Your SlideShare is downloading. ×
0
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Airline trends and how to make corporate travel management more efficient
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Airline trends and how to make corporate travel management more efficient

803

Published on

0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
803
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Next in Corporate Travel 2012 Airline Trends and How to MakeCorporate Travel Management More Efficient Rigas Doganis Chairman European Aviation Club , Brussels Visiting Professor Cranfield University, UK Non- Non-executive Director easyJet and Hyderabad AirportTurkish AirlinesIstanbul , 17th October 2012 © 2012 Prof. Rigas Doganis
  • 2. 2000- 2000-2012 An Unstable Decade ? Net Profit or Loss World’s Airlines as % of Total Revenues5%4%3%2%1%0%-1%-2%-3%-4%-5%-6% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007e 2010 Source: Compiled by author from ICAO/IATA data © 2012 Prof. Rigas Doganis
  • 3. Global Airline* Financial Results 2011 and Estimates for 2012 2011 2012 Forecast Net Profit $ Bil. Net Profit $ Bil.North America 1.3. 1.9Europe 0.4 - 1.2Asia – Pacific 5.3 2.3Middle East 1.0 0.7Latin America 0.3 0.4Africa 0 - 0.1GLOBAL 8.4 4.1* Includes LCCs and ChartersSource: IATA 2nd October 2012 © 2012 Prof. Rigas Doganis
  • 4. Despite Profits in 2010 & 2011 An Unstable Industry Faces Further Challenges Recovery slow/stopping in key states – e.g. UK Eurozone crisis unresolved High inflation in China/India and slower growth © 2012 Prof. Rigas Doganis
  • 5. Despite Profits in 2010 & 2011 An Unstable Industry Faces Further Challenges Recovery slowing/stopping in key states – Eurozone crisis unresolved High inflation in China and India Many airlines have weak balance sheets American Airlines long-term debt ….$ 10.2 bil. Air India ………………………………….$ 9.0 bil. Air France ………………………………..$ 8.5 bil. © 2012 Prof. Rigas Doganis
  • 6. Despite Profits in 2010 & 2011 An Unstable Industry Faces Further Challenges Recovery slowing/stopping in key states – Eurozone crisis unresolved High inflation in China and India Many airlines have weak balance sheets Fuel prices remaining at high level © 2012 Prof. Rigas Doganis
  • 7. Fuel Prices Remained High in 2011 and 2012 Jet Fuel and Crude Oil Price ($/barrel)200 (Source: Platts, RBS)180160140 Jet fuel price120100 80 60 Crude oil price (Brent) 40 20 Source : IATA Airlines Financial Monitor July-Aug.2012 © 2012 Prof. Rigas Doganis
  • 8. Despite Profits in 2010 & 2011 An Unstable Industry Faces Further Challenges Recovery slowing/stopping in some states – Eurozone crisis unresolved High inflation in China and India Many airlines in weak cash position Fuel prices remaining at high level Unstopable expansion of LCCs undermines Legacy airlines’ short-haul short- © 2012 Prof. Rigas Doganis
  • 9. Share of “Low-cost” seats on domestic and intra “Low- European routes in each country –Aug.2012 LCC penetration by country (Aug12 OAG data) Spain 67% United Kingdom 60% Hungary 59% Italy 51% Poland 50%Ireland Republic of 47% Portugal 41% Norway 40% Germany 39% Czech Republic 38% Denmark 38% Finland 37% Sweden 37% Netherlands 35% Belgium 33% Austria 30% France 29% 29% Average Greece Switzerland 28% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% Average 2003 = 17% Source: Compiled by author using OAG data © 2012 Prof. Rigas Doganis
  • 10. Despite Profits in 2010 & 2011 An Unstable Industry Faces Further Challenges Recovery slowing/stopping in some states – Eurozone crisis unresolved High inflation in China and India Many airlines have weak balance sheets Fuel prices remaining at high level Unstopable expansion of LCCs undermines Legacy airlines’ short-haul short- Increasing govt. travel and emission taxes (ETS) – impact on demand © 2012 Prof. Rigas Doganis
  • 11. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections2 Structural Changes – Concentration and Consolidation3 Operational Changes /Restructuring4 New Marketing Concepts © 2012 Prof. Rigas Doganis
  • 12. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections Rights Issues - US airlines, SAS $ 720m (2009) $620 (2010) Convertible Loans - eg BA , Air France Government Capital Injections - Air India c. $ 2billion (2009-10) ; JAL $ 6.1 billion debt waiver plus $ 4.1 billion capital injection(2010) Sell Non-Core Assets - eg. April 2010 AF sells Amadeus shares for Euro 195m as does Lufthansa for Euro 97m © 2012 Prof. Rigas Doganis
  • 13. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections2 Structural Changes – Concentration and Consolidation Airlines collapse Run for cover – sell out or merge Join a global alliance Focus on bilateral alliances eg Virgin , Etihad © 2012 Prof. Rigas Doganis
  • 14. Europeans: Run for cover –sell out BMed sold to BMi (Oct 07) GB Airways sold to easyJet ( Jan 08) Alitalia sold (Dec 08) Spanair – SAS sells 80% (Jan 09)- Spanair collapses 2012 09)- SN Brussels sold to LH ( 2009) Bmi sold LH (July 09) and then to BA 2012 Austrian sold LH (Sept 09) Olympic privatised (Oct 09) Air Berlin sells 29% to Etihad ( Dec. 2011) Attempts to sell LOT, Malev, Czech, Tarom all failed Malev, Most of these still face serious problems © 2012 Prof. Rigas Doganis
  • 15. Run for cover – merge Cross- Cross-Border DomesticAir France – KLM (2004) Jet - Sahara (2007)Air China – Cathay linkup (2007) Kingfisher –Air Deccan (2007)Avianca – TACA (Central Am.)(2010) Am.)(2010) Air India – Indian Airlines(2007) Airlines(2007)Lan Chile – TAM (Brazil) (2011-12) (2011- Alitalia –Air One (2008)British Airways – Iberia (2011) Delta – Northwest (2008) Meridiana – Eurofly (2010) Continental – United (2010) Southwest – AirTran (2010) And many more….. Is Consolidation changing industry dynamics ? © 2012 Prof. Rigas Doganis
  • 16. Profile Major Global Alliances in 2012 Share of 2011 Global Passenger-Kms Passenger- Alliance Members Share of World Pass- Pass-Kms % (Oct. 2012) 2011Star Alliance -24 membersAdria, Aegean, Air Canada, Air China, Austrian, ANA, ANZ, China, ANA, ANZ,Asiana,Asiana, Blue1, BMi, Brussels, Croatia, Egyptair, Lufthansa, LOT, 24.8SAA, SAS, SIA, Swiss, TAP, , Thai, Turkish, United-Continental, SIA, United-US Air,Oneworld - 10American, BA, Cathay, Finnair, Iberia, JAL, LAN, Qantas, Royal Cathay, JAL, Qantas, 15.1Jordanian, S7 – Malaysian and Air Berlin join 2012 –Qatar next 0Sky Team -15Aeroflot, Aeromexico, Air Europa, Alitalia, Air France-KLM, China France- 19.6Eastern, China Southern, Czech, Delta-NW, Kenya, Korean,Eastern, Southern, Delta-Shanghai,Shanghai, Tarom, VietnamTOTAL 3 ALLIANCES 59.5 Source: Airline Business Sept. 2012 © 2012 Prof. Rigas Doganis
  • 17. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections2 Structural Changes – Concentration and Consolidation3 Operational Changes /Restructuring Cut non-fuel costs Legacies restructure networks Legacies launch LCC subsidiaries – esp. In Asia Capacity cut-backs – esp. US carriers Increasing Legacy-LCC linkages LCCs move to long-haul – Air Asia X, V Australia, Cebu Pacific , Norwegian , Scoot © 2012 Prof. Rigas Doganis
  • 18. Network restructuring – legacies scramble to find model that works1 Reduce long-haul network refocus on short-haul long- short- eg Austrian , Tarom, Malev, Czech, Gulf Air, USAir, JAL, Kingfisher2 Cut some/many short-haul routes short- eg BA, Bmi, SAS , US Legacy majors , JAL , Czech3 Outsource short-haul operations to regionals/LCCs short- eg.Iberia –sets up Iberia Express 2012 ….. while AF has used CityJet, VLM and French regionals …4 Search for new Business Model eg. Qantas , Air Berlin , Lufthansa expands low-cost airline…… low- © 2012 Prof. Rigas Doganis
  • 19. Organic Growth ? Seats on Intra-European Flights Intra- July 2012 compared July 200820015010050 0-50 easyjet Air France Air Berlin Turkish Iberia Alitalia Norwegian Vueling FlyBe Austrian Ryanair KLM BA SAS TAP Aer Lingus Lufthansa Swiss Wizzair germ an wings NB Airlines ranked by size of seat offer with largest on the right Source: Compiled by author using data from rdcaviation “Capacity Report” © 2012 Prof. Rigas Doganis
  • 20. Growing Links between LCCs and Network Majors Germanwings takes over LH flights ex Hanover, Cologne and Stuttgart (2012) Iberia launches Iberia Express (2012) Air Berlin joins oneWorld ; 29.2% sold to Etihad BA/Iberia take-over Vueling ( Nov.2012) Air France expands Transavia network/fleet (2012) V Australia to feed Etihad in Abu Dhabi (2011) Delta-GOL code share (2011) then Delta buys 3% Gol shares (Dec.2011) WestJet interlines with Delta ,BA ; code shares with American (2011), JAL (2012) jetBlue 19% sold Lufthansa (2008) codeshares with LH, interlines with American, Etihad etcEtc…etc… © 2012 Prof. Rigas Doganis
  • 21. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections2 Structural Changes – Concentration and Consolidation3 Operational Changes /Restructuring4 New Marketing Concepts – Network carriers learn from the LCCs ☺ Simplify/unbundle fares ☺ A la carte pricing ☺ Sell direct online ☺ Develop ancillary revenues ☺ Target higher yields on long-haul – - increase Business seating - introduce Premium Economy © 2012 Prof. Rigas Doganis
  • 22. Airline Responses to Challenges and Uncertainty1 Financial Restructuring – Capital Injections2 Structural Changes – Concentration and Consolidation3 Operational Changes /Restructuring4 New Marketing Concepts © 2012 Prof. Rigas Doganis
  • 23. Impact of Airline Industry Changes on Corporate Travel1. Alliances + New Low-Cost Airlines Low- = many more travel options - not just national/local airline - more choice of airlines esp. if joint FFP - more origins and destinations - more alternative hubs for connections © 2012 Prof. Rigas Doganis
  • 24. The Power of the Mega-Hubs Total Destinations Served - Summer 2011FRANKFURT 267PARIS - CDG 237ISTANBUL - Ataturk 180DUBAI 171LONDON - Heathrow 166 © 2012 Prof. Rigas Doganis
  • 25. The Power of the Mega-Hubs Total Destinations Destinations Served by Served - 2011 Home AirlineFRANKFURT 267 162PARIS - CDG 237 149ISTANBUL - Ataturk 180 162DUBAI 171 109LONDON - Heathrow 166 107 © 2012 Prof. Rigas Doganis
  • 26. Impact of Airline Industry Changes on Corporate Travel1. Many more travel options2. Airline distribution via IT , mobiles and social media …..+ e-ticketing e- - empowers travellers - widens booking options But creates compliance and control issues © 2012 Prof. Rigas Doganis
  • 27. Impact of Airline Industry Changes on Corporate Travel1. Many more travel options2. Distribution via IT , mobiles and social media3. Lower, more flexible and unbundled fares Network airlines forced to match LCC fares/flexibility Airlines with new hubs/routes may offer best deals “A la carte pricing” and ancillary charges Need to widen search for “Value for money” But controlling total travel costs becomes more difficult EMD (Electronic Miscellaneous Document) will help © 2012 Prof. Rigas Doganis
  • 28. Impact of Airline Industry Changes on Corporate Travel1. Many more travel options2. Distribution via IT , mobiles and social media3. Lower, more flexible and unbundled fares4. Alliances may be more useful than airlines Alliances will develop: - common reservations/booking platform - more code-shared flights code- - global connectivity with better hub connections - more cross-selling each others flights cross- - common high service standards – but still problematic Joint Alliance frequent flyer programs will offer - more opportunities to earn points eg THY/STAR - more opportunities to spend © 2012 Prof. Rigas Doganis
  • 29. Impact of Airline Industry Changes on Corporate Travel1. Many more travel options now available2. Distribution via IT , mobiles and social media3. Lower, more flexible and unbundled fares4. Alliances more useful than airlines © 2012 Prof. Rigas Doganis
  • 30. Making Corporate Travel Management More Efficient1. Choose air supplier(s) more carefully Take advantage of wider choice of airlines and hubs Drive down travel costs Try options other than the national or traditional airline © 2012 Prof. Rigas Doganis
  • 31. Making Corporate Travel Management More Efficient1. Choose air supplier(s) more carefully2. If using Travel Management Company be more demanding Squeeze travel costs Demand more transparency Ensure earlier bookings to cut fares Use fewer TMCs © 2012 Prof. Rigas Doganis
  • 32. Making Corporate Travel Management More Efficient1. Choose air supplier(s) more carefully2. If using Travel Management Company be more demanding3. Revise and implement effective Travel Policy © 2012 Prof. Rigas Doganis
  • 33. Priorities May Differ and ConflictBusiness Travellers Want Travel Managers WantUse preferred FFP Best airline deals and discountsDirect flights Minimal travel costsMaximum comfort Fewer suppliersFlexibility Good control and monitoringPreferred hotels Value for money hotelsUse Business Lounges Etc …etcMinimise time away…etc.etc BUT also Happy Customers © 2012 Prof. Rigas Doganis
  • 34. Business Travellers’ Three Main Factors for Selecting Flight : 2010-2012Recommended co. travel dept. In flight Service Reputation of Airline Value for Money Good Experience Direct Flight Most Convenient Schedule FFP Programme % 0 10 20 30 40 50 60 Source: Compiled by author using IATA Airs@t © 2012 Prof. Rigas Doganis
  • 35. Impact of Frequent Flyer Preferences on Travel Costs (Survey of over 1400 Business Travellers in Australia) Survey of over 1,400 Business Travellers in AustraliaSource: McCaughey,2010 © 2012 Prof. Rigas Doganis
  • 36. Enforcing Company Travel Policies is becoming more difficult because (a) More booking channels (b) Individual travellers have direct access to airlines, fares ,hotels etc …i.e.more knowledge … and strong preferences (c) Priorities of traveller and travel manager may differ (d) “Ancillaries” make control more difficult © 2012 Prof. Rigas Doganis
  • 37. Making Corporate Travel Management More Efficient1. Choose air supplier(s) more carefully2. If using Travel Management Company be more demanding3. Revise and implement effective Travel Policy Establish clear policy so travellers know what they can do and what they can expect from travel manager Simplify travel booking process (electronic booking form) Justification/need for travel must be explicit Encourage early booking Change boundary for class of travel Are flexible tickets always necessary ? © 2012 Prof. Rigas Doganis
  • 38. Making Corporate Travel Management More Efficient1. Choose air supplier(s) more carefully2. If using Travel Management Company be more demanding3. Revise and implement effective Travel Policy4. Make greater use of self-booking tools Reduces intermediary costs commissions by 26% Reduces travel costs by 9% (Source: Amadeus) © 2012 Prof. Rigas Doganis
  • 39. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc © 2012 Prof. Rigas Doganis
  • 40. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities © 2012 Prof. Rigas Doganis
  • 41. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities Pressurise TMCs to get better deals and improve transparency © 2012 Prof. Rigas Doganis
  • 42. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities Pressurise TMCs to get better deals and improve transparency Shop around more to get best deals i.e. do not get locked in to 1-2 airline suppliers © 2012 Prof. Rigas Doganis
  • 43. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities Pressurise TMCs to get better deals and improve transparency Shop around more to get best deals i.e. do not get locked in to 1-2 airline suppliers Rethink traditional dependence on national airline – i.e. consider new/different suppliers © 2012 Prof. Rigas Doganis
  • 44. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities Pressurise TMCs to get better deals and improve transparency Shop around more to get best deals i.e. do not get locked in to 1-2 airline suppliers Rethink traditional dependence on national airline – i.e. consider new/different suppliers Think of “hubs” and alliances rather than airlines © 2012 Prof. Rigas Doganis
  • 45. To Increase Efficiency Corporate Travel Managers Should: Adjust travel policies to a more “dynamic“ market place i.e. encourage early bookings, change booking class boundaries… etc etc Enforce policies but understand your “customers” priorities Pressurise TMCs to get better deals and improve transparency Shop around more to get best deals i.e. do not get locked in to 1-2 airline suppliers Rethink traditional dependence on national airline – i.e. consider new/different suppliers Think of “hubs” and alliances rather than airlines Maximise the benefits of self-booking tools © 2012 Prof. Rigas Doganis
  • 46. “The trouble with today ..is thatthe future is not what it used to be” Paul Valery : French Poet 1871-1945 1871- © 2012 Prof. Rigas Doganis
  • 47. For More, Read Rigas Doganis’s:“Flying Off Course: Airline Economics and Marketing” (2010 Fourth Edition) Covers: Airline cost analysis Low- Low-cost airline economics Charter economics Cargo trends and economics New “a la carte” pricing ………..etc etc “Airline Business” (2nd Edition) Covers: Airline Alliances State- State-owned airlines Airline labour issues e-commerce……….etc etc Publisher: www.routledge.com, and also available from www.amazon.com or www.amazon.co.uk © 2012 Prof. Rigas Doganis

×