We had a talk with Daniel Justin about one of his big passions – the airline industry.
- What do you believe is going on in the European airline industry? “Since the millennium we have seen changes in the business models and strategies of European airlines, as the low-cost-carrier (LCC) model began blooming and started to take market shares from the established full-service-carriers (FSC). The LCC model comes from the US and focuses on providing a single product (flight tickets) without including fringe services, while serving primarily short-haul routes with low operating costs and an aggressive positioning in the price-sensitive market. The global financial crisis certainly supported the growth of LCCs, as customers became more price conscious. However, over the recent years we have seen the emergence of a hybrid model, in which airlines offer more than just a single class and ticket levels, as well as operating long-haul routes and a stronger network that comes closer to the traditional FSC hub-and-spoke model.”
- Which factors led to the emergence of LCCs in Europe and why do you think they have grown so strong? “As many industries, the airline industry was heavily regulated in the 1980s and while the US-deregulation process of this industry began in 1978, the European liberalization progress first happened between 1988 and 1997. This led to the loosening of power of the national flag carriers of the European states and allowed for new entrants, like LCCs. Further, the rise in commercial aircraft leasing led to a decrease in capital requirements for new airlines and thus lowered entry barriers to the airline industry. However, I do believe that the dynamic strategies of LCCs in Europe led to their strong growth, as they allow for more flexible network planning (quick dismissal of unprofitable routes), simple and easy to understand products, early offering of buying tickets online and their rather new aircraft fleet, which allows for lower operating costs, less fuel consumption and enhanced customer perception of the aircraft quality.”
- What do you expect to happen in the airline industry in the future? “While the airline industry generally is not prone to be the most innovative industry, as air transportation is a rather static mode of transportation, we have seen airlines pursuing new strategies to survive in the market. This includes FSCs acquiring other airlines to increase their position in different geographical and service markets, FSCs launching their own LCC airline brands, the emergence of a hybrid model and strategic network alliances between LCC, which typically is a FSC activity. Thus, I believe that we will see some interesting changes in the ways airlines will operate, collaborate and earn money. The need to be game-changing is growing strong and airlines are intensifying their innovation activities: SAS has founded its innovation lab in 2016, SAS lab, which is working on innovative ideas that can change the way we travel – from electronic baggage tags to check-in rings. Lufthansa’s Innovation Lab is working on co-creation with partner companies to reach the Lufthansa passengers for other products and to enrich air travel. Whatever innovations will happen, one thing is for sure – it’s going to be very interesting to follow!”