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
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 airlines website while the others will use online distributor
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 worlds 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.
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)
Industry Challenges (When asked to identify the three biggest challenges facing their airline in
Industry Revenue Impediments (When asked choose the top three biggest revenue
impediments to their airline in 2007)
Government regulations .............. 29%
Inability to secure new routes
of New Revenue Sources
In-flight entertainment (movies, earphones, DVD players, etc.)
In-flight comfort items (pillows, blankets, etc.)
Change in carrier types by January 2008
Number of low-cost carriers
Number of regional carriers
Will decrease ..... 26%
Number of international long-haul carriers
International Long Haul
Low Cost Carrier
Hybrid (combined elements of full service with value focused)
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