‘We are on the cusp of a new era’ with disruptive technologies, long haul low cost and personalisation set to deliver ‘a sea of change’ – more insights from the CAPA Americas Aviation Summit

This week the CAPA – Centre for Aviation Americas Aviation Summit has been taking place at a key time in the United States of America (USA) as it approaches the next generation of aviation. As consumer demands change rapidly, as infrastructure needs remain unsatisfied, and as longstanding policies are under attack, the US airlines are unprecedentedly profitable. But, there is much that needs to be fixed if they are not to be marooned in the present, domestically and internationally.

Here’s some more insights and observations from delegates during the event at the Hilton Americas hotel in Houston… 

Trinder Aviation & Aerospace Advocacy: ‘We are on the cusp of a new era and a sea of change’
Trinder Aviation & Aerospace Advocacy PLLC president and CEO Rachel Trinder said “an amazing array of disruptive practices coming online are just one of a number of factors influencing the aviation sector. We are on the cusp of a new era and a sea of change”. 

IAG’s plan to buy Norwegian is indicator of low cost long haul market potential
CAPA – Centre for Aviation executive chairman Peter Harbison said IAG’s plan to buy Norwegian is clear indicator of where the low cost long haul market is going internationally. He noted that globally there was a reduction in the proportion of premium seating between 2008 and 2018.

McGill University professor of law ‘wee bit sceptical’ about long haul low cost
McGill University professor of law Brian Havel said he is a “wee bit sceptical” of the long haul low cost model because it has “so many short comings that make it difficult to sustain”. Mr Havel noted that no long haul LCC has survived a complete economic cycle. He also emphasised that the aviation industry is not going to witness “perpetual low interest rates and fuel prices”. He added: “If the opportunity is so good why isn’t Ryanair doing it?”. Mr Havel noted that short haul LCCs, such as Ryanair and easyJet, can sell an aircraft seat six or seven times a day while a long haul LCC can only sell it twice. He believed mainline carriers are best placed to capture the “significant opportunity” the low yielding trans-Atlantic market presents “if they act quickly”. 

Google Flights is a ‘huge, looming threat’ to airlines and OTAs: Allegiant
Allegiant Air SVP commercial Lukas Johnson said Google Flights is a “huge, looming threat” to airlines and OTAs. He said over the next five to 10 years airlines will lose more and more of the share of searches to Google Flights because it is such a “great, transparent product”. He said it will be interesting to see how either airlines embrace or push away the Googles and Amazons of the world. He also anticipates there is not going to be a huge surge in new products over the next five to 10 years. He said most of the basic products being charged for on an airline ticket have been thought of or are already being charged for. He said the focus will be personalising prices for each individual consumer and maximising what an airline can charge for each product. 

Irelandia Aviation: ‘Pure economics’ of a route are essential to network decisions
Irelandia Aviation member of the advisory board Tony Davis said the “pure economics” of a route are essential in making network decisions. Mr Davis said: “Incentives are great, but what happens when that deal ends?”. He noted that a lot of presentations from air service development teams are overly focused on market opportunity. Mr Davis said airlines, especially LCCs, are more interested in the long term durability of the cost base. 

Orlando Airport: Orlando was ‘technology before it became Disney’
Orlando International Airport senior director marketing and air service development Vicki Jaramillo said a challenge for the airport’s air service development team is “letting airlines know there’s so much more to Orlando than tourism”. She said Orlando was “technology before it became Disney”. 

Lufthansa expects it to ‘take years and years’ for LCCs to match JV efficiencies on trans-Atlantic
Lufthansa VP airline sales Tamur Goudarzi Pour said if the low cost long haul trans-Atlantic model is successful “it will take years and years” to match the scale currently offered by trans-Atlantic mainline JVs. He said it is becoming more “transparent” to passengers that legacy carriers offer more value compared to LCCs, but noted the increasing presence of narrowbody options, in particular the A321LR and Boeing 737 MAX, “will be an important factor in shaping competition on trans-Atlantic in the future”. 

InterVISTAS Consulting says PPPs are not ‘passing fad’ but part of ‘long term solution’
InterVISTAS Consulting executive consultant Kenneth Currie said public-private partnerships (PPPs) are not a “passing fad” but part of a “long term solution”. Mr Currie noted that PPPs have not been implemented broadly at US airports due to the requirement by US FAA that money generated within the airport stay in the airport. He noted though that sometimes you don’t need to privatise the whole airport. Sometimes it should just be a terminal”.

US airport pilot privatisation programmes are good but very ‘prescriptive’: InterVISTAS Consulting
InterVISTAS Consulting executive consultant Kenneth Currie said US airport pilot privatisation programmes are good but are very “prescriptive” it terms of what is required to qualify for the programme. Mr Currie believes there should be a vehicle that makes the privatisation process a bit easier for airports.

US airports will have to alter business models to address emerging disruptive technology
Fisher College of Business executive-in-residence Nawal Taneja, said the issue with driverless cars is not if they are coming it’s when. Mr Taneja said US airports will have to alter their business models tremendously to address emerging disruptive technologies.

Volantio: Airlines can maximise revenue for ancillaries by altering booking experience by device
Volantio CEO Azim Barodawala said research by Volantio revealed airlines can maximise revenue for specific ancillary products by altering the booking experience based on the type device the passenger is purchasing on. He also noted airlines can only unbundle airfares to a certain extent. He said after that, airlines need to start thinking about the “next frontier”.

Southwest Airlines says US has witnessed robust decline in fares since 2015
Southwest Airlines EVP and chief revenue officer Andrew Watterson said he does not believe the US aviation system is broken. He said US airlines have witnessed a robust decline in fares since 2015, airline passengers and employees are enjoying numerous benefits and return on investor capital is at an all time high. Mr Watterson believes domestic aviation within North America is at a “gold standard”. 

Japan Airlines to take advantage of American Airlines JV to explore new ways to grow network
Japan Airlines VP marketing and strategy research Asia and Oceania Region Akihide Yoguchi said rather than simply focusing on expansion, Japan Airlines will grow step by step with a focus on profitability. In addition, Mr Yoguchi said the carrier will take advantage of its JV with American Airlines to explore new ways to grow its network. He said the JV has Airlines offered a valuable exchange of knowledge and skills which enabled Japan Airlines to address management various issues. In addition, Mr Yoguchi said the JV allowed Japan Airlines to overcome resource limitations. 

Southwest: High airport charges at Latin American airports are ‘very penalising’ for traffic
Southwest Airlines EVP and chief revenue officer Andrew Watterson said high airport charges at Latin American airports are “very penalising for short haul traffic”. Mr Watterson believes rates and charges need to be revised to facilitate and incentivise growth. However, he said Mexico City is important to Southwest in the medium term. He said while Southwest is presently focused on resort destinations within Mexico, it does see opportunities to expand into business and VFR markets in the future, stating “that is when the likes of Mexico City will become important for us”.