David Brett
President, Amadeus Asia-Pacific
THE latest figures released from IATA may sound alarm bells for the global travel community. Though passenger demand for July was up 3.4 per cent year-on-year, it’s a significant slowdown in comparison to the 6.3 per cent increase in June and average growth of 6.5 per cent over the first half of the year. What does this change mean for APAC travel players?
While the figures signify that Asia’s aviation and travel industry is not immune to economic downturn, I believe that it also highlights the need for airlines and industry players to foster and play to the opportunities that still abound here in Asia. Growing middle class communities in Asian nations, the rebound in demand in the Japanese market following the tsunami and earthquake last year, and China’s aggressive expansion plans as they buy new aircraft and develop new travel infrastructure to support their growth are just a few top of mind examples of key economic factors which set to push growth in Asia for the rest of 2012.
In this delicate climate of both challenge and opportunity, airlines need to work harder and smarter to stay afloat and capitalise on potential gains. Asian airlines are well accustomed to doing things differently to get ahead. Airlines in other regions may see the same opportunities, but it is Asian airlines that are moving the fastest to make sure they are ready when opportunity knocks.
Asian airlines breaking the mould
When Singapore’s new low-cost carrier Scoot took off on its maiden flight to Sydney in June this year, its passengers may have been surprised to find iPads in front of their seats. After all, iPads are not something one would typically associate with ‘low cost travel’. But this is an example of tactics being employed by Asian carriers to break the mould of traditional air travel, in an attempt to simultaneously reduce costs and differentiate from competitors. By fitting iPads in their aircraft in place of traditional entertainment systems, Scoot managed to cut seven percent off the weight of planes and therefore reduce fuel consumption, even after a 40 per cent increase in seating. And at the same time they gave passengers an entirely new entertainment experience.
Other airlines in Asia are also finding revolutionary ways to reduce costs and attract new passengers, and there is reason to believe these efforts are paying off. According to the recently announced Skytrax World Airline Awards, 13 out of 20 of the world’s best airlines, as voted by travellers from 160 countries, are from the region.
Why is this phenomenon so prevalent in Asia?
Re-inventing the wheel
Many Asian airlines are taking aggressive steps to ensure they stay afloat for the long run. In some cases, traditional airline business models have been set aside in favour of experimentation with new pricing models and new service offerings to attract new customers. Amadeus has worked closely with several airlines to implement technology that ‘unbundles’ the elements of an air ticket – such as the seat, meal, entertainment and baggage allowance – and offers these as individual products that an airline can charge separately for. The airline stands to up-sell additional products, and the passenger gets the exact experience they want at the price they are comfortable paying.
In other cases, airlines are creating entirely new brands to target new customers. The very existence of Scoot is an example of this. Singapore Airlines recognised the need to create a low-cost travel offering for a new customer profile – the budget traveller. And they are not alone – other airlines are on the same track, including ANA who have launched their low-cost subsidiary Peach in Japan and THAI who have launched THAI Smile in Thailand.
You’ve got to spend money to make money
Cost cutting has become an art form. Airlines must find ways to shave costs without jeopardising the passenger’s experience or their reputation. Many airlines are investing now in new aircraft and new processes with the vision of the longer-term pay off. ANA intends to broaden its global route network and reduce operating costs with the rollout of more fuel-efficient Boeing 787 planes. Other carriers are investing in airport technologies to maximise automation and increase efficiency. A recent report by Amadeus predicted that the airport of the future will be an almost unrecognisable environment of automation and personalised service, with Asia Pacific cited as the benchmark where the new self-service environment is already somewhat in practice.
High-tech tactics
New technology presents an avenue for airlines to achieve significant cost savings while also offering upgrades in passenger service. The Altéa system is one way that Amadeus is working with Asian airlines to outsource their passenger IT. This works behind the scenes of an airline to ensure that passenger processes are efficient and automated – reducing operating costs for the airline, while also making the travel experience more seamless for their passengers.
The current climate in the travel industry is putting Asian airlines in a prime position to succeed. The combination of pressure and opportunity seems to be the driving force behind them to break the mould, fixing the eyes of the world on Asia as the region continues to raise the bar for global travel evolution.
By David Brett, President, Amadeus Asia-Pacific
