Tutorial 101: How to fill your Airplane
We all know the irritations of flying. Sometimes it is your smelly neighbour or that screaming child behind you. It could also be that weird dude trying to do yoga in the aisle or drunk/noisy people when you fly home from your holiday. According to a survey from travel agencies the top 3 of most annoying things about flying consist of: 1) screaming children (88%) 2) lack of leg room (76%) 3) poor quality food/choice (52%). For screaming children I recommend bringing duct tape to a flight. It helped me 100% of the time, but sometimes it started the event of screaming and swearing women on the airplane. The problem of a lack of leg room however is not solvable. You just have to deal with it the next few hours. (travel.aol.co.uk, 2012) (economist.com, 2015)
Our professor T. Li mentioned that the airline industry is not a very profitable industry. The Airline industry has grown a lot and it still continues to grow. The revenue the airline industry made in 2004 was 369 billion dollars and in the year 2014 it was 746 billion dollars. The growth was mostly caused by low-cost carriers (LCCs), which captured 25% of the aviation market in 2014. However the profits declined to a really thin margin of 3%. Every company in the value chain: jet engine makers, airports, travel agencies, service companies, and airplane manufacturers etc. are making small profits. It’s ironical that one of the most important link in the value chain, the airline companies, struggle to break even. (strategyand.pwc.com, 2015)
Airline companies have a complex nature of business, which is significantly determined by regulation and exogenous events. These companies must focus on their growth and on their revenue gains. Profits depends mostly on those revenue gains. (strategyand.pwc.com, 2015)
A way to make more profit is to reduce cost per passenger. Airlines request airplane manufacturing companies to make airplanes with more capacity per m². Airlines filed for standing passengers for short flight. However the idea was stopped by regulators for being unsafe for passengers. (dailymail.co.uk, 2015) Some days ago Airbus filed for a patent for new designs in their airplanes. One design is to stack passenger on top of each other and to remove the hand luggage lockers. The leg room will increase and airlines companies can fit in an extra 30% of passengers. (wired.co.uk, 2015)
This is not the first design that try to stack more passengers in an airplane. Previously an airplane company named Zodiac Aerospace came with the honeycomb-like idea, where two passengers are facing front and one passenger facing backwards. This forces people to have a little more intimacy with your neighbour(s). This looks like one of the worst seating designs in a while. However there are some other design that are probably worse. One idea of Airbus was to create a saddle-like chair to decrease the space that every passenger needs. Another idea was to let passengers sit in a more elevated position so that they reduce the need of extra leg room. (wired.co.uk, 2015)
PWC consultancy ask for caution with cost reducing acts. They say that you have to cut the fat and not the muscle. This means that airlines need to cut costs that does not affect safety, reputation, branding, or customer value. You can better reduce costs by improving your operational efficiency. PWC say you can also increase profit by: 1) increase customer expectations and get to know your customers better 2) increase digitization 3) choose your partners strategically. (strategyand.pwc.com, 2015)
The airline will continue to struggle with profit margin, but with the new technologies and shifting customer expectations great opportunities lay ahead. It is important for the companies to investigate those opportunities and to exploit them. Only then it is possible for Airline companies to make a decent profit.