Market Overview: Market Size, Growth, and Outlook
In 2018, the net profit of the global airline industry is expected to increase by $38.4 billion, with an average net profit margin of 9.4 percent, driven by factors, such as strengthening of domestic market conditions and increase in passenger numbers.
- Despite challenges, such as cost front by rising fuel, labor and infrastructure expenses, airlines, are achieving sustainable profits, and 2018 is expected to be the fourth consecutive year of sustainable profits
- Airlines can further witness a potential growth with the support of the government - implementing global standards on security, finding a reasonable level of taxation, delivering better regulation, and building the cost-efficient infrastructure to accommodate growing demand
Key Trends in the Market: Airlines
- Passengers are seeking and willing to pay a premium for reliable airlines, which results in traveler retention through loyalty programs
- Airline passengers demand lower fares and airlines are willing to unbundle services (such as baggage, preferred seat selection, priority boarding, travel insurance, cabin upgrade, meal choices, inflight entertainment, Wi-Fi, bag valet, etc.) from the basic seat product for ancillary fees
- Forecast: Airline ancillary revenue (2017) is $70 billion
- Many carriers have been gradually modernizing their fleet to incorporate more fuel-efficient aircraft, as fuel efficiency is the best lever to reduce cost
- Aircraft tracking and pilot psychological fitness are on the radar of airline companies
- Airlines will focus more on enhancing their products and services to improve customer satisfaction, provide better loyalty programs, and develop next-generation payment solutions
- There will be advancements in ancillary product offerings, and increased investment in mobile and cloud computing to increase airline service delivery robustness
Major Alliances in Airline Industry
Airline alliance is an aviation industry arrangement between two or more airlines agreeing to cooperate on a substantial level. Alliances may provide branding to facilitate travelers, making inter-airline codeshare connections within countries.
- SkyTeam was founded in 2000, and it is the second largest alliance in the world, second only to Star Alliance and ahead of Oneworld.
The Vanilla Alliance is an airline alliance formed in September 2015 to improve air connectivity within the Indian Ocean region by strengthening the cooperation between the airlines of Indian Ocean Commission members.
It is an airline alliance formed in May 2016. It is the world's second alliance (after the U-FLY Alliance) to include only Low-cost Carriers (LCCs) as its members. However, it is the first pan-regional LCC alliance.
The Star Alliance network was established in 1997, and it is the first global airline alliance to offer worldwide reach, and it is the largest global alliance by passenger count, with 689 million.