UNDERSTANDING AIRLINES BUSINESS ENVIRONMENT
Airlines are continually facing issues related to their business environment. It is possible to list three significant changes that affect airlines in their operations:
- Socio-economical changes;
- regulatory changes;
- technological changes.
Each one of them has a considerable impact not only on the single business unit or the corporation but either on the market. Therefore, we have the opportunity to focus on some recent examples to better understand what they mean.
In 2017 IATA published the 20-Year Passenger Forecast, a comprehensive tool to understand the evolution of the market size on the long run. The International Air Transport Association expects
the number of flying people to duplicate in the next years, up to 7.8 billion passengers in 2036 with a 3.6% CAGR.
Eastern countries are growing at a fast pace. China will surpass the US on passenger journeys in 2022, increasing up to 1.5 billion in less than 20 years. Along with Chinese travellers, Indian and Indonesian will follow straight the trend. Globally, improvements on the infrastructure, policy stimulus and market liberalisation could help the growth reaching almost 12 billion passengers.
IATA’s 2036 Global Passengers Forecast
Deregulation opened the market in the USA in the 70s, and Europe 20 years later. Public policy made the LCCs possible, together with many other advantages for travellers. But deregulation is at risk due to the IATA’s Alexander de Juniac so-defined “re-regulation
”: an excess of regulation over the global standards in many countries. Re-regulation is a particularly hot topic
in the US, where there’s been a dispute over a new proposal to limit airlines (which have strongly opposed) on charges for checked bags, ticketing changes or ancillary services.
Regulatory changes should be introduced towards liberalising the market, leaving the companies free to decide how much to stick to the demand and creating space for improvements on the offer.
The most recent news regarding technological changes in the aviation industry has been the introduction of the ultra-long-range (ULR) aircraft. We will remember the last week as the turning point of the commercial non-stop flying from one side of the earth to the other. Indeed, Singapore Airlines has started the world’s longest route from Changi airport in Singapore to Newark – New York, a 17-hours trip made possible thanks to the recent updates on the aircraft
, the A350-900ULR.
Significant technological changes were introduced. The aircraft is capable of flying without stopping for refuel for over 20 hours, covering 9,700 nautical miles (18,000 km circa). Fuel tanks are placed under the wings and the centre passenger zone, and they can store 24,000 more litres of kerosene. Also, the cabin was renewed with a brand new lighting system and new materials, to strengthen the fuselage and therefore to ensure a better passenger experience.
Airline managers should be aware of these basic features in the business environment. The definition of airline marketing encompasses a deep knowledge of the industry trends, that influence decision and affect so many customers all around the globe.