In 2010, things are expected to look a lot brighter for the airline industry buffeted by one of the severest economic recessions in 2008-2009. To cope, in the past year, airlines have been forced to respond by cutting back on flights, rescheduling existing routes and searching for new revenue streams such as charging for aisle seats and baggage. In this article, the author outlines the top five trends in the “flight path” of the airline industry in 2010. Read more such articles at http://www.wns.com/Insights/Articles/tabid/81/Default.aspx

1. Five trends for the
airline industry in 2010
Todd Dirks, Vice President, Travel and leisure
WNS Global Services
In 2010, things are expected to look a lot brighter for 2. Airline-supplier consolidation: As airlines improve
n
the airline industry buffeted by one of the severest services while implementing aggressive pricing
economic recessions in 2008-2009. To cope, in the past strategies, many plan to forge new links with
year, airlines have been forced to respond by cutting back distributors, including travel management agencies that
on flights, rescheduling existing routes and searching for don't rely on the traditional GDS connections. A trend
new revenue streams such as charging for aisle seats that first started two years ago, airlines are expected to
and baggage. continue to implement direct-connect models to
manage products and inventories, and establish closer
According to IATA, the first green shoots of recovery are ties with their customers. For example, last October,
likely to be evident in 2010; passenger traffic is likely to American Airlines indicated its plans to move all
reach the peak levels of 2007 even as airlines drive down indirect volume to direct connections.
non-fuel unit costs by 1.3 percent. As a result, there is
This will change the nature of Airline-GDS
likely to be a tempered optimism in the airline industry
relationships. One notable potential by-product of this
in 2010.
trend could be GDS / TMC consolidation. With
There are some key themes emerging in the ‘flight path’ Amadeus and Travelport considering IPOs, the cash
of 2010 raised could be used to purchase a major global TMC.
The GDS would like to have a more direct impact on
1. Increasing travel demand: Two of the top six U.S.
n
their revenue potential from the carriers and, if this
airlines saw their best traffic results in 18 months this were to occur, a whole new dynamic will impact the
past November. While Southwest recorded a 12 percent already convoluted distribution model.
increase, Continental registered a 2.8 percent increase,
respectively, in miles flown per passenger. These 3. Environmentally-responsible aviation: By March 2010,
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figures represent absolute increases in ‘warm bodies’ EU-based airlines must provide carbon dioxide
flown - a more reliable metric than passenger load emission reports. That's why, over the last six months,
factor. several EU airlines have begun using bio-fuel either
Clearly, the slump in air travel is ending. IATA has wholly or in part on certain routes. This trend is now
now revised its passenger traffic estimates for 2010 spreading to North America where several airlines have
upwards by 4.5 percent (as against the previous indicated their interest in buying eco-friendly jet fuel.
forecast of 3.2 percent in September 2009). An In addition, several EU airlines have begun developing
estimated 2.28 billion people are expected to fly in carbon offset programs as well as implementing shorter
2010, bringing the total passenger numbers back in routes and efficient landing operations as well as best
line with the peak recorded in 2007. practices in fuel management to reduce emissions.
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2. Five trends for the
airline industry in 2010
Two years ago, Richard Branson spoke of coconuts as In 2009, some U.S. and global carriers experienced
an alternative to fly his planes around the globe. multiple slowdowns or ‘sickouts.’ Airline employees
His pioneering measures at Virgin Atlantic has raised believe they have taken more than their fair share of
the awareness about eco-friendly air travel. the pain in the downturn and are now fighting to regain
what they gave up. Even if strikes are not called, such
4. More incentive trips: After a year of bad press, travel
n smaller, targeted actions by the unions wreck havoc
incentives for top company performers are slowly throughout the network at a time when we are starting
coming back. to see the first good news in traffic growth in years.
This is good news not just for airlines and hotels but for
Even with signs of growth, the industry will not be out of
businesses further downstream such as TMCs, car
the proverbial woods in 2010. IATA estimates that airlines
rental companies and restaurants, to name a few.
will record losses of USD 5.6 billion this year – the good
According to the U.S. Travel Association, incentive trips
news is that this number is just over half 2009's
make for sound businesses and jobs. Such trips,
estimated losses.
meetings and events account for 15 percent of all
travel spending, which creates an estimated 2.4 million
jobs, USD 240 billion in spending and USD 39 billion
in tax revenue in the U.S. alone.
5. Union challenges: The U.S. government is working on
n
changing voting rules for unions which will effectively
give them more bargaining power. The U.S. Federal
Mediation Board is considering no longer requiring a
majority vote amongst all potential members for
unionization. For aviation, this would have negative
implications such as higher operational costs and
potentially increased disruption like delays and
cancellations.
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