Where is Air Travel Headed?

It is always interesting to read airline advertisements and press releases. In the end, we learn a lot
about the state of mind of the sector and we can guess the major trends to come. I note an essential
one: it seems that instead of a rapprochement between the “low cost” models and traditional
carriers, there is a shift towards more pronounced diversification.

During the first 50 years of modern air transport, which can be dated back to the end of the Second
World War, only one model existed: expensive transport with an exceptional quality of service to
compensate for the lack of comfort of the aircraft in service at the time. Fares were regulated by IATA
and the competition, which was very weak between operators, was mainly based on the quality of
service, with the emphasis being placed on new aircraft, of which the arrival of the Boeing 747 was
the archetype. And it worked pretty well. This system has led to the creation of a new mode of
transport that is increasingly reliable and expands to cover the entire planet.

The arrival of “low cost” in the early 1980s went a little unnoticed. The model was incomprehensible
to the managers of traditional companies, they simply despised it. Until the moment when it was
acclaimed by new layers of customers seduced by the considerable price differences on identical
destinations because the arrival of these new carriers coincided with the opening of the airspace to
new rules regarding traffic rights. So, faced with a phenomenon that they did not understand and
that they were unable to apply to aging companies, their managers tried to find a solution by
creating “low cost” subsidiaries with mixed success, because a significant part of the differences in
cost prices came from a better use of equipment and staff, which was particularly difficult to get
highly unionized employees to accept.

So gradually, traditional airlines have been forced to lower their costs in order to be able to align
their rates with new entrants. They have done so by densifying planes and cutting back on service,
which has brought traditional products to the same level as that of “low cost”, at least for short and
medium-haul flights, which still constitutes the bulk of the clientele. Add to this increasingly powerful
rail competition, which was an additional argument for lowering both prices and the quality of
service, including at airports.

We could have left it at that, but COVID arrived and everything was reset. When air transport
emerged from the abyss into which it had fallen, pricing policies were rethought and, to their great
surprise, traditional operators found that the massive price increases they had had to put in place to
get their accounts back on track were finally rather well accepted by customers, at least by a large
fringe of consumers. This is how we witnessed a change that was certainly not very brutal, but
nevertheless very effective in the communication of the historical companies, at least those that had
resisted. The focus is no longer on prices, since they have risen significantly and are clearly
differentiated from “low cost”, but on the quality of the product. The cabins were redesigned,
comfort was improved, and the reception in airports reappeared, especially for business customers
who had constantly improving lounges.

For their part, the “low cost” cannot improve their product because it would lead them to increase
their selling prices, which is contrary to their commercial policy, so they are looking for ways to
further reduce the published price offer by creating new sources of revenue. We started with the
payment of checked baggage, then in the cabin and now some people are wondering how it is still
possible to densify the aircraft a little more. We can even see the project initiated before Covid by
Micheal O’Leary, the dynamic President of Ryanair, which consists of making customers travel almost
upright. Thus, with the same cabin volume, we can put a little more passengers and therefore
maintain an ever lower price display.

We can see the two trends taking shape: traditional airlines are improving their product and service,
particularly for the front classes of aircraft, by assuming a clear difference in fares compared to the
“low cost” who are looking for more customers while maintaining an aggressive pricing policy.
Basically, it’s not so bad and everyone will find their fundamentals. As in restaurants or hotels,
customers will be divided according to their choices and means.