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Rapidly changing aviation markets, the rise of digitally empowered consumers, and ongoing industry consolidation are some of the important trends that are forcing carriers to reposition themselves for the future.

In aviation, disciplined cost reduction is a necessity now more than ever. International players must capitalize on opportunities in Asia, address the new dynamics of globalization, and establish lasting relationships with digitally connected travelers. The disruptive changes in the broader airline landscape make brand experiences that much more important, and airlines must constantly work to win the hearts and minds of their consumers.

Four Ways to Soar Above Market Consolidation

Most network and low-cost carriers will need to adapt to survive and thrive in an increasingly consolidated marketplace. In such an environment, it’s crucial for carriers to understand their strengths and leverage them appropriately. Four best practices are essential:

  1. Be the predator instead of the prey. Manage the balance sheet closely and retain access to capital.
  2. Move beyond the current definition of an alliance. Understand that alliances as they exist today may not exist tomorrow, so formalize the relationships that are strategically important.
  3. “War game” detailed scenarios where you respond to competitors’ probable actions.
  4. Think carefully about where you will find synergies and scale economies. Be aware that operational complexity can produce negative synergies.

Emerging Chinese Airlines and Middle Eastern Megacarriers are Reshaping the Industry

Carriers in China, already among the fastest growing and most profitable airlines, are well positioned to reshape the Europe-to-Asia routes. Certain Middle Eastern megacarriers have tripled capacity in just five years, while other Middle Eastern regional players are pursuing ambitious growth plans.

Here are potential implications to consider for international players.

  • Join forces to strengthen the network offer and minimize costs. Further consolidation and deeper alliances will likely characterize the industry going forward. To remain competitive, legacy endpoint and hub carriers should explore partnership options that will extend their offerings in Asia, the Middle East, Europe, and the Americas.
  • Continue to reduce costs. All carriers should look for ways to keep costs under control by adopting the cost-saving practices of their Chinese and Middle Eastern competitors—leveraging overseas crew bases and scale-efficient maintenance operations.
  • Build your brands. Trusted brands are important to all consumers, but in particular to Chinese and Middle Eastern consumers who associate Western brands with high quality. Because the travel market is still emerging and evolving, there is little brand loyalty yet—and, therefore, many opportunities exist for airlines to rethink and strengthen their brand portfolios.
  • Meet the needs of local consumers. Research shows that Chinese and Middle Eastern travelers uniquely value greater flexibility in changing flights, baggage delivery to hotels, a higher weight allowance for checked bags, lounge access, and priority security and passport control.
  • Explore new partnerships with regional carriers. To access Chinese and Middle Eastern traffic flows and achieve economies of scale, international airlines should seek opportunities to partner with important carriers—for instance, by trading brand, product, and commercial expertise for a share of the growing travel market.
Transportation, Travel & Tourism
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