Back in 2002, when I was researching The Human Race, I dug deep into the world of the airline industry and found it to be in some degree of turmoil. Still recovering from the devastating aftermath of 9/11, the airline industry also had additional challenges to contend with. These included the SARS virus, the continued threat of terrorism, sky high oil prices, a nascent green movement and economy airlines undercutting the established carriers. There was also a strong perception amongst passengers that flying itself was awful.
It seemed a long way off from the glory days of flight in the early thirties and forties. Now, almost ten years later, I am not sure much has changed.
From a business perspective, the airline industry is still a terrible business to be involved in. It appears that few of the airline carriers make substantial profits. Just as they were all recovering from the after effects of 9/11, a global recession struck and that was followed closely by a very disruptive volcano in Iceland last year. Oil prices continue to rise – and fuel accounts for a third of the airline industry’s operating costs. As a result, profit margins across the industry during the past 40 years have averaged a jaw-droppingly low 0.1 – 0.2%. Giovanni Bisignani, a former boss of Alitalia and the head of The Air Transport Association from 2002 to 2011, reminded colleagues in his leaving speech that even in 2010, “the best year of the decade”, they had “a pathetic [net profit] margin of 3.2%”.
What now for the airline industry?
The green movement is now well established and targeting the airline industry like never before. This comes in response to the dangers of aircraft emissions, which are more damaging at high altitude and growing fast as countries like India and China begin to develop their internal markets. In one sense the airline industry is an easy target and will continue to be so despite great advances in fuel efficiency. Similarly, the increased volume of planes in the sky will neutralise any gains for years to come.
What of flyer satisfaction? I think it’s a joke, and I don’t see it improving anytime soon. Ninety-nine per cent of passengers – those who cannot afford private planes or first class tickets – are treated little better than cattle. Every stage of the process appears to be designed to inflict maximum customer dissatisfaction:
- the online check-in
- the hidden extras
- the crowded airport
- the threat of terrorism
- the interminable queuing
- the delays
- the awful food
- the angry passengers
- the cramped seats
- the health risks
- the surly staff
- the jetlag
- the lost luggage
The list goes on…
The stock market, the green movement and the passengers are all less than fond of the airline industry. It seems a rather ignoble position for such an incredible and modern feat of human ingenuity and engineering. Let’s not forget that the first successful aeroplane was only invented in 1903. Yes, that’s right: just 109 years ago.
I don’t see the fortunes of the airline industry changing anytime soon.
That’s because there has been no real innovation in flight since the Wright Brothers invented it. Sure, there have been plenty of incremental and technical improvements that make you travel faster, further and more efficiently. But that is clearly not enough. And so-called “business innovation” doesn’t count. It just seems to make the experience of flight worse from a customer perspective, because it involves squeezing more people into less space for longer.
So what’s next for the airline industry? Unfortunately I predict more of the same: wafer-thin margins, more planes, more pollution and rock-bottom customer satisfaction. It’s a vicious circle with no end in sight, until some clever soul discovers an alternative.
Can someone please hurry up and invent teleportation?