What Is Wrong With Our Industry ?
Airline industry is one of the most less profitable industries in the world. In an economy where most industries still are profitable on an industry basis, we tend to lose money. Why ?
Despite all the red tape, financial burdens and global recession. Isn’t there a self-created issue ?
In my view – this self-created issue is the fear to try new things.
It is a widely accepted fact that the airline industry, despite being very technology-dependent, ironically still lags behind the world in terms of technology.
Despite the push from IATA DG Mr. Giovanni Bisignani to embrace new technologies, it seems the industry has not yet achieved the full potential of technology growth in the past decade or so.
Personally, apart from a handful of airline CEOs like Tony Fernandes of AirAsia, David Neeleman of DGN/Azul and Rob Fyfe of ANZ, I haven’t seen many airline executive who dare to try new things.
In fact, I’ve met industry renowned executives ( that I have much respect for ), who still fear to try new things.
We are in a industry that still tends to think traditionally. Because of this traditionalism itself, despite being better known as an airline business expert, I started consulting airlines for social media – since I had no airline business credentials to prove my ability despite the knowledge. But it is only then that I realised that despite many companies having had success with social media – how hard it was to convince airlines to embrace social media. In this league were some of the most successful legacy airlines of the industry.
My point here is not to prove that social media is a must for an airline to succeed. But, by ignoring the new technologies, and not adapting to the way the world’s business are using them to their success – and how social behaviour has changed with them – we, as an industry, are further pushing ourselves into the danger of red ink.
The colossal fear of trying new things, contributes to the colossal lack of success, our industry faces.
And those who adopted the new technology, from AirAsia to Air NZ to Emirates ( lacks social media, but unbeatable in e-commerce ), have achieved success through it.
Adapting to new technology will not make our industry profitable overnight, but it will definitely help us to reach there.
What do you think ?
This post was inspired from a conversation with Kathleen Tan, AirAsia Head of Regional, on Twitter.
I agree that one of the reasons is the fear of trying something new. Finally, they have tried new things like ancillary revenue and it seems to be working in terms of earning and they controlled capacity tightly that air fares went up by 20%. Both actions are not exactly travelling public friendly. But earnings are earnings.
Aviation is heavily taxed and a lot of governments consider the sector as a cash cow to fund the general budget.
The Majors in the US have made a lot of profit in Q3 and increased international traffic by 10% to 20% while holding back on capacity, that indicates how much spare capacity they had in the system. I don’t believe that the core business functions and flying and maintenance operations are profitable, at a lot of what we see as profitable airlines.
Only time will tell
Couldn’t have agreed more. In fact I do not believe we will see a profitable RyanAir if we take out ancillary revenue – so do many legacy carriers ( with other income sources ). However, I believe that there are many efficiencies, and cost savings achievable if we use better technology – especially regarding IBEs and other forms of reservations.