Recent market research report by Bombardier, a leading aircraft manufacturer reiterated the profit focus shift that will dominate the airlines industry in the next decade.
Airline profitability and financial stability will increase by prioritizing profit per passenger over cost per seat.
The present focus on high-volume, low-fare sales runs counter to the best interest of airlines. The strategy turns seats into low-yield commodities, which keeps the industry from reaping adequate profits from operations. Congestion and a focus on cost-per-seat instead of yield-per-passenger, have also resulted in poor passenger experience. As airlines seek to bolster profitability, they will pivot to right-sized aircraft in order to capture underserved or new intra-regional routes and relieve congestion both outside of and within the cabin. Precision-planning of intra-regional routes according to local demand, and the introduction of “closer to home" services in appropriate catchment areas will offer customers a less congested airport experience.
Right-sized aircraft will also offer better pitch and seat width, as well as passenger-friendly cabin design. This puts value back into the equation, allowing airlines to charge sustainable fares for improved services.
The challenges become more localized than globalized for the industry:
• Overcapacity and fare pressure will reduce per-passenger yields,
• Intra-regional routes represented 80 percent of global air traffic in 2016, and will continue to be the largest traffic flow segment, growing 5 percent CAGR through 2036.
• Over the next 20 years, more right-sized aircraft will serve more intra-regional routes.
And hence the focus remains tightly centered on accurate forecast of shifting demand and appropriate pricing strategy.