Tailwinds: 2018 airline industry trends

Tailwinds provides an overview of the current state of the global airline industry. Part one analyzes the current industry and emerging trends from a global perspective. Part two examines airline distribution in a digital, data-driven world as well as taking a deeper look at the effect disruptors are having on the airline industry.

Will same day delivery boost air freight?

For long-term growth in cargo, one key question is: will the growth in e-commerce, with its promise of next or same-day delivery, cause a secular boost in air freight?

PwC’s consumer markets analysts see some short-term pressure for retailers to increase their use of air freight but, over the medium term, a different scenario is possible.

Data’s new value

Data is often called the “new oil” for a reason: it can power dramatic cost cuts and more revenue in many industries, including air travel. Advances in analytics now enable carriers to mine data from distribution for cross-selling, customization, and more effective dynamic ticket pricing, among many other benefits.

Indirect booking vs. direct booking

An effective direct booking strategy starts with identifying loyal customers, who trust the airline brand and value post-sales service. The carrier can then use advances in data analytics to determine both the cost (see above) and the value of maintaining or bringing these customers inside the airline’s own booking channel.

With data analytics, it’s possible to pinpoint the most profitable customers for direct bookings. One customer may be a big spender across the board. Another may be price conscious when shopping for a ticket, but likely to make a high-margin last minute ancillary purchase.

Travel management companies (TMCs), online travel agencies (OTAs), and other intermediaries offer real value. When airlines look at the full costs of direct bookings, this value will likely be even more apparent.

Many airlines could draw more value out of partnerships than they currently do, and here IATA’s NDC and ONE Order initiatives may have a role to play. Using APIs to connect airlines and travel agencies, NDC offers airlines greater access to data, and the ability to enable full and transparent shopping of all their goods and services on intermediaries ONE Order aims to modernize airline order management by creating a single customer order record that will replace multiple reservation records.

The future of the airline industry

Airline customers increasingly want a frictionless, seamless shopping experience that gives them expansive yet personalized offerings.

Meeting rising expectations requires new technologies and capabilities—and therefore new costs. Digital distribution also offers powerful new opportunities to win customers and draw value from the data that distribution creates.

With industry profits high, the time is ripe to invest not just in products, technology, and talent, but also in the culture and process that this agility requires.

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