Airlines that have successfully installed connected cabins have an immediate opportunity to win US$33 billion in market share from competitors, according to new economic modelling from the London School of Economics and Political Science (LSE) in association with Inmarsat.
“Sky High Economics – Chapter Three: Capitalising on Changing Passenger Behaviour in a Connected World” examines the global shift underway in passenger demographics, behaviours and attitudes to loyalty.
It underscores an immediate need for airlines to innovate in order to stay relevant in a competitive industry landscape, identifying US$33 billion in share shift accessible today for those developing the digital inflight experience that passengers are seeking. This opportunity equates to six per cent of the total annual commercial passenger aviation market.
Today, the airline industry is experiencing a period of exceptional change. By 2028, Generation Z is poised to become the largest group of air passengers in Asia-Pacific at over 450 million, surpassing the millennials by 41 per cent, said the report.
Paired with this demographic shift, digital disruption on the ground is driving expectations of inflight experience, and redefining attitudes to airline loyalty. According to the LSE research, millennials, which form the largest passenger group today, value loyalty less than any previous generations – a trend set to continue with younger generations.
The report utilises current IATA data and primary research including data from frequent flyer schemes, interviews with regulatory agencies, airlines and passengers.
Sky High Economics identifies a market of close to 450 million passengers worldwide, currently uncommitted to any airline loyalty programme, who would switch their allegiance in favour of an airline offering high-quality inflight Wi-Fi.
This forecast is modelled using data from frequent flyer schemes, which reveal a market split into active, engaged frequent flyers (13 per cent) and less engaged, brand-agnostic passengers (87 per cent). Less engaged travellers – many of whom are younger flyers with new expectations of travel – present the largest opportunity for airlines to take market share.
Today, 12 per cent of less engaged passengers are willing to switch allegiance to an airline that offers reliable Wi-Fi, worth US$33 billion in share shift for airlines already offering the service to take from competitors. This sum is predicted to grow to US$45 billion in the next decade, by which time Generation Z is expected to be the airline industry’s largest customer base.
Philip Balaam, president, Inmarsat Aviation, said: “Within the next two decades, Asia-Pacific will be driving most of global air passenger traffic. In a region where internet connectivity is increasingly becoming commonplace, we anticipate passengers will expect their on-the-ground habits and preferences to be replicated even when they are in the air.
“Whilst securing airline customer loyalty may seem more challenging than ever before, airlines can stay relevant and remain a preferred choice over its competitors by adapting to the needs of the vastly changing demographic of passengers. Offering high-bandwidth Wi-Fi will be key to satisfying the ‘always-on’ passengers of tomorrow,” he added.
“High-bandwidth Wi-Fi with consistent coverage is essential to meet the demands of data-hungry passengers. But adopting the technology is just the start. The real opportunity exists in making inflight Wi-Fi an enabler for tailored passenger experiences, enhancing loyalty while accessing new revenue streams.”