Watching out for commercial aviation trends in 2018
2017 was a busy year in commercial aviation. There were bankruptcy-driven consolidations in Europe, setbacks for some Middle East carriers and changes of fortune for Airbus and Boeing order books, alongside continued passenger and revenue growth, a healthy recovery for cargo traffic and another year of profitability for many airlines, especially in North America and Europe.
Long haul low-cost travel gained new momentum, thanks in part to legacy carrier responses to the growth of new competitors. The first new technology long-haul narrow-body aircraft came into service, bringing new route opportunities. Airport infrastructure remained a constraint in some lucrative markets in Europe and Asia, benefitting some lucky legacy carriers – and airport investors – though not all, as competition combined with other factors to give Cathay Pacific a hard time. And the impressive track record of Europe’s number one LCC, Ryanair, had a stumble as it ran out of pilots and triggered the unthinkable: steps toward union recognition.
What should we expect for the industry in 2018? Here are some of my personal thoughts.
New airline consolidation opportunities will be fewer this year as last year’s European bankruptcies cleared out some dead wood and allowed breathing space to the stragglers. Attractive airlines are now expensive, making them less likely acquisition targets.
Legacy carriers will expand their response to long-haul low-cost carriers successfully, unbundling long-haul tickets to offer competitive no-frills prices – following the lead of Aer Lingus, Delta and Air France-KLM. The legacies have learned lessons from their fumbling responses in the early days of the LCC challenge.
Loyalty schemes will remain an important differentiator for legacy carriers, as British Airways recently reminded its customers. They and other airlines will work harder at personalizing transactions with customers outside loyalty schemes and customer databases. But airlines still won’t succeed in tapping into their valuable data-driven customer opportunities as far or fast as they should.
As further major airline joint ventures are announced or rolled out, global alliance relevance will erode (it’s over three years since an airline last joined one of the three global alliances).
Airports will increasingly facilitate self-connections, in turn helping grow LCC route opportunities at those airports, particularly for long-haul operators like Norwegian. These self-connections won’t be able to reach anything like the scale of conventional hub and spoke networks, however, so the likes of Schiphol and Atlanta needn’t get worried.
China’s long-haul growth will slow until there’s a significant change in the “one route one carrier” rule to allow Chinese carriers to compete on thick routes. And the greatest potential opportunity, from even greater growth in China-US flying, will remain restricted by the lack of an “open skies” agreement – unless President Trump suddenly sees the need for some sort of great eye-catching deal with China.
By the end of 2018, although the Ryanair pilot shortage will be largely forgotten, its move towards recognizing pilot unions will have emboldened other LCC workgroups and contractors in places with tightening labor markets to make their own pitches for better terms.
There will be lots of fudge around the UK’s post-Brexit air services arrangements: no cliff-edge of suspended flying rights; and lots of work for lawyers and lobbyists.
Whatever actually happens in 2018, right now there’s every reason to expect a safe, successful and profitable year for commercial aviation. Here’s to another great year for our industry!
Edmond Rose has wide experience in aviation working for British Airways and Virgin Atlantic and as a consultant. He spent six years on Virgin Atlantic’s leadership team directing fleet and network planning, RM and pricing, partnerships and strategy. He has also worked in customer data and loyalty. As a consultant, Edmond has advised airlines, airports, investors and aerospace companies in Europe, Asia, and the Americas on projects such as network strategy, low-cost carrier principles, joint ventures and airport air service development.
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