US airlines have emerged from years of losses and bankruptcy to being among the most profitable in the world, but rising costs could derail them from this trajectory unless further transformation happens, consultants say.
“Over the last 15 years, airlines have flipped their role, going from consistently loss making to consistently profitable,” Seabury Consulting managing director-aviation John Luth said at the IATA AGM in Cancun. There is some truth to American Airlines CEO Doug Parker’s claim that the airline industry has structurally changed and will be profitable from now on, barring unforeseen shock, Luth said.
Luth noted that consolidation and continuing capacity discipline have remade the industry and did transform it. However, unit costs are rising, thanks to rising oil prices and new labor deals most U.S. carriers have struck. “We are seeing some cost pressures,” he said. “Demographics for pilot hiring remain challenging.”
The next opportunity to transformation will come from digitization, said Jonathan Keane, Accenture’s global industry lead for aviation. “The airlines have digitized the passenger experience, with booking tickets, but the next step will be digitizing the back-end systems they use for operations.”
Now, airlines run a patchwork of different systems to handle such functions as maintenance; crew scheduling; safety; and other operations. Keane said to maximize efficiencies, airlines will need to harmonize these systems and create a platform that will handle all operational functions for an airline.
“Airlines sit on a lot of data,” Keane continued. “There is a need for various functions to collaborate to leverage this data.”
“This will be a lever to unlock the next transformation,” he added.