Major Challenges In Global Airlines

Airlines face a myriad of challenges today one of these major challenges, the global airline industry face is how to operate ‘Profitably’. The industry has struggled to remain profitable with a wide range of margin performance that vary significantly by region.

This is echoed in most of the regions, with only North American airlines consistently managing Earnings before interest & tax (EBIT) margins above 3%. In 2015, North America is likely to take a significant lead in the EBIT (earnings before interest and taxes) margin accounting to nearly half of global net profits.

As per IATA announced 2015 industry outlook, airlines will manage $29.3 billion net profit on expected revenues of $727 billion, achieving a smallish 4.0% net profit margin.

With the focus on profitability, airlines walk the tight rope trying to manage their yields , but the historic data indicates that ‘improving yields’ is another major challenge that impacts all airlines. This is apparent from the fact that over last 10 years, airlines have witnessed 2.6 percent average passenger yield growth while the average cargo yield grew only 1.2 percent. Over the same period the consumer prices have grown 4 percent on an average globally. Source – IATA, ICAO, IMF

Ancillary – a solution?

One common thread that could very well help airlines mitigate these challenges is actively working towards improving ‘Ancillary revenues’ and this is where NDC concept comes into picture.

Ancillaries is simply the revenue airlines make from non-ticket sales such as early boarding, extra baggage, better seating options etc. which helps airline achieve two objectives. Not only is it a source of extra revenue but just as importantly it enables airlines to differentiate themselves from the competition and apparently drives the bottom line for most of the airlines.

Airlines thus offer a whole range of services that make the flying experience more enticing such as catering choices, Wi-Fi or flight entertainment, ultimately personalized to the individual passengers

the passengers) needs better to innovate newer products and services

IATA is working with the airline industry (leading airlines, GDS providers, and travel agencies) to fix standards and business requirements. Several pilot projects are underway to verify requirements and test feasibility of NDC, but there are challenges as airlines try to adopt & implement this new distribution owing to legacy technology investment.

Why ‘NDC’ helps?

Airlines today sell their inventory through direct channels i.e. airline websites, as well as through indirect channels consisting primarily of aggregators, travel agencies and tour operators. For consumers, choosing the best product becomes possible only when they have visibility to the full value offered by a product i.e. value provided beyond a basic flight seat

Of the two distribution channels, the airline direct channels provide access to detailed product information to consumers enabling them to make informed choices, therefore offering a more rich and agile experience to the