Part 2 : Commercial Aviation Industry
With 2,000 airlines operating more than 23,000 aircraft at 3,700 airports around the world, the commercial aircraft industry is the backbone of the Aerospace industry. These airlines serve a total of more than 3.5 billion passengers a year or about 96,000 passengers a day. The commercial aircraft industry has been growing at 5% per year over the past 30 years and is expected to double over the next decade. This article examines 4 trends of the Commercial Aviation Industry.
1. Shifting Market Landscapes
According to PWC, the rapid growth of air travel in developing markets, such as Latin America and especially Asia, is shifting the industry’s center of gravity. Middle East–based carriers such as Emirates, Etihad Airways, and Qatar Airways are taking a large slice of the formerly profitable Europe–Asia traffic from those continents’ legacy airlines.
The Middle East carriers are highly dependent on connecting traffic, because their home markets are limited by the smaller population of their region. Yet their unique geographic positioning — most of the world’s population is within eight hours’ flying time — means they are able to capture a disproportionate share of long-haul market growth.
Similarly, low cost carriers continue to experience above-average growth rates for the industry, particularly in emerging economies with many first-time fliers. Worth noting, however, is that low cost carriers also increasingly face rising customer expectations, especially in mature markets. These carriers will need to find the right balance between making investments to improve the experience they offer and maintaining their cost advantage.
Source: Global Industry Analysts
2. Growing Demand for Commercial Aircraft Leasing
According to a report by market research publisher, Global Industry Analysts, the global market for Commercial Aircraft Leasing is projected to reach US $314.8 billion by 2020, encouraged largely by the healthy outlook for the world commercial aerospace industry.
Aircraft leasing, as an alternative to outright purchase, is growing in prominence. Leasing allows airline operators to shore up cash flows, as they don’t need to earmark huge capital outlays required for aircraft purchase. It also eliminates the long waiting period associated with new aircraft purchase. Aircraft leasing is a cost effective fleet management strategy for low-cost carriers with limited capital outlays.
The key factors driving growth in the market include increase in the number of low-cost carriers in developing countries, and the need to expand fleet sizes to accommodate the expected growth in air passenger and cargo traffic.
Critical Barriers to Digital Adoption by Airlines
Source: Digital Readiness for Customer Experience in the Airline Industry, Accenture 2016
3. Digital Transformation to Building Customer Loyalty
In an increasingly digitalized world, customers are demanding more personalized messaging, customized promotions and are increasingly fickle towards the messages they respond to. The commercial aviation industry, especially the airlines, is a good example of this.
In response, airlines are customizing and personalizing their propositions and user experiences to make an easy-to-use compelling model to create brand loyalty. Once upon a time, the airline experience was a simple transaction between an airline, a travel agent and a consumer. Today, this is a complex buying process that transcends the initial ticket purchase to include a multitude of pre- and post-flight services such as online check-in, seat allocation, car hire and hotel booking.
While some newer airlines have adapted to the digital revolution with greater ease and have been able to adopt innovative approaches to digital marketing and customer data capture, the majority of airlines are struggling to catch-up. As omni-channel purchasing and app-based services increasingly become the norm in customer buying habits airlines must continue to review their digital strategies to ensure that a seamless – and personalized – buying experience is available irrespective of what device the customer is using.
Additionally, Big Data can be a powerful force in transforming the industry towards the digital revolution and could be one of the most influential initiatives to hit the airline industry since the early days of computerized reservations systems of the 1960s. However, to create a truly personalized experience for the customer firms must also be able to effectively mine multiple streams of data from across the organization and be able to integrate, harmonize and interpret that data instantaneously. Information points such as user history, geographical location and recent browsing behavior can all be used to build up a personalized picture of the customer. Digital transformation is the facilitator to mining this data effectively and using that knowledge to create truly personalized and customized messaging and propositions for customers.
4. Need to Nurture Aviation Talent of the Future
According to ICAO, in the next 20 years, airlines will add 25,000 new aircraft to the current 17,000-strong commercial fleet. By 2026, 480,000 technicians will be needed to maintain these aircraft and over 350,000 pilots to fly them. More critically, it is also expected that a large contingent of the current generation of aviation professionals will retire, while aviation continues to compete with other industries for highly skilled professionals.
In today’s fast-moving global context, the need to nurture diverse talent is critical to success for the commercial aviation industry to stay agile and ahead. In a traditionally male and strongly aviation-industry experienced industry, there is a need to grow talent across gender, geographies, cultures and cross-industries.
Additionally, businesses need to recognize that developing people takes time and requires investment and then act accordingly. What’s more, and of particular relevance to the Commercial Aviation industry, skills development needs to go beyond technical training. Softer, people skills should also be a key part of training as research shows that effective line managers play an essential role in retaining talent. How training and development is delivered is also changing, from classroom style learning to on the job training and mentoring, with resources and learning tools available online and for mobile devices, making them much more user-friendly. Organizations should consider their development activities in line with these changing requirements and should take steps to measure how effective their development activity is, using clear KPIs to track and improve results.
Lastly, CEOs and HR Heads need to rethink their people strategy and implement holistic talent management if they are to attract, develop, and retain the best and brightest.
ABOUT THE AUTHOR
Kent is the Deputy Managing Director for Morgan Philips Executive Search, specializing in Aviation, Aerospace and Defence executive search across Asia Pacific. He is a leader in his field where he maintains strong relationships with the C level executives and the Board of Directors of some of the world’s largest Aviation and Aerospace companies. Due to his strong business and market acumen across the region, Kent has provided insightful opinions and advises to the leaders in the industry.
He has been quoted by Singapore’s mainstream media ‘Straits Times’ and from the Aerospace Association of Singapore Industries regarding his views on the talents within the Aviation and Aerospace industry across Asia Pacific.
He is currently based in Singapore but travels extensively for his assignments. With his vast experiences within the industry, he has successfully helped 2 major recruitment firms in Singapore and China to setup their Aerospace practices.
Kent will be in Germany for the Berlin Airshow which will be taking place from 1st June to 4th June where he will meet several Key Appointment Holders as well as Government officers.
Feel free to connect with him to have an open discussion regarding the industry or follow him on LinkedIn.