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Fri, 2 April 2021

Airlines: A Path Back to Profitability

Accelya has published 'Airlines: A Path Back to Profitability a research-based assessment and report of commerce and retailing challenges and opportunities facing airlines today.

The report is the culmination of a study conducted by Atmosphere Research Group an independent, strategic market research and advisory firm focused on the travel industry for the Air Transformation Lab, which Accelya launched in September 2020 to explore the current state of airline commerce and uncover perspectives on a profitable future for the airline industry.

The report provides a sobering acknowledgment of the severity of the crisis according to airline executives, with 79% viewing the pandemic as the most challenging moment in their careers. In contrast, the report also notes that almost all airline professionals participating in the study (96%) believe the crisis has created opportunities for positive transformations to their business, particularly in the areas of commercial processes, commerce, and retailing technologies. 89% of airline executives believe the crisis will fundamentally change how their airlines do business over the next five years.

Singapore Airlines Airbus A350-900 reg: 9V-SMH. Picture by Steven Howard of TravelNewsAsia.com Click to enlarge.

Among the findings are insights on the advantages of being leaner, less siloed organizations the result of organizations being trimmed due to the pandemic. In particular, airlines are inherently better positioned to innovate, which will play a key role when business recovery begins.

For example, although just 26% of executives considered merchandising/retailing to be extremely important pre-pandemic, 49% believe it will matter more during business recovery. The importance of innovation in offer personalization grew nearly 160% (from 19% to 49%) when comparing pre-pandemic perspectives to current views on business recovery.

In addition, 18% more executives view innovation in dynamic/continuous pricing to be extremely important during business recovery compared to before the pandemic (from 33% to 39%).

We view 2020 as the lost year for airlines, but far from being discouraged, we see airline leaders ready to make big, bold, and even unconventional moves to get back on track," said Henry Harteveldt, President of Atmosphere Research Group. Those airlines that are wise enough to take reasonable risks will be best positioned to advance their commerce and retailing and ultimately return to sustained profitability.

The report highlights direct customer relationships, dynamic commerce, and data-driven retailing as high-potential strategies for revenue growth:

- By 2023, airlines direct channels (digital and offline) will account for 56% of bookings a 12% increase in just three years, and NDC will play a central role. Airlines that plan to use NDC (31%) have already negotiated agreements with some or all of their GDS partners to sell NDC content (flights and ancillary offers).

- Dynamic and continuous pricing is the third most crucial revenue management priority for airlines after accurate demand forecasting and total offer management.

- 44% of airlines viewed data insights as extremely important to their strategic efforts prior to the pandemic. That viewpoint increases to 64% as airlines prepare for business recovery. However, a worrying point of note is that nearly half of all airlines surveyed (47%) believe inadequate data will keep them from fulfilling their visions of dynamically priced offers.

Being in the airline industry has never been easy, but it is now more challenging than ever. Success requires us to collectively bring fresh ideas, approaches, and innovations to the table. The flexibility to adapt to an increasingly dynamic landscape is also critical to growth, said James Fernandez, Chief Commercial Officer at Accelya. Now more than ever before, airlines need independent partners that understand the challenges they face and how to overcome them with a laser focus on delivering value.

Report Methodology and Approach

The research consisted of two core components: an online survey of 60+ airline executives from global network carriers, domestic/regional airlines, and low-cost and ultra-low-cost carriers around the world; and confidential one-on-one telephone interviews conducted by Atmosphere with 10 airline executives from around the world.

The report features charts and graphics that highlight the online survey results, along with anonymized comments from the one-on-one telephone interviews, and relevant findings from Atmospheres syndicated consumer and airline industry research.

The 39-page (2.33 MB) report can be downloaded here.

See also: Future of Airline Distribution and NDC - Interview with Yanik Hoyles, IATA (Nov 2019)

See latest Travel Industry News, Video Interviews, Podcasts and other news regarding: COVID19, Accelya, Forecast, Trends, Outlook.

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