Very interesting to follow Southwest Airlines’ earnings. It is the benchmark airline in the world of “low cost.” It was both the first to enter this field in 1971, with a huge expansion during the liberalization of the American skies in 1978, and it is also the largest in terms of turnover: $27.5 billion, even if the European Ryanair carries more passengers.

The fundamentals of the model are based on a few intangible principles: a single type of aircraft, faster turnarounds, densified aircraft capacity, no subcontracted distribution, very low call prices, a very stripped-down product with all services paid, all served by a young, enthusiastic, and sufficiently well-paid staff.

With this model, Southwest Airlines has been at the top of American domestic carriers with remarkable results. And then time did its work. Staff aged, became less efficient, and demanded and obtained benefits that were ultimately comparable to those of traditional carriers. The results paid the price. Not that the company lost money, but profits fell and, more seriously, the stock price began to decline with great regularity, which did not suit shareholders, especially investment funds. They demanded a change in management, and the latter adopted a very different strategy.

In fact, the new managers have evolved the pure “low cost” model toward a hybrid system. To begin with, distribution was extended to travel agents via GDSs; then the company entered into interline agreements, which had never been seen before. The product has improved and costs, as a result, have also increased. In total, the results were also badly affected, with a drop of 42%. And surprisingly, the stock price has soared more than 70% from its low, and the company is valued at 46 times expected earnings. Compared to Air France/KLM’s results, this would value the group at $16.3 billion instead of the current $3.63 billion, and let’s not even talk about Emirates Airlines, whose valuation on this basis would exceed $230 billion.

In other words, the stock market, which anticipates future results, has full confidence in the change in strategy of “low cost” carriers, whose product will gradually move closer to that of traditional airlines, which have gone the opposite way. Admittedly, after reaching the bottom just before Covid, the revenues of incumbent airlines are tending to rise. This was necessary because, even if their product was degraded, operational costs continued to increase, and customers no longer hesitated to leave for competitors who clearly displayed the simplest service.

It is therefore easy to imagine that the American example will be followed, albeit with some delay, by European and then Asian carriers. We are also starting to see the European leader Ryanair no longer hesitate to cancel services as soon as their profitability is no longer assured. EasyJet is taking the same path. This is how many small European airports will lose what kept them alive, as “low cost” operators have taken advantage of tax increases, decided somewhat lightly by government authorities, as a pretext to reduce their sails.

It is necessary to emphasize once again the lack of understanding in government policies which, in order to please a certain electoral clientele who will not be grateful to them, have consisted of taxing air transport in favor of railways, even going so far as to eliminate access to planes by administrative means, as we have seen in several European countries.

Meanwhile, orders for new aircraft, admittedly less polluting and more efficient, have multiplied. More than 16,000 aircraft are expected in the coming years, not counting new orders that continue to pour in.

Where are we going to put them if governments reduce access to major airports and if regional services can no longer be profitable because they are too heavily taxed? How will air transport, with its “low cost” components, be able to continue its beneficial role for the global economy and for bringing people closer together?

The next competition will no longer be in in-flight service, or even in fares, which we can expect will gradually be displayed more rationally than in the past, but will be played out in airports. The latter have become the main obstacle to air transport, which is poorly suited to the necessary fluidity of traffic, because if “low cost” carriers abandon small airports, there is no doubt they will strengthen their offer on the major platforms.

All air transport customers are well aware that certain practices seem curious, even useless.
Interactions between the actors are parsimonious, to say the least, each of them wanting to preserve some small advantages over others and legislators sometimes meddle in what does not concern them. All these little abuses make air travel strewn with small irritations that we could do without. Each component of air transport suffers the inconveniences caused by the other players and the same ones are a source of difficulties towards their respective environments.

Airports
Crossing a major airport is perhaps the most difficult moment for a passenger. Access is often complicated, signage is sometimes incomprehensible or even completely absent and the spaces seem to be more dedicated to shops, which are largely drained by the airports, than to facilities reserved for passengers. Let’s add to this the famous PIFs (Screening Inspection Posts) set in an incomprehensible way, and often different from one terminal to another in the same airport. Should you keep your seatbelt, put down your watch, open your toiletry bag, take off your shoes? In short, all these small frustrations are a source of stress that passengers would gladly do without.

Airlines
Nor are they free from abuse. Take pricing for example. Who can explain the basis on which fares are multiplied, up to more than 100 for a long-haul flight in the same class of service on the same day? This is a first source of frustration felt as an injustice when a customer realizes that his seatmate has been more favored than him. And that’s not all, the boarding procedures are sometimes similar to the gathering of sheep before they are sheared. Customers are made to wait in the bridges, sometimes for nearly half an hour while waiting for the aircraft to be ready. Why this procedure when passengers could just as well have waited in the airport. Moreover, without knowing if the difficulty comes from the airlines or the airports, there are few terminals where the boarding queues are clearly delimited and where passengers do not mix.

Governments
Curiously, the administrative authorities have a great tendency to interfere in the functioning of air transport. Flight delays are punished outright and strongly and companies sometimes have to pay compensation much higher than the fares paid by customers. In fact, some of them can make a profit by not only traveling for free, but by making money. The practice of “overbooking” is punished as a deterrent. We even see the European administration taking a close interest in the way luggage is handled. It must be said, however, that many rules had to be enacted because the companies had not agreed to solve the well-known problems between them. IATA should have played the role of referee, which it has never done, except in terms of safety with the IOSA (IATA Operational and Safety Audit) program. And let’s not forget the repeated taxes that each state sees fit to impose on air transport because, after all, customers can afford to use this type of travel and can therefore pay well without revolting.

Customers
Let us not forget them. They are also a source of multiple abuses. The behavior of some of them can make the trip unpleasant for others. Of course, these erratic behaviours can sometimes be explained by the stress to which passengers are subjected, particularly those who are less familiar with air travel. But finally, how can we explain certain jostling during check-in or boarding, how can we justify that some customers systematically put their cabin luggage in the first racks of the plane when they have decided to pay only for seats at the back of the cabin, how can we accept that some, in order not to pay for excess baggage, arrive on the plane with multiple packages and occupy a space much greater than what is allocated to them? And then there are those who claim undue compensation for a yes or no, because you never know…

It can never be said enough, air transport is a complex activity. It puts into operation a multitude of players and each of them can seize the machine. So it would be wise for each player to look for ways to simplify and streamline a mode of transport that is still magical.

How else can we describe the struggle between aircraft manufacturers? I’m not just talking about Airbus and Boeing, but also about engine manufacturers, equipment manufacturers and new entrants, Chinese in particular, not to mention Embraer and even ATR. The figures published by the firm ID Aero, whose analyses are authoritative, are a bit dizzying.

The stakes are high. The amounts are so large that it is difficult to imagine them. Come on, let’s get into the big numbers. It is estimated that currently 26,750 aircraft are in commercial service worldwide. Manufacturers, Boeing in particular, estimate that there will be 50,000 air transport fleets by 2044, which is in less than 20 years and this corresponds to a doubling of the number of aircraft. But that’s not all, the average size of devices is steadily increasing. It has gone from 50 seats in the 1950s to 100 seats 20 years later and to 200 seats now. And the aircraft are flying farther and farther. Let’s also keep in mind that the average price of a commercial aircraft is around 100 million dollars, all of which is very approximate because between the list price and the amount actually paid by buyers there is a huge difference, which is not only on the airframes, but also on the engines.

So in this context, the two giants are obviously Airbus and Boeing. The latter has taken a knee following purely disastrous decisions which, in recent years, have consisted of privileging the stock market price by abandoning the vocation of the company. The price to pay was colossal with 2 fatal accidents causing the death of nearly 300 passengers, not to mention a large number of other incidents that could have increased this number. It should also be noted that Boeing has just been ordered to pay $28 million to the heirs of a victim of the Ethiopian Airlines crash. We must hope for the manufacturer that this does not snowball. The new management of the American giant led by Kelly Ortberg, an engineer and not a financier, is back on the right track.

At the end of October, Airbus still had 8,698 aircraft on order and Boeing 6,534, and the amount will increase further for the two protagonists following the Dubai Air Show. At 100 million dollars per unit, the sales figures are dizzying, it’s more than 1,500 billion dollars, in other words 1 and a half times the total turnover of air transport 2025. The deal is all the more interesting between the two manufacturers as they have offers in direct competition: the B737 MAX for one and the A320 for the other in the medium-haul category and the A350 opposite the B777X for very large aircraft. The characteristics are pretty much identical, except that Airbus has a big advantage with the A350 already on the market for a long time while the B777X is not yet certified and will not be far from 15 years behind its competitor when it enters service.

And the fight doesn’t stop there. Engine manufacturers hold a large part of the forces involved. Three of them are in the running: Rolls-Royce, which specialises in very large engines, is followed by GE, which is developing an even larger machine to equip the B 777X. The fight is also severe for the smaller engines. The prices are also huge: a very large engine can cost more than $40 million. So often engine manufacturers make offers for rent. For the smallest engines that equip medium-haul aircraft, the rental rate is around €200,000 per month. France’s Safran, allied with General Electric, has become a major supplier in this category with the American Pratt & Whitney.

And then you also have to count on the major equipment manufacturers such as the French Thales or the American Rockwell Collins. For them too, the field of competition is global, each contract is very remunerative and their turnover is of the order of a large group of airlines.

For the smallest holders, the horizon has brightened. Bombardier was bought by Airbus and Embraer after going through a difficult time during Covid has developed a range of aircraft with less than 100 seats, very efficient, so that the Brazilian manufacturer has abandoned its turboprop project leaving ATR alone in this market niche.

The Chinese, with the manufacturer COMAC, are seriously starting to show their noses, even outside China, by placing their first aircraft outside their borders with Lao Airlines. Largely supported by their government, it would be surprising not to see them arrive in force on the African continent.

The market is gigantic, the operators are few, and the fight promises to be fierce.

Decidedly, you have to have a strong backbone to create an airline. The more we advance in technology, the more perfect safety becomes, the more fuel consumption decreases, the more air transport basically becomes a model for the future of the planet and the more it is attacked. And in this group, carriers, those who ultimately take all the risks, are the most impacted by the attacks on this sector of activity.

For decades, civil aviation has been the darling of governments. The latter have largely helped their national companies to develop with all kinds of protection and massive injections of money. They did it because they found it to their advantage. An important company was the image of the country and played a major role in its political influence but also in its economic development. This fruitful collaboration has led to the creation of modern air transport, which has been one of the main drivers of global growth by promoting trade.

And then, in the short time being, let’s say less than ten years, the perception of air transport by the political authorities has changed. It must be said, in their defence, that the sector has not been free of excesses, in particular because it has not managed to integrate the arrival of the “low cost” model in a quiet way. Instead of accepting it as a convenient way to develop a new customer base, traditional carriers have had no other goal than to compete with new entrants when they would have been much better off cooperating with them. This is how the disastrous price war began. The insane call rates have been copied even by traditional airlines and customers have rushed to travel for a yes or no, because that’s how freedom is exercised. This led to the development of “over-tourism”.

And from that moment on, the legitimacy of air transport was called into question. It has become the emblem of the destruction of the planet, when this is totally false. Except that we can still see the effects of a certain overconsumption. From then on, it was easy to point the finger at this growing means of transport, but whose effects could lead to regrettable disorders. The “shame of travelling” began to creep into people’s minds and governments took advantage of this to take administrative limitation measures, and to levy taxes whose destination was not devoted to research to further decarbonize air transport, but to support its competitor, the railway, which was never able to finance itself.

And now a new danger awaits this activity. This involves the use of drones to disrupt the airspace around major airports. Thus, European air transport has become a new target in the war between Russia and Ukraine. It is easy, not very defended, and a single drone can not only force the temporary closure of a major airport, but also disrupt the operation of airlines because it only takes one “hub” to be threatened to disrupt an entire operation. In addition, the media impact is immediately very important.

Basically, air transport will now become the target of all the discontented. Environmentalists have made it their main target, governments have found a mine to balance their budgets, and the military is using it to settle their differences. Instead of tackling the fundamental issues, it becomes more practical and certainly simpler to point the finger at air transport, even if, deep down, the rulers are well aware that this is not the solution. But it is a sector of activity that is both media and popular because a majority of voters are still not users of this mode of transport.

In the midst of this, some companies continue to do well, even if they are also subject to strong geopolitical constraints. Emirates, to name just one, has just achieved a historic result: $3.3 billion in profit in a single quarter. This can bring back a certain optimism in this much-maligned activity and one wonders why.

And optimism will be needed.

There is a position that all ambitious airline employees dream of, that of Executive Chairman of an
airline. And yet, on reflection, is it such an enviable profession? The constraints both internal to the
company and related to its environment, in the midst of which it must evolve, can make life
impossible. Listing them is a real headache, but we can at least sketch the most conspicuous ones.

Ecology
Taking it into account has changed the air transport environment, which until now had to evolve by
focusing on its economy and safety. This is something to occupy the mind of any leader. We must
now add this new constraint which, without us really seeing it coming, is increasingly influencing the
ecosystem in which all carriers must operate. No exploitation programme can be envisaged without
taking this into account. It even influences the composition of fleets and of course the lines to be
served. And it will only increase in the years to come.

The unions
They are very powerful in this sector of activity. Antagonizing a category of staff can completely seize
an airline. However, corporations are varied and have different expectations. Of course, the pilots’
unions are by far the most powerful, so much so that in the not-so-distant past, United Airlines pilots
took the helm of the major American operator, with a disastrous result. No airline manager will
admit to doing without sometimes endless discussions with the unions because any of them,
including the most modest jobs, I am thinking of baggage handlers among others, can put their
company at a standstill.

Manufacturers
The almost endless growth of air travel is leading to a bottleneck for manufacturers. Airbus, for
example, delivered only 73 aircraft in September, a drop in the bucket compared to the 8,000 to
9,000 aircraft ordered. At this rate, it will take nearly 10 years of production to meet the demand and
during these ten years the manufacturer will receive several thousand additional orders. And there is
no chance for airlines to compensate for the European manufacturer’s delivery delays by turning to
Boeing, which is in a very difficult situation for quite some time. It should be added that engine
manufacturers are also unable to keep up with the production rate. It must be said that new devices
are more and more efficient and that they are more and more complex to build. In short, how can
you manage a medium-term operating program when you are unable to know the delivery dates of
the aircraft? This difficulty is not the least to be solved by the bosses of the companies

Controllers
At least in Europe, they are the terror of the operators. At any time and for any reason, they can go
on strike. However, in Europe there are many control centres: more than 40 and spread over the
various states that must be crossed to get from one point to another in this continent, which is
ultimately small, at least geographically. And each country has a different management of this wage
body, which means that the risk of disruption of operations is multiplied by the political and
economic conditions of each state. The United States has had to deal with such problems, but they
were brutally solved by President Reagan in the early 1980s. The European political situation is much
more complex.

The States
Governments cannot help but stick their noses into air transport and therefore very often into the
management and direction of airlines. They impose new constraints, often administrative, at their
leisure and they use this sector of activity to bring money into the public coffers without these
contributions being used to modernize air operations. We have also seen traffic rights granted to
carriers only to sell military equipment. And I’m not talking about the companies that are often
subject to transporting politicians for free or employing pseudo leaders to house friends.

In short, running an airline is certainly prestigious, intellectually very interesting, sometimes
financially comfortable, but it is certainly not a sinecure.