Modern air transport dates back to the end of the Second World War, it will be 80 years old next year. Since then, it has undergone a tremendous evolution, driven by the manufacture of increasingly efficient aircraft models, highly reliable air traffic control, all to keep up with a demand for transport that continues to increase as a middle class arrives on the market on the most populous continents. But, while technological progress is permanent and impressive, the airline model has remained fixed around two concepts: traditional carriers and “low-cost” airlines. However, it seems that a new model must be invented.

Incumbent operators are facing the increase in their production costs as a result of the growing demands on their staff. This is also the role of the unions, which have become very powerful, even capable of blocking a corporate strategy, as we saw a few years ago in the Air France/KLM group, where the growth of the group’s “low-cost” operator was blocked by the unions. Since then, things have fortunately been settled. We have also seen in the United States, the unions take over the management of United Airlines, one of the three American majors, with the disastrous consequences that have led the company to reorganize. Faced with rising costs, traditional airlines have had to face the arrival of “low costs”, the other new concept of air transport. This is based on simplicity and better productivity, and aims to attract new layers of customers by lowering sales prices, which has been made possible by a reduction in costs that is at least equivalent.

This is the landscape in which air transport must move. At the same time, the manufacturers have grouped together and there are only two left: Airbus in Europe and Boeing in the USA, at least for aircraft with more than 100 seats while waiting for the arrival of the Chinese. However, one of them, Boeing, is facing considerable difficulties largely due to a management that has favoured the distribution of real or supposed dividends to shareholders, to the detriment of the obligation of safety. The consequence is that instead of delivering around 100 aircraft per month, which was the goal, the American manufacturer is only releasing less than half of them. This comes at a time when, after emerging from the terrible Covid era, passengers are scrambling to travel and companies are placing orders by the hundreds. The portfolio of the two major companies is currently around 15,000 aircraft, which represents 100 months of production, i.e. more than 8 years, all while orders continue to pour in. However, operators make their medium-summer long-term operating plans according to the delivery date of the aircraft ordered and this can no longer be respected. Engine manufacturers are not keeping up, maintenance workshops are struggling and the 400 or so subcontractors needed to manufacture the aircraft are struggling to provide their services on time.

And what do passengers think? There is no doubt that they are sensitive to the communication of the companies who promise to make them travel at fares well below their cost prices. Of course, everyone knows that this promise is fallacious, it only concerns at best a very small number of seats and if not, the “low cost” seat, it is compensated by the extreme modesty of the service, which forces customers to buy, often very expensive, services that should be included in the price of the ticket. Basically, companies don’t care about the expectations of customers who are, in professional language, only “pax”, i.e. consumer units.

However, it should be acknowledged that, although widely criticized in some of their aspects, the two concepts have brought about the results we know: nearly 5 billion passengers per year and a level of safety close to perfection. However, we now have to deal with a doubling of demand in the next fifteen years, while equipment is having great difficulty keeping up, whether on the ground with airports or in flight with aircraft.

It is high time that air transport invented a new model that is both respectful of the environment and of passengers, who should really become customers with the quality of service that this requires. This would perhaps slow down the development of the sector, but is it not necessary at a time when we are having so much trouble absorbing growth? The solution is certainly not easy to find, but after all, it was not either when the “low costs” were created. So let’s trust the imagination.

The subject regularly comes up in the news as soon as a new bankruptcy is pronounced against an airline. This time, it is the case of Air Belgium, which will leave 11,000 customers without a solution unless they buy a ticket on another carrier. And even since 2023, a prosperous year if ever there was one in air transport, several dozen airlines have had to cease their activity. This sector of activity is inherently very fragile, and this weakness spares no one, including the very large carriers. It should be remembered that the three largest American and therefore global groups—Delta Air Lines, United Airlines, and American Airlines—have also gone through Chapter 11, which has allowed them to recover at the cost of colossal efforts and the dismissal of tens of thousands of employees. SAS and Avianca, to name but two, owed their salvation only to the use of this same means.

It is clear that each company must take responsibility for itself and that the sanction of failing management or even external circumstances results in its disappearance. This is the rule of the economic game, and every manager is well aware of this risk. In this unfortunate scenario, creditors have little chance of recovering their money, and shareholders lose everything. This is one of the consequences of our capitalist system, which we have not yet found how to replace.

Only air transport has an additional specificity: its relationship with its customers and distributors. It is organized on a global concept with a very powerful association of airlines, IATA, at its head, which has the right to choose its distributors: travel agents. However, in order to be accepted into this group and to have the right to sell the airlines’ tickets, travel agents must provide bank guarantees to ensure the payment of the sums they hold on behalf of the airlines to the carriers via IATA. There is no doubt that this very restrictive procedure has significantly improved the economic reliability of this network, which is nevertheless essential for air transport. It should be remembered that 70% of sales are still made through intermediaries, whether they are physical or virtual travel agents, with the massive use of the possibilities of the Internet.

However, if the funds intended for operators are well protected, the same cannot be said for the latter with regard to their commitments to their customers. The latter buy the right to use their services, but they do not benefit from any protection in the event of the failure of the company they have chosen. However, since the mid-1990s, carriers have been waging a fierce war to display the lowest fares with a simple mechanism: the earlier you buy, the more competitive the fares are. Thus, customers are required to ensure the cash flow of the airlines, without which carriers could not survive. Except that what must be called a cash advance is not protected by the carriers, who, quite rightly, demand that it be protected by their distributors. Thus, the risk of default increases with purchases made often six months before their execution.

So what happens when a company fails? It’s very simple: the customer loses everything. However, the most affected are often the most vulnerable, those who save a whole year to pay for their annual trip, often to join a family from whom they are separated most of the time. The solidarity of the IATA member companies should then be exercised. It is nothing. At best, competing carriers agree to open low-cost fare classes if they have sufficient seat availability.

How can airlines be forced to create a solidarity fund to compensate for shortcomings in their profession? IATA’s response is consistent: “We are an association and we depend on the decisions of our members, and they don’t want to hear about such a solution.” So there is only one way out: that decisions are taken at the political level, in plain English by the European Commission and the American FAA. After all, these same organizations do impose their ecological rules; why don’t they care about the protection of passengers?

A new European Commission is being set up. After the formalities of acceptance of the Commissioners by the European Parliament, it will become operational in 2025. This is a welcome subject that would be widely appreciated by customers and distributors unless the companies finally decide to create real protection for their customers in the meantime.

The American manufacturer certainly didn’t need this. A major Boeing union, IAM, with its 30,000 members, has just launched a strike that could be short-lived if management accepts the demanded wage increases for a return to work. Jon Holden, the head of IAM Boeing, aims to take advantage of the manufacturer’s current weakness to quickly achieve their demands. The halt in deliveries of Boeing’s flagship models—the 737, 777, and 767 freighters—would be a severe blow to a company already struggling with inextricable difficulties.

The new CEO, Kelly Ortberg, inherits not only a severely damaged image and meticulous oversight by U.S. authorities but also a $60 billion debt, largely created by previous managements who sacrificed the company’s future to pay dividends to shareholders using financial resources the company didn’t have. All this, along with a share price that has dropped 40% since the start of 2024.

Boeing’s complicated situation mirrors the broader challenges facing key players in air transport, including manufacturers, airlines, and air traffic controllers. Under constant pressure from powerful unions, large groups have been forced to concede wage increases and benefits incompatible with the need to control costs in a fiercely competitive industry. Some sectors, such as air traffic control, are protected, and their unions wield considerable power over management. The last significant challenge to this power was during Ronald Reagan’s presidency, when U.S. air traffic controllers were tested, but only at the cost of severe airspace disruption for months. In Spain, a royal decree succeeded in forcing striking controllers back to work. These are the only two cases where the unions’ tug-of-war didn’t end in victory for the strikers.

Airlines are perhaps the most vulnerable target. Flying a plane safely requires a complex organization, comprising a variety of roles from pilots to baggage handlers, any of whom can bring operations to a halt. Pilots, being the highest-paid employees, can hold out the longest during work stoppages, but airlines are not immune to demands from every employee category. To maintain a fragile economic balance while satisfying their workforce, airlines have subcontracted a significant portion of their operations. Service providers, with much lower wage costs, can perform the same tasks for far less than carriers. This benefits airlines by giving them substantial bargaining power over subcontractors, lightening their payroll and improving cash flow since outsourced services are often paid for much later—something not possible with direct employee salaries.

As a result, large portions of the air transport industry are now in the hands of external suppliers. This is particularly true for MROs (Maintenance, Repair, and Operations) companies, which are essential to airlines, providing not only maintenance but also painting and engine repairs. In another area, General Sales Agents (GSAs) have replaced the sales teams of airlines, handling bookings and sales at a fraction of the cost by pooling services and being paid based on results.

Gradually, airlines that, up until the late 1970s, handled all their operations in-house have been forced to offload many of them. In doing so, often without realizing it, they’ve entered a dangerous spiral, weakening themselves from the inside while allowing external operators to grow stronger. The shift has occurred, and it’s almost impossible to reverse. Bringing these operations back in-house would have disastrous consequences for costs at a time when airlines are battling to offer fares lower than their competitors’.

For now, the subcontractors are not yet economic giants—they remain fragmented and have little influence over their clients. However, if they were to merge, which seems increasingly likely, they could become a negotiating force comparable to that of the airlines, potentially shifting the balance of power.