No one is saying that 2009 is going to be a good year for the airlines. But travel technology still will be catalyzing changes behind the scenes that will help the airlines ultimately become more successful, profitable, and “customer-centric” even as the recession is still receding.
If I could characterize 2009 in a word, that word would be volatile.
The early reductions in capacity made last year by North America’s network carriers have helped position those airlines to ride out the downturn, insulating them from changes that are reshaping the marketplace. By contrast, although the low-cost carriers have done better in the cash department, they are still skating on thin margins. These are the realities underlying the volatility we will experience in 2009.
One of those realities is that the airlines will try to raise fares even as they further cut capacity. These capacity cuts are being made in response to lower discretionary spending among leisure travelers and tighter corporate budgets for business travelers. I predict further softening of the market in 2009; at best travel this year will be flat.
Coincident with the across-the-board pullback in travel, we could see some well-known travel brands go out of business in 2009. The current market can’t support them all. What will happen is that in some cases brands will consolidate. It’s already happening among the big airlines.
For example, United Airlines and Continental Airlines are working toward operating as “one carrier” on several fronts. They are streamlining and “operationalizing” (stripping out redundancies in operations) their business models to implement common technology across the enterprise, instead of having separate silos of discrete assets. This kind of airline pseudo-partnership is more than just codesharing or linking certain backoffice systems. The goal of the two airlines is to build a common platform that shares customers, human resources, and assets.
As a result, the duo may be able to negotiate for common vendors and suppliers. This could enable them to realize the greatest savings and efficiencies short of a full merger. On the pricing front, the carriers are seeking anti-trust immunity not only with each other but with other Star Alliance members like Lufthansa and Air Canada. This will be a necessary step if they are to coordinate their schedules and pricing. If successful, this initiative could prove an alternative model for future partnerships.
Is this airline mini-marriage a good thing for travelers? It could be. If they align themselves in a partnership that improves service and fills gaps in scheduling, the United-Continental alliance could be a win-win for the carriers and its customers. In fact, we are about to find that out.
One of the major questions that 2009 holds for the travel marketplace is what form and timeline will the federal government’s infrastructure stimulus take? Could the stimulus result in the acceleration of airport expansion, improvement of the air traffic control system, and creation of new high-speed rail links? All of that is possible, and at least some of it is highly likely. One thing is certain, however, and that is that the economic slowdown will only continue to stimulate change, not delay it.
This year is one in which all bets are off. Look for travel to change at an ever-faster pace. Change in the form of acquisitions, failures, mergers, and alliances will make 2009 the most unpredictable in memory.
Airline Futurist • Miami • www.us.amadeus.com