10 Dec 2019
Posted in Travel & Tourism
Aircraft issues, sustainability, regulation, consolidation and long haul low-cost profit problems to shape airline industry in 2020, says GlobalData
This year has been an eventful one in the airline industry. As 2019 draws to a close, Nick Wyatt, Head of R&A, Travel and Tourism at leading data and analytics company GlobalData, a, looks at the key trends that will shape the industry in 2020, ranging from aircraft issues to consolidation:
“This has been the hot topic of 2019 and it will continue to weigh heavily on the industry in 2020. The Max grounding has been very high profile and when it will return to the skies remains uncertain. Customer and crew confidence will need to be rebuilt and this will be a challenge.
“There are delays and technical issues with other new aircraft too – such as Trent engine issues, with the 777x experiencing high-profile setbacks. All of this is causing havoc with airline route planning and Q1 plans are already heavily affected. Further disruption could well be seen beyond the first quarter.”
“Airlines are an easy target for the ire of environmentalists and there has been much talk of flight-shaming, or ‘Flygskam.’ There is no doubt that sustainability has increased in importance, although the Flygskam phenomenon is being overplayed, with a contradiction between what people say and their unwillingness to stop flying.
“People won’t stop flying en masse because it is the most efficient mode of transport for journeys over 1,000 miles. That said, airlines can’t afford to do nothing and development and testing of alternative fuels will increase.”
“EU261 payments are a growing burden and, in truth, this regulation needs revising. The level of compensation airlines have to pay is excessive. The Civil Aviation Authority (CAA) wants to keep this legislation post-Brexit but even in Brussels there is now some thought that it has gone too far and it would not be a surprise to see some changes in this regard as airlines continue to lobby hard.
“Regulation in regards to aircraft will also increase with the Federal Aviation Administration (FAA) taking Max’s approval out of Boeing’s hands and the European Union Aviation Safety Agency (EASA) refusing to rely on the FAA when it comes to the new 777x – instead insisting on a ‘concurrent validation’.”
Long-haul, low-cost flights
“Airlines will continue to struggle to make long-haul, low-cost flights work. Wow air is a cautionary tale, having attracted price-sensitive traffic but lost money and ceased operations. At present, nobody is making low-cost, long-haul work and that is unlikely to change”.
“The industry has notoriously low margins and not everybody can thrive in an increasingly competitive environment. This creates opportunities for consolidation as companies fail and strategic acquisitions are made. There is already evidence of this in Europe. It is still less advanced than in the US but moves such as IAG/Air Europa is a harbinger of things to come. However, consolidation is unlikely to happen on the same scale in the gulf or Asia.”