Here’s a look at the trends that will affect the way you fly:
Small Town Blues
“Air travel can’t go to all the same places it used to,” contends Mike Boyd, president of Boyd Group International, a respected commercial aviation consultancy. That’s because 50-seat regional jets and smaller 19-seat propjets have become increasingly uneconomic for the airlines to operate.
Contributing to the exodus from smaller cities in the US is an emerging shortage of regional airline pilots. According to a report from by the Governmental Accountability Office, “Pilot schools that GAO interviewed reported fewer students entering their programs.” The reason: “concerns over the high cost of education and low entry-level pay at the regional airlines.”
Consider, it can cost more than $100,000 to earn a degree from a four-year aviation program. According to the Air Line Pilots Association the average pay for regional airline first officers (co-pilots) is $22,000. In contrast, the average pay for an assistant manager at McDonalds is $28,622 according to Glassdoor.com.
New US safety rules also contribute to the regional airline pilot shortage. Incoming first officers now must have at least 1,500 flight hours; it used to be 250.
GAO indicates regional airlines are responding to the shortfall by partnering with aviation schools. Some regionals are even offering new co-pilots “signing bonuses or tuition reimbursements to recruit new pilots.”
But Boyd believes the trend is clear: “Smaller cities out there are going to have to realize that they are part of an air service system business model that’s focused on airport access, not local air service.”
For business travelers not located in major metro areas, that may well mean doing what this BTE reporter does. I used to fly out of my small southern city to Atlanta to catch a plane. Now, I drive east on Interstate 20 for my flight because there is no more local air service.
The implications of the regional airline pilot shortage in the US assumes global dimensions when you realize regional airlines are the entry-point for future cockpit crewmembers. According to information released at the Global Aerospace Summit in Abu Dhabi last April over the coming 20 years world airlines will more than double the size of their fleets. That means they’ll be adding more than 25,000 aircraft. And that means bringing on board some 350,000 new pilots – not to mention in the neighborhood of 480,000 technicians.
Fuelish Notions?
Airline consolidation in the US has gone about as far as it can go. There are a trio of network carriers – American, Delta and United – that, alongside domestically dominant Southwest Airlines, constitute the Big Four standing astride the skyscape. Each of them practices finely-tuned capacity constraint, to make sure that there aren’t too many seats chasing too few fannies.
“The airlines have learned their lesson not to compete on market share based on seat capacity,” says Tulinda Larsen, PhD. Larsen is president of masFlight, another influential aviation consultancy.
As for the effect of lower petroleum prices on the cost of flying, there are two schools of thought. On the one hand, cheaper oil will have negligible, if any, impact on airfares, Boyd maintains, believing it “won’t lower them at all.” By contrast the International Air Transport Association’s 2014 end-year report on the Economic Performance of the Airline Industry asserts, “Consumers will… benefit from cheaper travel, due to the fall of fuel prices.”
IATA predicts an average roundtrip fare, before surcharges and taxes, of $458 in 2015. Adjusting for inflation that’s 5.1 percent lower than 2014.
Of course, another factor driving down the cost of a revenue passenger kilometer is air carriers’ recent multi-billion dollar splurge on fleets of new airplanes. It used to be airlines would miserly hang on to their aging airframes as long as they could, wringing the last useful hour of life from them.
One positive development coming from the days of $100-per-barrel oil was the push for new, fuel-efficient aircraft. There’s a new airplane smell in the air, and it’s invigorating.
IATA says in 2015 commercial carriers the world over will take delivery of 1,700 new aircraft. That works out to be an investment of some $180 billion. Previously, “sustained high fuel costs had made it economical to retire older aircraft at a higher rate. Over half of this year’s deliveries will replace existing fleet.” As a positive result, the substitution of newer planes for older ones will increase fuel economy in the industry as a whole.
As we go to press the debate over the impact of lower fuel costs on fares continues unabated. So, if you assume carriers flying 86 percent full aren’t going to compete on the price of a seat, that leaves (take a deep breath) service. “That’s the buzz,” says Larsen. “That’s what everyone is talking about.”
Raising the Bar at 35,000 Feet
Consider recent rejuvenative moves by American and Delta. A year after closing its merger with US Airways, AA recently announced it’s investing “more than $2 billion to give its customers a world-class travel experience.” Fully lie-flat seats, international WiFi, more inflight entertainment (IFE) options, revamped Admirals Club lounges and upgraded, healthy food options are in the offing.
Meanwhile, Delta Air Lines says it’s “redefining the products it offers customers.” In a move seen by some as a reaction to ultra-low fare Spirit Airlines’ expansion, DL is further segmenting its service offering. It will be offering five cabin options, although not all on the same airplane.
The most direct response to Spirit appears to be taking the economy cabin and making it two-tier: Main Cabin and Basic Economy.
Here’s what sets Basic Economy apart: Delta’s basic fare product won’t offer advance seat selection and there are no ticket changes or refunds. Complimentary non-alcoholic drinks and snacks will be available on most flights, and Basic flyers will be able to order from Delta’s EATS menu on flights greater than 900 miles in length. There’s also access to WiFi, when available. Basic Economy will be available on domestic routes.
By contrast, on domestic runs, Delta’s Main Cabin offering serves up seat selection at time of ticket purchase and offers “flexibility for flight changes.” On long-haul international trips Main Cabin serves free beer and wine, and offers a meal as well as eyeshades and earplugs.
Delta Comfort+ is an up-graded Main Cabin product. The big lure is four more inches of legroom.
Up front, in the pointy end of the airplane, there’s Delta One for long-haul international routes, as well as transcontinental trips from New York Kennedy to Los Angeles and San Francisco; it features full flat-bed seats and “chef-curated” menus. The product on other Delta domestic routes is still known as Delta First Class.
Again, the argument for what’s driving Delta’s new differentiation – aside from the never-ending quest for paying premium passengers – is “absolutely” competition from Spirit, says Mike Boyd.
Despite consolidation, competition is still keen. But is it enough to drive decidedly better corporate deals? Don’t bet on it. Says Boyd, “You’re not going to have much negotiating power. You’re going to have to deal with that.”
Of course, there are premium passengers and then there are ultra-premium passengers. The latter, increasingly, are the province of Middle Eastern airlines. Etihad Airways just unveiled its A380, fitted with a pricey little hideaway dubbed The Residence First Class apartment. It’s a three-room enclave that includes a separate living room, double bedroom and in-suite shower room.
Down the pecking order, to accommodate flyers who can ante up the price, there are nine First Class Apartments per se. Then come 70 Business Class studios. It’s there you’re most likely to find US business travelers.
“Middle Eastern carriers have really become the driving force in customer experience,” says Larsen. “Some of it is real; some of it is illusion.” Middle Eastern airlines have flat out defined the game board in terms of things such as cabin layout and service, but masFlight’s president contends they’ve “lagged behind” in areas such as WiFi and flight disruption management systems. Still, “the perception of the traveling public is that you’re going to have a better customer experience on the Middle Eastern carriers.”
Certainly Dubai-based Emirates and Doha-hubbed Qatar continue their expansive ways, the latter out of a brand-new airport.
The Airport Angle
In addition to growing the air nexus of the Middle East, look for the next five years to open up new connection corridors, especially via Turkey and China. Arising in the former is the €22 billion ($27 billion) Istanbul New Airport, with Phase one of the megaport coming on line in 2018.
It’s supposed to sport the world’s largest terminal under one roof. Initially the airport will be able to handle 90 million passengers per year. By the time all the phases build out that number is set to hit 150 million.
Turkish Airlines will be the immediate beneficiary of Istanbul New Airport. It will allow the carrier to significantly expand operations. And that could mean even more new routes to North America, rendering Istanbul a real competitor in the international arena.
Even as Istanbul accelerates, Beijing is busy building Daxing International. The Chinese are keeping comparatively mum as to specifics just now. But published reports are the airport will be able to handle some 130 million passengers annually and sport an octet of runways.
All that concrete could well bolster China’s commercial aviation ascendance. “It’s a huge country,” says Mike Boyd. “They do need additional infrastructure.” The aviation insider asserts within five years the lion’s share of the seats across the Pacific will belong to Chinese carriers.
Indeed, Asia remains ascendant as far as air traffic concerned. The consultancy Oliver Wyman, using data from PlaneStats.com, identified the Top World Traffic Flows by region. Employing September 2014 numbers, while US – Asia traffic comprised just 4.4 percent of what the industry calls Available Seat Miles, traffic within Asia accounted for an impressive 19.7 percent. These numbers reflect the comings and goings not just of leisure travelers, but of business travel as well. Middle East – Europe (4.7 percent) and Middle East – Asia (4.5 percent) fared comparatively well too.
The airport angle isn’t just about traffic flows, new runways, mega-terminals and expanding passenger capacity. Tulinda Larsen says the push for a better customer experience extends beyond just what happens in flight, and has moved into the airports. “The airports are taking control of their passengers,” she says. “They view passengers as their customers now.” Take wireless connectivity. Not only is free WiFi all but de rigueur these days but the preference is for WiFi “that provides location-relevant information for the passenger while inside the airport terminal.”
More important to the airport piece of the service equation is expediting customers and immigration, rendering it more technology-enabled. Witness convenient automated passport arrivals kiosks at places O’Hare International Airport, Los Angeles International Airport and Hartsfield-Jackson Atlanta International Airport, three of the planet’s busiest aerodromes. Whether all this development ultimately exerts upward momentum on services levels and downward pressure on seat prices remains very much to be seen. What’s clear is that business travelers are in for a fascinating ride.
