Success in the airline industry remains elusive. While many carriers have returned to profitability, Jetsgo’s recent filing for bankruptcy protection illustrates the importance of a sound business model. The good news is that passenger demand is up and several major carriers have now completed their restructuring efforts.
While the economic situation is far worse today than it was in the early 1990s, thanks in no small part to 9/11 and the Iraq War, profitability is possible for both network and low-cost carriers. The key is to build strategies that don’t compromise successful, unique points of differentiation — because, right now, business models are blurring. Both network and low-cost carriers are converging on a “middle ground,” which, over time, will result in a game of commodities. To prevent this, careful consideration of competitive advantages is needed across all parts of the business, in particular, channels to the consumer, service model and operations. Of course, other factors, will also be critical. But targeting the right consumers with the best business model is paramount for a successful, long-haul journey.
A changing landscape
The composition of the industry has changed dramatically in just a few short years. Recent market share changes are driven by low-cost, “no-frills” carriers capitalizing on structural cost efficiencies and leveraging other advantages in the marketplace. For example, they enjoy lower labour costs and use of secondary airports on routes, as well as high seat density and fast “at-gate” aircraft turnaround time.
As a result of intensifying price competition, most network carriers have suffered a decline in revenue per seat mile. Unfortunately, investment capital and financing are becoming more costly and ...