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What’s Next For The Air Transportation Industry?


Executive and managing director at DRCT, the leading technology provider for airlines and travel companies. Expert in airline retail.

While Covid-19 put a spoke in the wheel for the aviation industry, airline companies had a chance to rethink business models and investigate new growth points. As the co-founder of an airline retail platform, it seems to me that another breaking point is going to shake the industry soon. Let’s take a look at the industry today and where it could be heading.

Challenges For The Industry

An obvious problem many carriers faced in the last couple of years was a lack of cash. Fixed costs like maintenance, distribution and other expenses remained the same, while customers stopped flying or reduced their trips. This led to significant losses. Airlines were forced to burn through stashes and borrow money from investors and the government. Those who had bigger stashes were the luckiest, like Ryanair and Wizz Air. Their business model and financial capacity gave them a chance to promptly react to demand bubbling on different routes while countries reopened their borders to travelers.

On the technology side, many years ago, airlines were on the cutting edge of innovation. They were pioneers in using complex computers for processes automation. Management of aircraft, reservation systems and large databases were digitalized in cooperation with the mammoths like IBM. However, airline companies started to cut costs on IT systems over time. Today many airlines continue to use old systems and support passengers manually.

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Then the pandemic showed up unexpectedly. Complicated operations of processing refunds and tickets changes manually have been a heavy burden for unprepared support teams. Many airlines struggled to support passengers with impeccable and rapid service. On top of that, outdated IT infrastructures can cost airlines significant amounts of money each year. By supporting such infrastructure, carriers gained additional challenges.

Changing Customer Expectations

During the pandemic, passengers faced the worst from airlines—flight cancellations, inconvenient delays with refunds, poor customer support (paywall), the bankruptcy of some airlines, etc. Nevertheless, the pandemic boosted services in other industries. It even changed the habits of many people in older generations—some became advanced internet users. Online shopping, ultra-fast food delivery, massive usage of social media and ubiquitous video conferences have become the way to interact with the world. It could not but affect the habits of users, including in the air transportation industry.

Anyone felt how effective it could be to use online services to live in the isolated world. The boom of food-tech is a great example: Tech companies became indisputable leaders in providing food to people as it appeared no restaurant could compete with companies like DoorDash and Uber Eats. Virtual restaurants that don’t actually operate a physical restaurant are on the rise. People of all ages started using applications to order food from grocery stores and restaurants. I think this happened because tech companies were better than any restaurant at understanding customer expectations of digital services.

In my view, airlines are similar to restaurants: They still struggle to understand and offer that experience to their passengers. Even now, there are fewer carriers that can match high client expectations in their apps.

The Future Of The Industry

Clients are accustomed to getting services in the way leading tech companies provide them. This implies ultra-fast delivery, instant interaction and high levels of support.

It seems that there is a huge gap between market expectations and what airlines offer. I anticipate two possible scenarios. The first is that companies like Google, Amazon or Uber could launch aviation services. The second one is that the situation will give rise to new players—virtual, or neo-airlines. The first scenario is easier to imagine—tech giants have capabilities and a loyal client base. Nevertheless, history shows us that startups could be much more efficient where new business models appear.

Uber has become a transnational corporation that created a taxi service without its own cars. Airbnb won the place under the sun and pushed famous hotels and booking. Neo-banks like Chime and Revolute compete with banks and become a new big thing in banking. I think neo-airlines could become a new big thing in civil aviation. Without the actual possession of the fleet, neo-airlines can focus on the IT part of airlines’ business—efficient pricing and digital client experience.

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For air transportation industry leaders, I think the best way to be prepared for the future is to implement the best practices from IT giants.

1. Invest in innovation.

The digital sector is full of investment funds and incubators. Their purpose is to find and develop innovative initiatives that could enforce the core business. I think that the same strategy should be used by airline companies. Many large airlines already have such incubators, although they do not seem to be very popular.

2. Do not be afraid to fail.

In my view, one of the most salient features of airlines is conservatism. Airlines are not ready to experiment, and they are not ready to fail. Meanwhile, what are IT giants doing differently? Their business isn’t less complicated. However, they are ready to take a risk. Just take a look at the Google graveyard. It lists 264 projects that were ultimately killed. Does it mean that Google has simply lost that money? Not at all. Google gets technologies, expertise and ideas. I believe it is worth it. It’s part of what makes Google a company we all know.

3. Get rid of non-core business.

Many modern successful business models do not build a vertically integrated business model to keep development and production under their complete control. Take a look at Uber. The company started as a taxi service, and today they work with food delivery and more. One could say they aren’t focused because their core business is rides. However, I think their core business is really monetizing customer demand in logistics. That’s why they do not own cabs. Instead, Uber has developers working on algorithms. The company neglects everything that it can outsource and focuses on what is unique.

There’s plenty the air transportation industry can learn from technology companies. Technology is bound to change the way we fly.


Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

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