Author: Jonathan Kletzel, Transportation & Logistics leader, PwC US
The aviation sector has long been acknowledged as a critical multiplier of economic growth. So I think it’s good news for everyone that airline CEOs are even more optimistic about short-term prospects for their industry’s growth than CEOs across the board, as found in our recently released 2014 Global Airline CEO Survey.
Still, airline CEOs are slightly less positive about the prospect of growth for their own companies. That’s probably because they’re acutely aware of threats to the industry and the difficulty of containing costs. While demand is on the upswing, so is competition.
Even more importantly, we’re in an era of unprecedented global change, and global airline CEOs know it. They expect technological advances, shifts in the global economy, and demographic changes to transform their business over the next five years. Over the next 20 years, the industry is expected to triple in size, as the middle class grows in developing countries. Airlines will need to keep up.
In client discussions, and at industry conferences, like the IATA’s Annual General Meeting held in Doha over the summer, I’ve been hearing that talent strategies and technology investments are on many airline CEOs’ minds. These areas are also where the largest number of airline CEOs say their companies are already implementing plans for change, along with production capacity and strategies for customer growth and retention. Some airlines are also looking at improving data analytic capabilities, which could prove useful in market segmentation, revenue and price modelling, and flight and operational planning.
In our view, though, there’s one area where airlines still need to do even more -- innovation. Traditionally, airline CEOs have focused on gaining profitability by keeping down costs and capacity discipline. Change in the industry has been incremental rather than transformational, with only pockets of innovation. These tactics, along with consolidation in the industry, have enabled the airlines to move into the black. But to deal with the dramatic shifts occurring in the world, airline heads will need to up their game.
While many CEOs say their companies have plans to improve their R&D and innovation capabilities, or have already made a start, the airline industry has yet to fully explore a broader range of service and business models. And new technologies still have a lot of potential to increase competitive advantage and drive greater efficiencies. We talk more about how innovation can help improve customer service and engagement as well as help companies manage their supply chains, operations, and maintenance in the Airline Survey and in our recent Tailwinds report.
And the timing for such investment couldn’t be better, with many airline chiefs having earnings to invest.
In my work with clients, I see the most successful airlines balancing short- and long-term initiatives. They’re investing in improving the efficiency of their operations, while also spending some of their profits on innovations. The trickiest bit? Choosing the right projects. And that’s something airline CEOs have in common with their fellow chief executives in nearly every industry.
Jonathan Kletzel, leads the US Transportation & Logistics practice. He has more than 15 years of experience helping clients develop and execute business and technology strategies with a particular focus on modernising customer channels, optimising operations, and improving cross-functional collaboration. Jonathan has been serving clients in the travel and transportation industries for over 10 years. Read more.