Guest Comment: Flight Centre MD Graham Turner

Guest Comment: Flight Centre MD Graham Turner
By admin


We believe 2013 will be another year of significant change as airlines move to distinguish themselves from the competition. Further airline consolidation is likely to be on the agenda, a move that could create opportunities for competing carriers to fill any void by launching or expanding services, along with modifications to in-flight services and fare structures.

While not all changes to in-flight services and fare structures are universally welcomed by travellers, the positive effect is that these changes create new options.

For example, corporate high flyers will inevitably find better facilities in first and business class cabins, backpackers may be able to access cheaper no frills fares and families may be able to stretch out in premium economy or extra leg-room seats during a long haul flight.

Competition and consolidation

Barely a week went by in 2012 without mention of possible alliances between airlines that service Australia. This is set to continue in 2013, although likely partners are becoming harder to identify in Australia given that the local airlines are now pretty much spoken for.

The effects of this rationalisation on capacity have to some degree been offset by the launch and expansion of new airlines. Further change, coupled with the ongoing growth in Australian outbound departures, could create new opportunities for international airlines to expand or launch Australian services.

No frills airfares

Airlines are aggressively unbundling fares. As a result, services that were once part of the fare are now considered optional extras in many cases.

Low cost and hybrid carriers are leading the race to charge extra and travellers can now expect to pay for everything from checked luggage and assigned seats to in-flight entertainment and the privilege of airport check-in.

In America, some airlines are even charging passengers for hand luggage. How long will it be before we see an Australian airline adopt the same policy?

More innovation

While many airlines are unbundling, others are targeting niches by enhancing their offerings. Expect to see new features at the front of the plane as first and business class cabins continue to evolve into mini hotel suites. Airlines are also listening to the common travel complaints and are recruiting celebrity chefs to enhance in-flight meals, developing faster check-in facilities and, in some instances, larger overhead luggage bins to cater for the growth in carry-on luggage.

At a time when seat pitch is at a premium, extra leg-room seats may also be available — at a price.

The class divide

A class divide is emerging within the economy cabin. As noted above, leg-room is often at a premium, so some airlines are offering travellers a cure in the form of extra legroom seats. Premium economy cabins are also becoming more common and are a popular option for those who want to stretch out without stretching the holiday budget too far.

Margins

Supplier margins have been reasonably stable in recent years.

New entrants have generally worked with the strong Australian travel agency network for mutual benefit, while incumbent airlines have generally been keen to remain competitive.

More of the same is expected. Early indications are that some high profile international carriers are ready to raise margins during 2013, with a view to boosting their market share. Already in 2013, Malaysia Airlines and Emirates have adopted this strategy and look set to benefit.

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