* United Lufthansa buys final tranche of Iberia assets.
* China Southern, Cathay Pacific and EVA Air merge.
* Airline conglomerate KLMN announces record profits.
* American to pull out of intra-European markets.
* Second runway at Tokyo/Narita delayed for three more years.
* TWA prepares for fourth bankruptcy filing.
* Bob Crandall emerges from retirement to head low-cost startup airline.
* Iata says airline industry made a $1 million profit in 2004, its first for five years.
Coming up in this broadcast: How United Lufthansa recovered from the slump. Where will Vietnam Airlines expand next? And why the European Commission may fine five airlines for price-fixing.
Well, it's fun to speculate about what the world might be like in 10 years' time. But it is also beneficial to step back from every day activities and think a bit about the longer term future.
These mythical stories from 10 years' hence illustrate that in a dynamic business environment some things just cannot be predicted, yet others are likely to remain surprisingly constant. The unpredictable elements include which airlines will merge with which, when the next recession will take place, how high (or low) fuel prices will be, how the aeropolitical environment will change, and the identity of the director general of Iata who announces that industrywide profits have reached such a dazzling level.
Some predictions are safer. It is fair to bet that the airline industry will still be cyclical, with low margins and a constant struggle to make money against a background of rising demand and declining yields. Airport congestion will be a feature. The spread of deregulation will lead to tougher competition and environmental pressures will intensify.
In taking a 10-year look for the survey in this issue of Airline Business, there seemed little point in trying to speculate seriously about business issues. Who knows which airlines will survive, which will fail and which will merge? Who can tell what the global economic and political environment will be like? However, in trying to imagine the airline business 10 years' hence one thing is clear: the information superhighway really will have made its mark.
No aspect of the airline business will be left untouched by the information revolution. Videoconferencing will affect the market for business travel. Consumers' ability to make travel decisions via their PC will transform the distribution system. Interactive in-flight entertainment is already coming on stream.
Many airlines' internal systems are already highly automated, but there is still plenty of scope for further developments - airport systems and maintenance are two prime examples highlighted in this survey.
The detail, of course, remains hazy. Nobody knows what the precise effects of particular technological advances will be. Nobody can tell how airlines - or other businesses - will harness the dormant power currently hidden away in the chaotic Internet. Few would place money even on such apparently basic predictions as how customers will want to buy their air tickets.
Indeed, the future shape of airline distribution is perhaps the hardest aspect of this business to predict. Why should either tourists or business travellers use travel agents if they have access to all the information they need by clicking on an icon on their PC? Or will travel agents become all-powerful? How will airlines retain their loyalty programmes? Will the Internet offer a low-cost distribution channel?
Despite the imponderables, some principles can be established relatively easily. A forward looking, flexible approach will be required. Carriers will need a clear strategy, and a careful definition of which parts of the business are core and which are best left to others - for example, should airlines own travel agents and tour operators, and what IT skills need to be retained inhouse?
To say that close knowledge of the market is required sounds obvious, but the market could change radically in a short space of time, and carriers will need to be aware and take notice. Above all, in deciding which technologies to embrace airline managers will have to exercise good judgement - the need for significant, relatively risky investments might have to be balanced against the cost of not being able to compete in tomorrow's digital world.
To say that close knowledge of the market is required sounds obvious, but the market could change radically in a short space of time, and carriers will need to be aware and take notice. Above all, in deciding which technologies to embrace airline managers will have to exercise good judgement - the need for significant, relatively risky investments might have to be balanced against the cost of not being able to compete in tomorrow's digital world.
Source: Airline Business
