TravelNewsAsia.com

   

 

Sabre Airline Solutions’ Global Survey on Key Industry Challenges

Travel News Asia Thursday, 17 May 2007

Fuel cost is the top issue on the minds of Asia Pacific airlines, according to results of a survey conducted in March 2007 among international airline executives by Sabre Airline Solutions, a leader of software and services for the airline industry.

While concerns about the environment are growing significantly in international markets, fuel costs dominate all other issues impacting the airline industry. By wide margins, the 197 leaders of the airlines who participated in the survey viewed fuel costs as their top challenge and the most significant impediment to profitability. Government regulations and customer loyalty round out the top three issues impacting the airline industry. 

According to the International Air Transport Association, the industry spent US$112 billion on fuel, which was 26% of airlines’ operating expenses in 2006, up from US$44 billion, or 14% of operating expenses, in 2003. This year, it is forecast to grow to US$120 million or 26% of operating expenses.

North American and international airlines were virtually identical on the impact of fuel costs with 95% of international and 94% of North American airlines saying it will have a “significant” cost, revenue or operational impact. 82% of North American and 77% of international airlines said government regulations would have a significant impact; and 77% of North American and 74% of international airlines cited customer loyalty.

While high fuel costs are a top airline concern, the Sabre Airline Solutions consulting practice said cost savings in this unpredictable facet of operations can be achieved.

“Our consulting group recently engaged with a North American carrier and a Latin American carrier and found US$5.1 million and US$8 million, per year, of potential fuel savings for these carriers, respectively,” said Khaled Al-Eisawi, of Sabre Airline Solutions consulting, “This level of savings opportunity is significant for any carrier.”

The emergence of environmental issues, as well as the disparity between airlines headquartered in North America and those based in Latin America, Asia, Europe, Africa and the Middle East was also highlighted in the Sabre survey. Only 5% of North American airlines currently view environmental concerns as a major challenge, while 34% of international airlines named it as one of the three biggest challenges they will face in 2007. 

“As long as U.S. carriers are focused on survival and rebuilding their balance sheets, and their regulatory climate is not pushing hard, they will not likely embrace environmental concerns as much as European or other regions’ carriers,” said Steve Hendrickson, Sabre Airline Solutions senior strategist. “The momentum for potential regulatory actions against airlines’ carbon emissions is much more pronounced in Europe than in the United States. Also, U.S. airlines are still obsessed with the emerging financial recovery they are slowly achieving, while carriers in many other regions are largely doing pretty well.”

Some 48% of respondents believe developing new revenue streams is important to the overall airline revenue strategy, but only about a third or fewer thought some of the most talked about ideas for generating new revenue would be effective, such as offering unbundled pricing and service.

35% said charging extra for seat selections would be an effective source of new revenue and even fewer said in-flight entertainment (34%), meals (24%) and inflight comfort items such as pillows and blankets (17%) would be effective revenue sources. There was a significant difference of opinion on this issue between North American and international airlines, however; 30% of international airlines said meals could be an effective revenue source but only 13% of their North American counterparts agreed.

Slightly more than two thirds of the respondents - 68% - predicted the number of lowcost carriers would increase by January 2008, while 9% believe the number will decrease and 23% predict it will stay relatively the same. Far less than half the airlines surveyed saw increases in the number of regional or international long-haul carriers. The majority of respondents (89%) in Asia and Latin America believe online air bookings will increase in 2007. Among those who book their travel online, airline executives said six out of 10 will book through an airline’s website while the others will use online distributor websites.

Sabre Airline Solutions conducted the online survey between March 13 and March 23, polling some 197 airline executives from 101 different airline companies.

“While most airline-related surveys reflect the opinion of passengers on airline service, our survey polled the world’s top airlines on the issues that are directly affecting them, their operations and roadblocks to their successes,” said Gordon Locke, vice president, Sabre Airline Solutions and Distribution Marketing.

Detailed Results

Industry Impact (When asked to rate on a scale of 1 to 5, with 5 representing significant impact, the percentaage of airlines who rated the following issues either 4 or 5 as having the greatest impact from a cost, revenue or operational standpoint)

Fuel costs …………..……… 94%
Government regulations ….. 79%
Customer loyalty …………... 75%
Security concerns …………. 58%
Labor contracts ……………. 55%
Alliances …………………….. 50%
New entrants ……………….. 42%
Airline mergers …………….. 34%
Airline bankruptcies ……….. 34%

Industry Challenges (When asked to identify the three biggest challenges facing their airline in 2007)

Fuel Costs …………….….. 91%
Customer loyalty …………. 55%
Government mandates ….. 40%
Security …………………… 34%
Environmental Impact …… 25%
Safety ……………………... 19%
Mergers ……………………. 18%

Industry Revenue Impediments (When asked choose the top three biggest revenue impediments to their airline in 2007)

Fuel costs ………………..….…… 91%
Labor costs ………………………. 44%
Airport costs ………………….….. 43%
Distribution costs ……………...… 39%
Government regulations .............. 29%
Inability to secure new routes ….. 25%
Management costs ……………… 20%

Effectiveness of New Revenue Sources

Seat Selection

Effective ………. 35%
Neutral ………… 24%
Not effective ….. 41%

In-flight entertainment (movies, earphones, DVD players, etc.)

Effective ………. 34%
Neutral ………… 26%
Not effective …… 40%

Meals

Effective ……….. 24%
Neutral …………. 22%
Not effective ….. 54%

In-flight comfort items (pillows, blankets, etc.)

Effective …….…. 17%
Neutral …………. 28%
Not effective …… 55%

Change in carrier types by January 2008

Number of low-cost carriers

Will increase …... 68%
Will decrease ….. 9%
No change …….. 23%

Number of regional carriers

Will increase …… 37%
Will decrease ..... 26%
No change ……… 38%

Number of international long-haul carriers

Will increase …… 41%
Will decrease ….. 13%
No change ……… 46%

Survey demographics

Carrier Type

U.S. Major …………………. 9%
International Long Haul ….. 18%
Traditional Flag …………… 25%
Regional …………………… 20%
Low Cost Carrier …………. 10%
Hybrid (combined elements of full service with value focused) ……………………. 18%

Headquarter Location

North America …………………. 32%
Europe/Middle East/Africa …… 36%
Latin America …………………. 10%
Asia …………………………….. 22%

See other recent news regarding: Travel News Asia, Sabre, Fuel, Tourism, Visitor Arrivals, Survey, Research

Subscribe to our Travel Industry News RSS Feed Travel Industry News RSS Feed from TravelNewsAsia.com. To do that in Outlook, right-click the RSS Feeds folder, select Add a New RSS Feed, enter the URL of our RSS Feed which is: https://www.travelnewsasia.com/travelnews.xml and click Add. The feed can also be used to add the headlines to your website or channel via a customisable applet. Have questions? Please read our Travel News FAQ. Thank you.

     

Advertising
Advertising

 
Copyright © 1997-2022 TravelNewsAsia.com