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Sunday, January 02, 2011

2011 - what will it bring?

Happy New Year all.  To start the year off, I thought I'd summarise what I think will be the highlights and themes for the airline industry, in terms of customer experience, for 2011.  These are not centred on any particular markets, but trends I am observing more widely, plus events to be watched.

Connectivity:  Internet access, live news and other broadcasts (e.g. sport), email, SMS and phone calls are going to be the order of the day.  Whether it is driven by domestic business travellers (US) or long haul, the big issues are going to be managing bandwidth, regulating content (e.g. how many don't want to be sitting beside someone accessing adult content) and most of all the nuisance aspect of mobile phone use in the air.   Let's hope security also does not become a problem.

Low cost airlines chase premium traffic:  It is already seen now with Air Berlin becoming a full service carrier, Virgin Blue with premium economy and lounge access, and Easyjet offering fully flexible fares.  As business travel re-emerges, but low cost leisure travel remains flat, the low cost airlines will see more potential in taking on full service carriers where viable.  Watch Aer Lingus pursue premium traffic as it joins a major alliance, again.

Low cost long haul finds a niche:  Low cost long haul airlines have come and gone before, but Air Asia X may have found a model for niche players.  Flying from secondary hubs to secondary hubs.  It requires a very low cost base, but also a competitive premium product offering business class seating at premium economy prices.  Jetstar is adopting a similar model to replace Qantas on lower yielding routes, but don't expect it to take off under the current market environment.

Mergers and alliances continue:  Following United/Continental, it looks like others from SAS to Virgin Atlantic are next for full takeover.  Expect more alliance membership from Asia, Africa and Latin America.  Lone full service carriers have a more limited future outside the Gulf carriers, but also watch airline alliances change on the edges, as carriers start switching.  Some of the most intense competition between carriers is within alliances.

Boeing 787:  The first majority composite airliner, which for passengers will herald in flights with higher humidity, higher air pressure and bigger windows.  ANA should have put the first into service by the end of year (fingers crossed), and if passengers really do notice the difference, it will be a noticeable step up in long haul flight comfort.  However, for airlines they will care far more whether Boeing can address rather serious weight and range issues.

Cuddle Class:  Air NZ's revolutionary new "flat bed" in economy class on its new Boeing 777-300ERs will be launched on the Auckland-Los Angeles route in the next month or so.  If successful, expect Air NZ to expand it on its long haul fleet and for others to follow.  It might work for couples winning to spoon, or families, but most importantly it is the biggest leap forward in economy since personal TVs.  As a side note, expect Air NZ's introduction of freshly cooked food to see in flight catering become a new attraction, if successful.

Premium Economy grows and improves:  Whilst established for some years in the UK and Japan, it has more recently been successful for Qantas, Air NZ, SAS and Air France.  Expect more European and Asian airlines to adopt it as a way of winning long haul premium leisure customers,  and business customers knocked back by travel budget cuts, as well as being able to plug the gap between cattle class and flat bed business class and be a step ahead of the Gulf carriers (none of which offer it).  Carriers in the Americas are most likely to fear it will cannibalise business class.   Premium economy will get better catering, more recline, more legroom, more privacy and will look a lot like business class did 20 years ago...

First Class continues to disappear from more and more routes:  Quite a few carriers have upgraded First Class, whilst dropping the routes which carry it.  Beyond the vanity factor for some carriers, first class as a product has to provide outstanding privacy, catering and ground service to compete with the best fully flat business classes.   However, few routes have enough very high yield travellers who demand this privacy.  Even the Beckhams are known to use Air NZ Business Premier between LA and London.  In other words, business class is looking in many ways a lot like first class did 10 years ago. 

Fuel efficiency above all else: Oil prices will keep slipping skywards, putting more pressure on new engine technology and for the composite fuselage aircraft to deliver.  The Airbus A320 NEO will put pressure on Boeing to decide on its next project once the 787 programme is bedded down, it will be driven by whether it thinks it can get more of a fuel efficiency advantage from updating/replacing the 737 or the 777 first.   However, don't expect Boeing to move fast whilst it want to make the 787-9 work and launch the 787-10.  Airbus will seek to make the A350 the 777 killer, meanwhile the A340 and the 747 will both be a bit less common as both are replaced by more fuel efficient alternatives.

Finally, Boeing 747-8i appears in service:  Boeing's final version of the 747, for passenger service, has had very limited interest (with only Lufthansa, Korean and a handful of VIP orders).  However, the proof will be in the flying.  Lufthansa is expected to launch its fully lie flat business class on this aircraft, which isn't extraordinary in itself (more "about time" really), but the bigger proof will be whether Boeing can meet and exceed expectations of fuel efficiency and overall performance.  If it goes well, it might just pick up a few more orders, which are desperately needed. 

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