seats, an option that gives passengers more legroom, better meal service, and bigger video screens. Featured image courtesy of Pixabay Tags: aviation industry guest post industry trends.

airline industry trends

The Future Of The Boeing Letter From the Editor: In Review. Neville theme by Acosmin.Air travel can elicit strong emotions from all types of people. What are some airline industry trends for ? Air travel can conjure up a melting pot of emotions: boredom, excitement, frustration, anticipation, and many more. But when you cut through the noise and get down to the core, what are customers really looking for from the airline industry?

And what does the conversation look like? In our report on Consumer Trends forwe analyzed 8, global survey responses and thousands of social posts to find those answers for you. Right off the bat, we saw that trends and preferences vary based on airline cost. Budget flyers have different expectations than luxury passengers. Unfortunately the overarching trend for both budget and luxury fliers is negative conversation. Delays and cancelations make up an enormous part of the online chatter for the airline industry.

When you have a three hour delay and nothing but your phone to keep you company, Twitter often becomes your venting mechanism. It does mean that customer service responses are more important than ever. This flight delayed three times for different reasons and now we are delayed again upon landing. Not sure if I'll make it to my connecting flight that I already had to rebook due to delays.

Will I be sleeping in Chicago's airport terminal tonight? Stay tuned! Despite the negativity, budget flyers have plenty to say about staff that goes the extra mile when crisis strikes. For example, we found a trend of positive comments for staff who worked past the end of their shifts to help customers.

The exceptions? Respondents in Germany, Spain and Mexico. So, not only do consumer expectations vary around differently priced offerings, they also vary when it comes to geographic location. Birthdays are made for celebrating and luxury passengers are willing to spend some extra cash for the occasion.

Our data shows that a lot of positive trends in airline conversation center around birthdays.Airlines are the lifeblood of the aviation market.

When airlines succeed and prosper, the rest of the market prospers.

Economic Analysis: The Low-cost Airline Industry (LUV,DAL)

The obverse, however, is also true: a general decline in the health of airlines impacts the whole market albeit lessors have shown their ability to move aircraft quickly to where the demand is.

Exogeneous shocks aside, the fortunes of airlines tend to be restricted to certain jurisdictions during downturns, which is when lessors show their ability to move aircraft quickly from stressed situations to areas of greatest demand, managing their fleet and profitability through the cycles. Over the past decade, as the global economy has improved, airlines have grown in profitability, matured in terms of employing better capacity management and cost controls, and have benefitted from the explosion in demand for passenger air travel.

Airframe and engine manufacturers have booked orders and reported record deliveries, with plans to further push up production to historically high levels. Leasing companies are busier than ever as demand for lift continues, which is attracting many new entrants — backed by new investors — into all sectors of the leasing market, from brand new aircraft to mid-to-late-life equipment. Banks, too, are eager to lend despite impending constraints imposed by new capital regulations; commercial debt finance is more popular than ever despite the lower yields, while structured capital markets transactions are becoming more standardised and tradable as investors pile into the sector.

Airlines, lessors and banks are operating within a global environment where a multitude of exogenous factors are colliding at once presenting numerous challenges. Geopolitical threats are building. The departure of the UK from the European Union EU is categorised as a restrictive and protectionist measure that could severely impact the aviation industry there, especially in a no-deal Brexit scenario at the time of writing, an exit agreement has not yet been passed by the UK parliament.

Interest rates are rising globally, but particularly in the US; this impacts currencies as a higher US dollar exchange rate pressures airlines with revenues in non-dollar currencies, slicing margins. In India and Indonesia for example, currencies are at a year low against the US dollar. This is a punishing situation for airlines that pay for their costs — mostly jet fuel and lease rentals — with US dollars but book revenues in local currencies.

The US central bank had planned for at least two further rate rises inbut this may change depending on the fallout from the trade war between the US and China and the general health of the US economy. The Bank of England has stated that after an increase in Augustthere will not be another rate rise before Brexit in Marchbut that too could change in the event of a hard Brexit.

Passenger travel continues to grow above the long-term ten-year average of 5. Indemand measured in revenue per kilometre RPK grew by 6. IATA expects passenger demand to drop to 6. Capacity measured in available seat kilometres ASKs rose by 6. Passenger load factors have therefore continued their slight upward trend from The same IATA report also highlights the profitability of the world airlines.

Profits as a percentage of revenue fell to 3. Analysts are broadly positive on the fundamental strength of the market. Moreover, airline profitability has improved to such an extent that analysts see many airlines being cushioned from some of the sharper shocks to operations, such as fuel cost increases and fluctuations in the value of the US dollar.

Many of them have delivered. Their costs have gone down. The load factors are up because that affects revenue. In general, airlines are healthier.This website uses cookies to make your browsing experience more efficient and enjoyable. You can find out more about which cookies we are using or switch them off in settings. Allow cookies. Cookies are small, simple text files which your computer, tablet or mobile phone receives when you visit a website.

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The entry of new market players, rising fuel prices and rapidly evolving customer expectations present new challenges for the airline industry. To stay relevant the industry must continue to innovate its operating models, find newer revenue streams and offer exceptional customer experiences.

However, the industry seems to have caught a break at last. Despite poor macroeconomic conditions and rising voices against globalization, the growth of air travel has remained steady, if not more. Is it any wonder that Buffett is now the biggest shareholder of four leading U.

Budget or Bougie? Examining Airline Industry Trends For 2020

For the third consecutive year, and only the third time in history, the average carrier posted a positive Return on Invested Capital ROIC in The outlook on both these fronts is pretty sanguine for the industry, according to most observers.

So, what are the major trends that will shape the course of the aviation business going forward? How are chief executives addressing the challenges posed by the entry of new market players, rising fuel prices and rapidly evolving customer expectations?

Will top-line and bottom-line expansion continue at the same pace as in recent years, or is there a hard landing ahead?

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Here are six significant trends influencing strategy formulation and implementation across the sector today:. Passenger numbers are estimated to increase by about 7. Cargo demand, which has taken a hit in recent years amid a slackening of globalization and trade, should rebound as well, as an upturn in the economic cycle boosts business and consumer confidence. As a result, airlines, on an aggregate basis, are likely to post a 5. Boost from Higher Capacity Addition.

This growth will be driven by the still comparatively low fuel costs, supply of older aircraft coming off leases and the growth of Low-cost Carriers LCCs. Improving Operational Metrics. Intense investor scrutiny of balance sheets, particularly on the cost side, is something the industry has gotten used to, considering almost airlines have gone bankrupt over the decades.

Not surprisingly, managements of all carriers have been laser-focused on trimming the fat wherever possible. This trend has been underpinned by a substantial decline in the price of Aviation Turbine Fuel ATFnon-fuel unit cost decreases amid greater airplane seat density and large-scale industry consolidation. However, Moody's expects 3 the cumulative operating margin of airlines of those that it rates to approach 9 percent in and reduce to 8 percent next year, as compared to This will largely be on account of an estimated 21 percent spike in per-barrel average oil prices, from USD In the U.

However, they will still enjoy better operating margins compared to other airlines across the world, largely due to a strong dollar and the relatively more rational domestic market.

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Legacy airlines in Europe and developing nations, in contrast, will face significant headwinds as LCCs continue to mount pressure on them. High Load Factors Driving Revenue. The trend of the past two years which saw occupancy levels hit all-time highs is likely to continue. IATA expects the average load factor to rise from Labor expenses have now overtaken ATF costs to emerge as the largest overhead for airlines, marking a return to the era before the fuel price surge in the early s.January As ancillary revenues are on the agenda of every airline, much has been written and said about the grand vision of airlines as omni-channel retailers, in which the in-flight part is just another touchpoint in an end-to-end, personalized, seamless, digital travel eco-system.

Android-based in-seat IFE platforms, wireless IFE, Internet connectivity, plus the large number of passengers — and increasingly cabin crew as well — that carry a digital device, provides airlines with much more control how to move beyond providing just entertainment to new opportunities to generate ancillary revenues in-flight. Our industry needs a new term to describe a holistic experience that is equal in every way to how people leverage their devices on terra firma.

How do we move from an in-seat system, where an airline is looking at cost line, to an in-seat solution coupled with connectivity that moves to a revenue line? The lounge features the latest technologies and innovations along with improved service and catering. While this is just a taster of what is yet to come, customers can already take advantage of this in a temporary setup while refurbishment of the second part of the lounge continues until its festive opening in summer The lounge facilities are located on the second floor and on a newly opened, completely rejuvenated third floor.

Passengers are welcomed individually by personal lounge assistance and can gain easy access by scanning their boarding passes at self-service devices. Lounge to Cabin The idea of commencing the journey early by providing a lounge experience that comes near or matches the experience in the air has began to take hold.

The concept uses dynamic mood lighting and neutral furnishings to set a mood that suits the time of day, destination or season. Delta passengers on domestic flights can track their checked bag s in real-time via the Delta app, even when up in the air.

With sharing real-time bag tracking with passengers still being a novelty in the industry, Delta has further innovated its baggage service to include delayed luggage. Delayed baggage claim via Delta app Earlier this year, Delta expanded its Fly Delta app functionality to allow passengers to skip the bag service office visit when luggage is missing. The mobile bag service feature allows passengers to file a bag claim at their final destination through the Fly Delta app, instead of having to visit the local Delta baggage service office, when Delta sees the bag has missed a checkpoint.

The airline proactively notifies passengers if their bag will be delayed, and provides a link to complete a delayed bag file with the app. As cities across the globe have been taken part in bicycle share programs which are enjoyed by tourists and locals alike, those bicycles are a smart and relevant way for an airline to advertise. This also resonates with consumer trends such as authenticity, storytelling and the rediscovery of national and regional identities in a rapidly globalized world.

Persimmon is an edible fruit whose tree is symbolic to good wishes. Apart from the wood veneer finishes, the cabin is also covered in a dark carpet with geometric images of the persimmon fruit. The negative spaces of the caligraphic drawings are of light gold colors while the positive spaces are dark blue.

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