Why North American airlines have to adapt to a New World Order
The aviation market is in a state of upheaval, with fewer carriers competing across more borders than ever before.
With competition increasing across long-haul routes, how will airlines respond to demand? Will it be with increased service or by packing more onto planes at the cost of passenger experience? And where does technology factor into this discussion?
Last week’s CAPA America’s Aviation Summit highlighted some of the stark realities facing North American carriers, who are basically faced with the prospect of adapting to a New World Order that includes immense sector growth in Asia, the shifting realities of Open Skies and the enormous strides in global service standards.
Here are some thoughts on how this all plays out for North American carriers.
Asia on top
AirAsia CEO Tony Fernandes was the highlight of the event, as he rarely travels so far away from his home base for speaking engagements.
He made this very clear and then proceeded to show a slide that indicated how many people lived within the regular service area of his airline, AirAsia: nearly 3 billion.
By focusing on this market, the airline is poised to dominate, even as other carriers come in to compete. In comments to the crowd, Fernandes said:
I welcome all competition, we will destroy you! Jokes aside, we are still the lowest cost airline in the world. In the end, the consumers win and they have allowed us to grow to where we are. There’s a huge amount of opportunity…Asia is going to explode.
With the impending growth of aviation in Asia — China alone is set to outpace anywhere else for jet deliveries by 2030 — China-originated traffic is the easy, low-hanging fruit.
For carriers like ANA, this is a vital flow of traffic, says Tadashi Matsushita:
Inbound traffic from visitors to Japan is increasing. We are focusing on this inbound traffic as well. We are confident that having an inbound hub in Tokyo puts us in a good position.
Korean Air’s John Jackson is already leveraging the growth in this market:
I can tell you that Korean Air won’t look back at 2015 and say why didn’t we talk about China. China is essential to our strategy, we have the most destinations of any non-Chinese airlines.
AirAsia’s Fernandes also sees some missed opportunities serving the long-haul markets in Asia, something that the major U.S. carriers are missing out on given the size of most cities within China and India:
The long-haul offers a huge opportunity for US airlines [in Asia]. When you watch US airlines, they are pre-occupied with domestic and their hubs.
I never understood why they didn’t see the opportunity in long-haul. Theres a huge opportunity for sure. As visa restrictions come down, we’ll see more of that.
We’re interested in the secondary and tertiary cities – but in China those are huge cities. China, India and Southeast Asia are amazing markets with very little competition.