Airline Industry Trends, Changes, and Innovations

September 11 Incident

Increased Security

The September 11 terror incident in the USA led to an increase in security checks and measures across the entire airline industry. The need to combat terrorism has seen airports fitted with scanners for the main purpose of helping with the searching process. The US Senate then since passed the Securing Aircraft from Explosives Responsibility (S.A.F.E.R. A.I.R. Act), which allows the use of advanced imaging technology to create individuals’ visual images. The technology shows the skin surface of all travelers and reveals other body objects as applicable, such as explosives, weapon components, and narcotics.¹

Increased Regulation

The US President signed the Aviation and Transportation Security Act into law in November 2001. The new regulation empowered the Transportation Security Administration (TSA) to undertake the screening of passengers, the establishment of security policy, as well as performing other related security functions. Additionally, a new department, the Homeland Security, was created in 2002 with the purpose of strengthening national security. It combined TSA together with other 21 federal agencies, forming a single department devoted fully to national security.

In Canada, a new regulatory body, the Canadian Air Transport Security Authority (CATSA) was created. The responsibilities of CATSA include screening travelers together with their baggage, among other security related roles.

Changes in Technology

Online Reservations

The airline industry has turned into self check-in services in line with the new technological advancements. Airlines are setting up automated services that allow travelers to receive services through a computer interface.² This applies mainly to booking reservations by customers where individuals log in to the airline’s websites and choose the reservations that they wish to make. The traveler can download and print his or her ticket without physically visiting the booking offices once the bookings are made and payment made. This trend aims at increasing quality service delivery and save on the cost of operation.

Upselling

There is rising convergence between retail and airline industries. With the advancement of technology, particularly the Internet, airlines are presenting an opportunity for their travelers to do their shopping as well while in the comfort of their airport lounges.³ The availability of handheld browsing devices, including iPads, Smartphones, and laptops that are owned by almost every passenger has provided airlines with the opportunity to exploit a new business front. Customers can shop online and pick their goods or have the goods delivered to their physical locations. Airlines are seeking to explore on the convenience created by information technology to earn extra revenues on top of their primary travel business.⁴

Kiosks check-in

Airlines are rushing to establish check-in kiosks in strategic locations to encourage their customers to utilize self-service, instead of relying on face-to-face service encounters. The check-in kiosks provide several services, including automatic teller machines, to help with ticket servicing and bank withdrawals, among other services.⁵ The airline industry is capable of serving many customers at the same time, while boasting of certain appeal and enabling the airlines to standardize their service delivery. The industry is also cutting down on operating costs as a result of relying on check-in kiosks where there is no longer need to employ many service attendants to serve the clients. Instead, the automated machines offer these services effectively and efficiently.⁶

Social Media

The airline industry equally embraced social media to benefit from the advantages of its rising popularity. The power of interconnectivity in social media platforms such as Facebook and Twitter is immense and provides companies with the opportunity to reach a wider audience at a very limited cost. These social media platforms are easy to use and have been integrated in almost all versions of mobile phones. Airlines are using their convenience to pass information to their prospective and existing customers. Social media’s ability to re-share details amongst friends makes them highly effective in their performance. Most airlines conduct their customer care services through Facebook and Twitter, in addition to other platforms where travelers can pose their questions or concerns directly. This has eased congestions on telephone lines because customers can still receive directions on their social media without necessarily using their phones.

Customer Demands for Innovation

Airlines are working towards turning their cabins into WiFi hotspots as they seek to increase comfort for their travelers. Advancement in information communication technology has provided an avenue for the innovations, especially within the cabin. Airlines are moving towards offering Internet connections during flight to allow their customers to enjoy instant messaging, as well as wireless email. While cell phone use during flight has traditionally been prohibited, the increasing customer demands to exploit the capabilities of ICT has forced the emergence of this new trend. Radio spectrum for mobile telephone use during flight has already been auctioned off and airlines are already moving towards forming partnerships with telecommunications service providers. Airlines in Europe, the Middle East, and America are already angling themselves to pursue this new practice to increase customer satisfaction.⁷

Marketing Strategies

Low cost vs. full service

Most airlines are adopting standalone, seat-only, short-haul, no-frills service as a way of cutting down on operating costs, while still offering full service. Increased competition in the industry, the ever-rising fuel prices, as well as the growing alliances between carriers are forcing airlines to consider low cost marketing strategies as the best way to maintain their operations.⁸ Airlines are transforming into hybrid service providers and abandoning their traditional niche marketing strategies. As the carriers seek to widen their profit margins, they are virtually focusing on the entire air travel business to bring on board a myriad of add-ons.⁹ Today, carriers operate a multiple of interline and codeshare agreements, including feeder arrangements.

Hub and Spoke vs. Point to Point

The deregulation of the airline industry in the 1970s has seen an emergence of a new method of planning flight routes referred to as a point-to-point transport network. This is opposed to the traditional transport network referred to as a hub and spoke. The new trend known as the hub and spoke involves carriers serving fewer numbers of routes, but maximizing on the frequencies of travel.¹⁰ During such flights, the airlines make maximum use of available cabin space to lower the costs of operations. Thus, the carriers may reduce the number of routes to only 5, but increase the frequency of travel in each route rather than have 10 different routes served by 2 planes with half capacity each week. The centralization of operations, which results from the hub and spoke mechanism, eventually achieves economies of scale for the carriers.¹¹ In other words, the transformation from point-to-point to hub and spoke mainly seeks to enable the airline firms lower their operation costs. The Delta Airlines, for instance, has established a hub at the Hartsfield Atlanta International Airport where it strategically serves all its routes without spending more on operations.

Costs Directly Passed On To Customers

Airlines are resorting to a new practice where passenger airfares only charge individual charges, excluding other additional services. Thus, airfares by most carriers reflect the least rates that are chargeable. This highlights their focus on building competitive advantages. However, travelers with baggage are charged an extra fare depending on the weight of their baggage. Additionally, travelers can choose the types of food they wish to be served during their journey or leave out on the option altogether. In other words, the carriers no longer charge a compound cost that includes foods served in the cabin during flights. This gives travelers an option of regulating the fare amounts to be charged.¹²

Operating Cost

The air travel industry has been grappling with high operating costs, especially after the September 11 attacks in the USA.¹³ Airline firms have been forced to spend more on security as terrorism concerns and related security threats have increased over the last decade. Carriers have invested in new technology equipment used to screen travelers and baggage. New national and international regulations have forced travel firms to spend more as they seek to adhere to the recommendations. Additionally, global fuel prices have also increased sharply over the last decade as demand for fossil fuel increases. Global politics pitting fuel producing countries, mainly under the Organization of Petroleum Exporting Countries (OPEC), and the West have further resulted in unsteady fuel prices.

Bankruptcies

The poor economic conditions, combined with other harsh macro environmental factors, have pushed several airline firms into bankruptcies.¹⁴ In particular, the last decade suffered from one of the worst global financial crises that saw the US economy, as well as several other European economies face shutdown threats. This harsh economic condition affected the airline industry the most owing to its overreliance on international travels. Coupled with rising market competition and unpredictable global oil prices, airline firms across the globe found themselves enduring a very tough situation. The less established firms went down owing to declining revenues and rising operation costs.

Consolidations

The airline industry has witnessed an increase in consolidation of operations between various firms as a way of tackling the poor economic conditions that have affected business for virtually all the carriers. Firms are signing agreements where they seek to pull their resources together to manage the tough business conditions easily. Consolidations in the airline industry are also occurring in the form of agreements on travel routes where individual firms allow their partners to serve certain routes without interfering with them in the form of giving them competition.¹⁵

Rise in Global Business and Travel

The contemporary business environment is sustained by the globalization phenomenon where physical boundaries have virtually been eliminated. Individuals are able to do business in other regions of the world because most governments encourage foreign investors in their territories. Equally, individuals travelling from one global location to another in search of quality education, jobs, or tourist sites have been on the increase over the years.¹⁶ This has seen airlines increase their travels as they seek to serve the increasing global travel demands. The carriers have been expanding their fleet as they anticipate market growth and performance.

Bibliography

“Feeback: Is the Airline Industry Becoming Like Retail?” Flightglobal. 2012. Web.

“Gogo Joins with Allstate to Introduce In-flight Internet Access During Weekend Flights [Professional Services Close – Up].” TCM News. 2013.

Ball, Christopher. “Rethinking Hub versus Point-to-Point Competition: A Simple Circular Airline Model.” The Journal of Business and Economic Studies, 13, no. 1 (2007): 73-87.

Fenn, John William. “Low-Cost Air Travel Set For Take-Off.” Middle East, no. 341, p. 49-50.

Lu, Jin-Long, Hung-Yen Chou, and Pei-Chuan Ling. “Investigating Passengers’ Intentions To Use Technology-Based Self Check-In Services.” Transportation Research Part E: Logistics and Transportation Review, 45, no. 2 (2009): 345–356

Mironenko, Olga. “Body Scanners Versus Privacy And Data Protection.” Computer Law & Security Review, 27, no 3 (2011): 232 -244

Schumann, Jan H., Nancy V. Wünderlich, and Florian Wangenheim. “Technology Mediation In Service Delivery: A New Typology And An Agenda For Managers And Academics.” Technovation, 32, no. 2 (2012): 133–143

Footnotes

1. Olga, Mironenko, “Body Scanners Versus Privacy And Data Protection,” Computer Law & Security Review, 27, no 3 (2011): 232
2. Jan, Schumann, H, Nancy V. Wünderlich, and Florian Wangenheim, “Technology Mediation In Service Delivery: A New Typology And An Agenda For Managers And Academics,” Technovation, 32, no. 2 (2012): 133
3. “FeebacK: Is the Airline Industry Becoming Like Retail?” Flightglobal.
4. Ibid., para 6
5. Jin-Long, Lu, Hung-Yen Chou, and Pei-Chuan Ling, “Investigating Passengers’ Intentions To Use Technology-Based Self Check-In Services,” Transportation Research Part E: Logistics and Transportation Review, 45, no. 2 (2009): 34
6. Ibid.
7. “Gogo Joins with Allstate to Introduce In-flight Internet Access During Weekend Flights [Professional Services Close – Up],” TCM News.
8. William, Fenn John, “Low-Cost Air Travel Set For Take-Off,” Middle East, no. 341, p. 49
9. William, Fenn John, “Low-Cost Air Travel Set For Take-Off,” Middle East, no. 341, p. 49
10. Christopher, Ball, “Rethinking Hub versus Point-to-Point Competition: A Simple Circular Airline Model,” The Journal of Business and Economic Studies, 13, no. 1 (2007): 73.
11. Ibid.
12. “Gogo Joins with Allstate to Introduce In-flight Internet Access During Weekend Flights [Professional Services Close – Up],” TCM News.
13. Ibid.
14. Ibid.
15. “Gogo Joins with Allstate to Introduce In-flight Internet Access During Weekend Flights [Professional Services Close – Up],” TCM News.
16. Ibid.