In this series, professionals debate the state – and future – of their industry. Read all the posts here and write your own (use #MyIndustry in the body of your post).
The outlook for airlines today is better than it has been for many years. That was the clear message from the recent annual meeting of the International Air Transport Association.
IATA expects airlines to report total profit of US$29.3 billion this year, compared with US$16.4 billion last year.
Passenger numbers in 2015 are growing at their fastest rate since 2010, economies continue to recover from the Global Financial Crisis, and fuel prices are relatively low, giving airlines a stable base for profitability. For the first time, IATA expects airlines – on average – to return their cost of capital.
Despite this strong performance, margins remain thin (a forecast 4 percent in 2015) in a sector where profits are always hard-earned.
But what makes me optimistic about the industry’s future is the work airlines are doing to take control of their destiny.
Business models are being reworked, fleets renewed, service revitalised and new partnerships formed. Much of this work has been hidden by tough economic conditions in recent years – now it’s starting to shine through.
That’s good news for travellers, because a healthy financial performance gives airlines the foundation to re-invest in service, technology and ultimately growth.
The longer-term challenge for the industry is to understand and respond to the deeper, underlying trends that will shape the future.
Arguably the most influential of these trends is the rise of the Asia-Pacific region.
Already the world’s biggest aviation region in terms of passenger numbers, by 2034 the Asia-Pacific market will be double the size of Europe and North America combined. Over time you would expect the region to close the profitability gap with the current leader, North America (set to report US$15.7 billion in profit this year, compared with the Asia-Pacific’s US$5.1 billion).
Airlines inside and outside the Asia-Pacific are looking for the best ways of serving the region’s diverse markets and connecting them to the other big global regions.
Consolidation between airlines has already happened on a large scale in North America and Europe. The Asia-Pacific is the next frontier, but consolidation here is likely to happen via a mix of different models, rather than pure mergers. I see Qantas playing a big role in this emerging Asia-Pacific network through organic growth, through partnerships with airlines like Emirates, China Eastern and (as we announced most recently) American Airlines, and through minority investment in the Jetstar airlines.
A
strong brand, a broad network and the right partners will all be
competitive advantages in the changing global market. But potentially
the biggest competitive advantage of all is customer understanding – one of the other big themes of the IATA annual meeting.
With hundreds of millions of new passengers set to enter the global aviation market over the next two decades, the airlines that understand clearly what their customers want and shape service to their needs will have the best chance of success. Brands like Apple are the world leaders here – setting the standard for airlines to aspire to.
If airlines can combine stronger profitability with a new generation of customer-focused innovations, competing with the best brands in other sectors, the industry’s future will be bright indeed.
The outlook for airlines today is better than it has been for many years. That was the clear message from the recent annual meeting of the International Air Transport Association.
IATA expects airlines to report total profit of US$29.3 billion this year, compared with US$16.4 billion last year.
Passenger numbers in 2015 are growing at their fastest rate since 2010, economies continue to recover from the Global Financial Crisis, and fuel prices are relatively low, giving airlines a stable base for profitability. For the first time, IATA expects airlines – on average – to return their cost of capital.
Despite this strong performance, margins remain thin (a forecast 4 percent in 2015) in a sector where profits are always hard-earned.
But what makes me optimistic about the industry’s future is the work airlines are doing to take control of their destiny.
Business models are being reworked, fleets renewed, service revitalised and new partnerships formed. Much of this work has been hidden by tough economic conditions in recent years – now it’s starting to shine through.
That’s good news for travellers, because a healthy financial performance gives airlines the foundation to re-invest in service, technology and ultimately growth.
The longer-term challenge for the industry is to understand and respond to the deeper, underlying trends that will shape the future.
Arguably the most influential of these trends is the rise of the Asia-Pacific region.
Already the world’s biggest aviation region in terms of passenger numbers, by 2034 the Asia-Pacific market will be double the size of Europe and North America combined. Over time you would expect the region to close the profitability gap with the current leader, North America (set to report US$15.7 billion in profit this year, compared with the Asia-Pacific’s US$5.1 billion).
Airlines inside and outside the Asia-Pacific are looking for the best ways of serving the region’s diverse markets and connecting them to the other big global regions.
Consolidation between airlines has already happened on a large scale in North America and Europe. The Asia-Pacific is the next frontier, but consolidation here is likely to happen via a mix of different models, rather than pure mergers. I see Qantas playing a big role in this emerging Asia-Pacific network through organic growth, through partnerships with airlines like Emirates, China Eastern and (as we announced most recently) American Airlines, and through minority investment in the Jetstar airlines.
A
strong brand, a broad network and the right partners will all be
competitive advantages in the changing global market. But potentially
the biggest competitive advantage of all is customer understanding – one of the other big themes of the IATA annual meeting.With hundreds of millions of new passengers set to enter the global aviation market over the next two decades, the airlines that understand clearly what their customers want and shape service to their needs will have the best chance of success. Brands like Apple are the world leaders here – setting the standard for airlines to aspire to.
If airlines can combine stronger profitability with a new generation of customer-focused innovations, competing with the best brands in other sectors, the industry’s future will be bright indeed.
