Airline Business

Strategy

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Even through brief shocks and ruptures, we have seen the pace of traffic expansion always return to the historical level and, considering the current landscape, there is no meaningful reason why it would be different this time.

Global traffic growth is expected to keep its historical level of 4.4% annually. This growth will be led by emerging markets, with 6.1%, followed by the advanced economies with 3.1%.

In this context of perennial growth, the airline industry is in constant quest for sustainability and profitability. These two pillars have always been considered by stakeholders in order to make our business adaptable to different factors in every region of the globe.

One of the key movements in the airline industry is the convergence of business models.

On top of strategies for dealing with LCC competition, several FSCs are now in restructuring mode, with US major carriers leading the course – all made possible through consolidation.

Europe and Asia-Pacific are still highly fragmented, despite several mergers and airline groupings. Persistent underperformance in airline margin terms owes much to the fragmented nature of the industry and the market share battles.

Apart from the United States, further consolidation and uses of alliances could be a defensive tool to improve the legacy airlines’ competitive position, while focusing on international expansion and reinforcing the role of regional airlines in their hub‑feeder strategies.

In parallel, the LCC focus on cost reduction and the reliance on ancillary revenue in order to implement a price leadership strategy is limited. Since ticket revenue alone does not cover unit cost, ancillary revenue has been key to healthy LCC financial performance. As the growth potential of ancillary revenue is finite, the focus is now turning to increasing yields.

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