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New directions for the airline industry

New directions for the airline industry. Robert Kuijpers Former Executive Chairman of SN Brussels Airlines. Background to Airline industry. Not all doom & gloom In Europe: +/- 11 million seats per week 25% are no-frills Load factors: Europe 65% USA 85% Asia 80%

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New directions for the airline industry

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  1. New directions for the airline industry Robert Kuijpers Former Executive Chairman of SN Brussels Airlines

  2. Background to Airline industry • Not all doom & gloom • In Europe: • +/- 11 million seats per week • 25% are no-frills • Load factors: • Europe 65% • USA 85% • Asia 80% • 8 million passengers per week • Underlying growth of traditional carriers: 4%

  3. The international market Four types of players: • Mega Network • Network • Non-Network • Pure Leisure Non-Network

  4. Mega Network Carriers • Large domestic market • Intercontinental flights • Interlining/code sharing • Alliance member • Many primary/secondary feeder markets • Multi-class product • Complex revenue management system (costly)

  5. Network carriers • Non-existing/small domestic market • Niche intercontinental flights • Interlining/code sharing • Most carriers join an alliance • Some feeding • Multi-class product • Complex revenue management system

  6. Non-Network carriers • Some domestic • Simple revenue management system • Point-to-point • Ancillary revenue is critical • Aggressive pricing/cost focus • Primary airports (except Ryanair)

  7. Pure Leisure Non-Network carriers • Some intercontinental • Simple revenue management system • Point-to-point • Set-only product • Aggressive pricing/cost focus • Primary airports

  8. Challenges (1) • European margin: 0,6% first profit in 6 years (carriers with long haul) • Decline in premium passengers in Europe: +/- 13%

  9. Challenges (2)No Frill airlines Point-to-point: • Exclusive traditional carriers: 1850 connections • Exclusive No-frill carriers: 700 connections • In direct competition: 300 connections Example: BRU-BCN -60.000 CRL-GRO +150.000

  10. Challenges (4) Middle East carriers: • Emirates: 74+93 (45 A380) • Quatar: 23+25 (2 A380) • Ethiad: 8+31 (4 A380)

  11. Everyone makes money EXCEPT airlines! Return on Capital Employed:

  12. Conclusions • The aviation industry is segmenting, regional centres are being served point to point • Traditional airlines are reducing costs, thereby using certain aspects of the business model of low fare airlines • < e-ticketing - distribution - e-commerce > but also business class, full fare economy, best buy, one way fares and ancillary revenue.

  13. Recommendations • Direct contact between tourism boards, PCO,s and convention centres with the airline will become more and more important • A modern airline can predict its loadfactor 12 months out, passengers for an event are ideal for the airline if the forecast is low • Convention centers can use this to attract an event , the event organisors can get more attendants.

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