December 2009 | As 2009 has come to an end, here’s our take on some of the most interesting quotes of the past year. Together they give a nice indication of the major trends currently shaping in the airline industry. Happy New Year!
1. Customer Experience. “They [legacy carriers] basically should get out a clean white sheet of paper and start again. Most of them are beyond repair. They got far too big and have management groups that don’t care about customer service. The experience the traveling public gets on those other carriers is pretty dire. […] If I was them, I’d start a new airline. I just don’t see how they can rescue their current airlines.” – Virgin CEO Richard Branson on what legacy carriers could learn from Virgin America (in Advertising Age).
2. The New Normal. BA’s CEO, Willie Walsh, recently observed a “structural shift” was occurring, noting “it may be that demand in the highest-yielding, fully-flexible premium business market will never recover to the levels we were seeing in 2007. […] That is a sobering message for all traditional airlines. Premium travel has been central to the viability of their business model for a very long time”. – What to do with a broken airline model? (Centre for Pacific Aviation).
3. Gulf Gullivers. “We will now have 15 A380s by the end of 2010, instead of the planned 20. So, we will be down by five A380s which will obviously impact our growth plan. However, despite this, we are projected to take [delivery] of 22 aircraft worth USD3 billion within this financial year. […] [Our] current fleet is operating flat out and existing orders have been allocated to new services. […] The fleet order we have in place is probably not as big as it needs to be.” – Emirates President Tim Clark says Emirates may buy more planes despite the recession (in Arabian Business).
4. Format Competition. “High fuel prices […] and other uncontrollable externalities – both in cost and demand – will relentlessly force most low cost airlines towards reconstituting the network model, domestically and internationally. Perhaps the most marked example of this evolution is found in the AirAsia/AirAsia X short haul-long haul combination. It is early days to pronounce this a format which can be imitated everywhere, but it does have characteristics that point the way to building an international network system. Virgin Blue is following a more conventional, but still expansive, full service approach in its New World Airline model. Other, more tentative steps are being undertaken by carriers such as JetBlue, partnering and code sharing with Lufthansa, Southwest and others code sharing with foreign LCCs and going international. […] All of these centripetal forces offer probably an even greater threat to the full service flag carriers than has the short haul movement. The possibility to deliver a networked high quality long haul service at low cost – much easier to achieve when extrapolating from a low cost local base than by contracting from an existing full service global model – represents a serious challenge for the legacy carriers. That will be the fiercest battlefront for the next decade”. – Peter Harbinson, Chairman Center for Asia Pacific Aviation, on the future of low cost airlines.
5. Connectivity. “When most consumers pay for internet, they pay a monthly fee, not a one-time charge. That’s what people are used to. And in places where people can’t use their subscription Internet services, Wi-Fi is more often a perk than an add-on. Coffee shops, book stores, and even intercity bus lines use free Wi-Fi to attract customers and fold the cost of providing the service into the price of whatever they’re already selling. There’s a lesson in this. An airline that wants to get a leg up on its rivals might be better off offering free WiFi to business class travellers to attract more customers and folding that cost into ticket prices, as Starbucks does with coffee.” – The Economist’s Gulliver blog on why passengers are unwilling to pay for inflight broadband.
6. Ancillary Revenues. “It boils down to price and product competition. Either you’re the lowest price or you’re differentiated. […] Traditional European airlines competing with low-cost carriers have to consider if [charging for ancillaries] makes sense. If it does, then they have to make sure that the items they charge for are perceived as good value.” – Patrick Murphy, chairman Performance Consultants International, on how perceptions are all important for make ancillary strategies successful (in Airline Business).
7. CO2 Emissions. “[Today] aircraft account for an estimated 2 to 4 percent of global carbon dioxide. Experts say global aviation emissions could reach 2.4 billion tonnes in 2050, which would be 15-20 percent of all CO2 permitted under a global agreement and a nearly four-fold increase on current levels.” – Reuters reporting on KLM carrying out the first passenger flight powered partly by biofuel.
8. Social Media. The Internet has opened the door to millions of people to beam their views across the planet on everything from the quality of airplane food to how long they waited on the tarmac to take off. This presents a conundrum for some airlines. […] Discount airlines have traditionally outflanked the big network carriers in customer service and low fares, and it appears they’re extending their advantage to social media. The discounters often respond with quick feedback to travelers’ concerns on social networking sites, while traditional network carriers peddle last-minute fare deals but seem slow to embrace Twitter and Facebook to beef up customer service. – The Associated Press on how low-cost airlines are tapping social media.
9. High-speed rail. “In the super-speed rail world of my dreams […] I would have boarded a dimly lit carriage, settled into a comfy seat with a generous pitch and deep recline and dozed all the way to Munich. Somewhere around the Austrian-German frontier I would take a seat in a perfectly appointed dining car and tuck into a very Mitteleuropean breakfast buffet, knocking back two “melanges” crafted by a Trieste-born barista. As most European legacy carriers have all but given up even trying to run a differentiated business class product, a completely high speed Europe, where the connections are fast and frequent (and round the clock), can’t come soon enough.” – Tyler Brulé on a better way to travel other than catching an early morning flight (in Financial Times).