Airline business models IATA
The Challenges Facing Today’s Airline Business Model
National flag carriers are struggling for survival, not only due to classical reasons such as increase in fuel and tax or natural disasters, but largely due to the inability to quickly adapt to its competitive environment – the emergence of budget and Persian Gulf airlines.
In this research, we investigate how airlines can transform their business models via technological and strategic capabilities to become profitable and sustainable passenger experience companies. To formulate recommendations, we analyze customer sentiments via social media to understand what people are saying about the airlines.
Have you noticed the rise in budget airlines and those from the Persian Gulf? They are among the biggest threats for national flag carriers today, which cannot operate on the same business model as the emerging competitors. How can the traditional flag carriers turnaround the challenges into profitable opportunities?
The paradox of the airline industry is an interesting one – International Air Transport Association (IATA) reported a 5.9% growth in passenger traffic in 2011, with 9.4% increase in revenue to $598 billion but total profits plunged by 50% compared to 2010.
Not only are aircrafts costly to maintain, airlines also face with a plethora of challenges: increasing oil prices, unexpected events such as the 9/11, natural disasters such as volcano eruptions, global economic crises, regulatory changes, tax increase, soaring rivalry and the list goes on.
But that is only one part of the story. Then there is passenger experience management. We have heard it all before: delayed departures, late arrivals, lost luggage, cancelled flights and so forth. These incidents led travelers to vent their dissatisfaction about airlines, who are constantly under pressure to meet time-based deadlines, cost-saving directives, quality measures and passenger expectations.