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Airlines at economic crossroads

NEW YORK: A new survey by PricewaterhouseCoopers says airline CEOs plan to follow the money as middle-income classes expand in Asia-Pacific, the emerging economies of Latin America, the MENA region and Sub Saharan Africa.

Over the next 20 years, PwC expects the airline industry to triple or quadruple in size as a result of a shift in economic power that will "change the dynamics of how people and trade move by air around the world with new flows, new routes and a shift in emphasis between existing routes".

Transporting more than three billion people and 50 million tonnes of cargo last year, airline CEOs are apparently much more conscious of a changing global balance of economic power than their peers in other industries – with 82 percent seeing it having a transformative effect compared with only 59 percent of all CEOs.

wifiPwC says many airlines now find themselves at a crossroads of incremental or transformational change. The company cites the disappearance of Malaysia Airlines flight MH370 as one example of the need to apply advanced technology to replace the reliance on a 'black box' to discover what happened.

In a poignant coincidence, the airline and investigators are still relying on such methodology in the downing of flight MH17 over eastern Ukraine – despite recent advances in networking and mobile devices.

"The 'connected airline' is now not just a concept, but a reality," say PwC study authors Julian Smith and Jonathan Kletzel: "The connected airline ties together mission critical processes, data and related systems, including reservations, maintenance, crew, revenue management and flight control, to improve decision-making and resolve operational problems in the short-term and reduce costs and increase revenue in the long-term."

With 26 percent of airline CEOs reporting a new strategic alliance or joint venture in the last 12 months, PwC says greater consolidation is crucial for generating better performance and raising future margins. However, "persuading governments to remove the regulatory barriers to full-scale M&A remains a tough task. Regulators will need to be convinced that national, economic, labour and broader societal interests will be advanced, rather than threatened, by greater cross-border consolidation," the authors add.

Finally, in an echo of recent comments by Etihad CEO James Hogan and IATA head Tony Tyler, the survey authors think governments "must transform their view on commercial aviation from an easy source of revenue to a catalyst for broader economic growth. Today's competitive playing field is growing more uneven as some governments increase taxation and regulation while others not only lower taxation but invest in airport and other supporting infrastructure projects".

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