Airline Industry buoyed by a rising working group, widening middle class demography, increased travel & tourism avenues, and strong growth in external trade. This presents substantial growth opportunities for airlines businesses to be successful. But the increased fuel costs, competitive environment, operational inefficiencies and rapidly morphing landscape of airlines have led to increased complexity.
Key trends shaping the Airline Industry
Increasing Demand: Developing world is emerging as a top aviation market fuelled by rising domestic & foreign tourists, emergence of cities as global business hubs and strong growth in external trade. Business & leisure travel is continuing to boost growth.
Greater Focus on Infrastructure
To meet this growth, the airport infrastructure is undergoing modernization with the induction of most advanced facilities including setting up of new Greenfield airports and installation of security, surveillance and air traffic navigation systems. Strong projected demand making returns attractive; growing Public-Private Partnerships (PPP), Policy Sops, FDI encouragement and increasing liberalization is attracting new investments.
Growing Opportunities in MRO: Growth in aviation is accentuating demand for Maintenance, Repair & Overhaul (MRO) requirements and facilities considering that expenditure in MRO are the second highest expense after fuel cost. This presents a huge potential to companies desirous of capitalizing on MRO businesses.
Challenges facing the players involved in the Airline Industry
Cost Structures: Traditional levers of cost management are not serving enough to squeeze value and release required margins in business and hence successful firms have to drive even deeper levels of efficacy and efficiency. Carriers might need to rethink their existing operating models to support their growth ambitions.
The spiraling cost of aviation turbine fuel, economic slow-down, low returns, high operational costs and the consequent widening gap between revenue and expenditure are some of the factors that are reducing the margins in business and increasing financial instability.
Asset Productivity, Yield Management & Network Optimizations: Airlines has been struggling in the face of high costs and intense competition. Systemic approach to getting right yields and load factors would be crucial for managing the financial health of the carrier.
Carriers in their quest to improve business growth, have to expand their network to new market. Given the increase in permutations and combinations and thereby increased complexity in arriving at Optimal Network on dynamic basis, making the right decisions would be crucial for the profitability of carriers.
Differentiation in Market Propositions: In this highly competitive system the airlines have largely converged on pricing and product. From a passenger perspective there is little to distinguish between an LCC and an FSC in economy class, other than the fact that the latter offers a complimentary onboard meal, but this too is being rationalized. Carriers need to develop portfolio of services and deliver it correctly to right segments to create meaningful differentiation and value to its customers.
How can BMGI help?
BMGI has deep experience in working with airlines across the travel value chain and developed proven methodologies in solving the challenges facing the industry currently. BMGI’s expertise in tackling issues related to revenue strategy sustainability, operational efficiencies and service excellence has made it preferred consulting partner in the airlines industry.
BMGI has helped in increasing the bottom line of many partners in this value chain and provided them a differentiated edge to retain uniqueness in this space
To know more about our Airline Consulting Industry Practices, we encourage you to Give Us a Call.