Disruption in the aviation sector hasn’t occurred like a bolt out of the blue. The transformations have been in momentum. The case in point is the development of commercial jet airliners in the 50s and the roll-out of jumbo jets in the 70s, which signaled the industry to the impending seismic shifts and the inevitable need of dropping the old guards for trendsetting knick-knacks.
Currently, the Aviation Disruption is on an expansion spree; moving at a breakneck speed, so much so, that if a participant doesn’t identify and act transformative, it might lag unimaginably behind the competition.
Let’s take the case of the US Airliners and its prominent growth pitfalls.
The US Aviation industry has been consistently raising the benchmarks of global service standards and is synonymous to successful, cash-rich aviation. It has a sizeable fleet of top-notch aircraft, strong management, and a robust revenue strategy to stabilize itself in the competitive space.
All going well, right?
Wrong. The biggest pitfall facing the US aviation industry is the burgeoning budgetary gap between affordability and profitability.
Let’s read how.
Affordability a Steep Halt to Profitability for the US Aviation
With increasing per capita income and reducing air travel costs, the number of passengers opting the air route has exponentially doubled, and so are the number of airlines and geographies covered. The advent of ultra-low-cost air carriers (ULCC) and OTAs (Online Travel Agents), chasing down affordability as the topmost criteria for a majority of customers, has triggered a significant disruption that has dethroned the successful airlines out of stability.
To outdistance the competition from both domestic and international ULCCs, the established airlines have also started providing affordable traveler experiences, which are impacting the profitability at scale. As of today, the profit margins of the US airliners are way below the corporate average which is discouraging.
Make no mistake, the ULCCs aren’t vanishing soon and so is the stiff competition unleashed by them on other airlines. Today, the rise of ULCCs has jolted the status-quo of the air transportation in the United States.
Operational Overheads Taking Profits Down in the Drain
The operating environment for the US aviation is quite challenging owing to poor weather conditions. Factors, like airport equipment failures, and never-ending airport constructions lead to interrupted flight operations, leading to loss and a huge burden on cost savings.
Though there has been an appreciable headway in improving flight operations, like better on-time rates, upgraded baggage services, and efficient customer grievance management, the expenses are more than the total revenues, spoiling the expenditure and profitability ratio.
It’s important for the airlines to reduce the operational costs and improve the customer experience simultaneously. While affordability plays an important role, other factors, like enhanced customer service, increased engagement, and easy access to information through technology, can go a long way in securing a loyal customer base.
Digital Transformation and Aviation - Are You Ready to Usher in the Digital Aviation Age?
Digital Technology happens to be the new nerve center of aviation transformation and the subsequent growth. With the boisterous wave of digital revolution, there’s no dearth of defining opportunities for the airliners to carve a unique niche in the ever-competitive markets and retain a strong customer base.
With the help of new technologies, like ISMAC (IoT, Social, Mobility, Analytics, and Cloud), the global air transportation structure has a solid potential to enable operational reliability and service quality, including check-ins, baggage claims, flight information, and disruptive services, like on-the-fly change in flights, automated security checks, mobile immigration, self-service kiosks among more.
So, it’s time to say goodbye to old-line operational metrics. Change is the only constant. Period.