Industry rationalisation has helped the US majors enjoy very healthy profits over the last year. But this has not always been kind to airports which previously enjoyed hub status. Also, the infrastructure that supports the airline industry’s growth is in urgent need of reform. Despite a decades-long acknowledgement that the country’s airports and air traffic management system needs to modernise, little progress has been made.
ULCCs are also making an impact, forcing the US majors to deploy an array of tactics to keep them at bay, in the form of segmented fare families and product unbundling. Further north, in Canada, ULCC start ups have injected renewed competition into the tightly held Canadian market.
Long haul low cost international operations are becoming a feature of the US-Europe market, introducing a new dynamic into the equation. These have until now been the territory of foreign airlines, but with airlines like the mid-cost/mid-frills jetBlue now about to embark on trans-Atlantic operations, a new era of competition could be in the wind.
Meanwhile, new aircraft technology is also reshaping route economics and opening up new markets in ultra long haul destinations to and from the continental US.
This week delegates at the CAPA – Centre for Aviation Americas Aviation Summit have been discussing many of these areas. Here’s some of the key insights and observations from the event at the Four Seasons Hotel in Denver…
Americans need to be educated on ultra long haul travel
Qantas senior EVP the Americas, New Zealand, Pacific Islands and Japan Stephen Thompson said: “Americans aren’t used to ultra long haul flying, whereas Australians are, so it’s a matter of convincing Americans that Australia isn’t that far away… Australians will see the world before they see Australia… Now we need Americans to start travelling outbound too”.
‘It takes us longer to train our call centre agents’ than pilots’
Sun Country Airlines president and CEO Jude Bricker said: “It takes us longer to train our call centre agents than it does to train a pilot… I can onboard a pilot faster than I can onboard an agent”.
History of trans-Atlantic LCCs is littered with dead airlines
Spirit Airlines VP capacity planning Mark Kopczak on the risks of launching low cost long haul services, staid: “If you look at the history of low cost travel, especially across the Atlantic, it’s littered with dead airlines”. On the prospects of full service/LCC partnerships, Mr Kopczak added: “I don’t think we’re there yet”.
Airlines are too siloed and afraid to make mistakes to be truly customer focused
Air China VP & GM North America Zhihang Chi said: “We claim to be customer focused, but we aren’t actually customer focused… Because we’re so siloed and afraid to make mistakes. We’ve got a long way to go to be truly customer focused”. On passenger uptake on new product segments, he said: “Their [millennials] willingness to pay is a lot more open” than passengers from older generations.
Millennials are ‘destination indecisive’ and ‘brand agnostic’
Expedia Group VP transport partner services Julie Kyse said: “Millennials were the forefathers of how everything is advertised and sold today”. Ms Kyse added millennials are often “destination indecisive” and “brand agnostic”, instead looking to photographs and brands on social media to inspire them for travel ideas. To capture millennial business, she said: “You need to help them convert that cognitive overload [from social media], otherwise you’re not going to win their business”.
If you lose your cost position, you lose the market
VivaAerobus CEO Juan Carlos Zuazua said: “If you lose the cost position, you’re going to lose the market… We are confident we’ll always be number one because we have the lowest cost”.
Airlines can get into the art of retailing, but they are not in retail
Farelogix CEO & president Jim Davidson said “airlines can get into the art of retailing, but they’re not in retail”. Mr Davidson said one of the biggest hurdles to operating a successful ancillaries programme is airlines’ fear of failure and being siloed in legacy operations. He also noted airlines need to stop giving up revenue by keeping middle seats empty. “A lot of airlines give up so much revenue by having middle seats empty… You can start to look at optimisation,” he said.
NDC adoption must be paired with machine learning to make it a success
Expedia Group VP transport partner services Julie Kyse said: “If you’re not investing in machine learning along with your NDC, you’re not going to get the benefits of that [NDC] programme”. She believes the industry should create relevance for everyone rather than focus on groups. “You shouldn’t just think of millennials as avocado toast eating and craft beer drinking… Relevance for everybody is what your target should be”.
Sustained growth from secondary Chinese cities cannot be maintained
Charlie Pappas International principal Charlie Pappas said: “Growth in China has primarily come from the so-called secondary cities, and a lot of that has been subsidised by local governments or local airports… It remains to be seen if that can be sustainable in the long term”. Mr Pappas added: “I think we will see a balancing out through the major hubs”, as Chinese airlines consolidate.
Some additional quotes…
“When the lower classes taste the forbidden fruit [air travel] for the first time, they’re going to want more.”
ICF Aviation principal Carlos Ozores
“Corporate travellers are maniacal about sitting about where they want to sit.”
AmTrav CEO Jeff Klee
“Carry on bags are the number one reason for conflict between passengers and conflict on the plane.”
Association of Flight Attendants-CWA international president Sara Nelson
“There are potential big challenges with blockchain, the performance and scalability isn’t great at the moment.”
ARC president and CEO Mike Premo
“We’re not doing this [expansion] on a whim, we’re doing this because our airlines tell us they need it”.
Denver International Airport COO Chris McLaughlin
“Ancillaries are optional, that’s the point… Most important is the low fare, if fares are high they [passengers] don’t travel at all.”
Sun Country Airlines president and CEO Jude Bricker