Every year in January, we in the travel industry spend time thinking about what the new year will look like, what will change, and what the main innovation is going to be. After many years of experience, I have learned that the factors impacting the airline industry are so diverse, that making accurate predictions is quite challenging. However, while I relaxed with my family over the holiday break, I had some thoughts related to the business environment, challenges and opportunities that airlines in North America may face this year.
Airlines in North America will experience some interesting challenges: the unpredictable cost of operations due to fuel (currently going up), labor and aircraft. There’s also going to be increased competition among both local and global airlines, along with a fast-changing regulatory environment and trade practices. And with more passengers taking to the skies than ever before and more visibility to service performance, system outages are increasingly disruptive and unacceptable, especially when caused by legacy technology that has not kept up with market demands.
Airlines will see opportunities for increased customer focus, enhanced product segmentation, better and improved loyalty programs and next-generation payment solutions. In addition, there will be advancements in ancillary product offerings, and increased investment in mobile, cloud computing and modernization of legacy technology to increase airline service delivery robustness.
Better, personalized service
Passengers will continue to ask for more and better services. Their expectations mirror the same type of personalized, fast and frictionless services they receive from other B2C companies, especially retailers. Unbundling of ancillary services will create unique expectations from flying passengers, and reduce their tolerance when those expectations aren’t met. With the added pressure of social media, airlines are now required to make split-second decisions to manage complex situations across different customer touchpoints. For example, if a passenger pays extra for a seat and their flight is impacted, they’ll demand a comparable or better seat in their rebooked flight. Or if they check and pay for a bag, they expect it to be trackable and delivered as promised.
Airline fares are more than 25 percent lower than they were in 1999, and most expect this trend to continue. LCC and ULCC airlines continue to refine their models to offer lower fares. LCC and ULCC used to primarily compete for intra-North America travel but we now see new players aiming for the lucrative cross-Atlantic travel. Full-service and hybrid carriers are innovating to compete by offering more options to their passengers, while managing the operational complexities involved in delivering those services. Airlines must grapple with the delicate balancing act of providing services, while managing the cost of delivering them.
Mobile usage is only going up, and it’s expected to become the main booking method for passengers, regardless of booking channels. Customer service via mobile devices, such as check-in and flight-delay notifications, is no longer simply a “nice-to-have” benefit. It’s an expectation and a differentiator. Airlines must adopt technology that allows them to respond to the ever-connected digital passenger of today’s environment.
Proactive & reactive
Airline schedules are already complex, and they will become even more so. Now, it’s more important than ever to be able to protect those schedules from disruptions and react quickly when they occur, rebooking the passengers and offering them a seamless and friendly experience.
Given the number of outages and other issues with legacy systems that many airlines experienced in 2016, I expect that airlines will increase their focus on operational reliability. Airlines developed plans and they’re now making investments to reduce IT risk and the impact on their bottom line.
At Amadeus, we’ve spent billions of dollars in innovation and development investments over the past decade. And we are ready to provide the most advanced, innovative IT solutions and services, enabling North American airlines to achieve their business objectives and provide travelers with a personalized customer experience in 2017. We look forward to another great year helping to shape the future of travel.