"Aviation In Transition" The Futur of LCC and Charter
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Transcript of "Aviation In Transition" The Futur of LCC and Charter
1 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
"Aviation In Transition" The Futur of LCC and Charter
Wolfgang Kurth
14.-16. February 2007 10th Aviation Conference, Hamburg
2 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Nothing has changed….
…we still like going on vacation!
3 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
A Package Tour
Brochures Travel
Agency Transport Incoming Transfer
Tourist Guide
Hotel Beach
Yesterday: Highly complex integrated product chainYesterday: Highly complex integrated product chain
Essential?no
Essential?no
Essential?no
Essential?no
Essential?no
Essential?yes
Essential?yes
Essential?yes
Tour Operator Added Value: • gathers information, presents destination and resort• selects hotel and guarantees quality• minimizes foreign exchange risks• guarantees prices• arranges for transfer from destination airport to hotel and vv• local assistance minimizes cultural and language problems • one focal point for problems along the product chain• provides security• manages complaints• protects customers during crisis•………..
4 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
….A Whole Lot Has Changed!
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Less “Standard” Customers
The Standard Customer: “John, 35 years, married, two kids, white collar employee suburban home, 1 Japanese SUV“
- package tours (in Europe!), - follows advertisements - neighbor‘s life style provides guidance - purchasing is based upon ratio - status symbols are important („my family, my home, my car!“)
6 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
More “Mature” Customers
The Hybrid Customer: in any sozio-demographic group mobile non conformistic picky, critical thrifty and lavishly can‘t be defined by price segments purchase is experience; at the same time decisions to purchase standard goods are based upon economical thinking often a “lead customer“
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Information (Power) To The People!
? !
8 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Mapping
9 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Mapping
10 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Information (Power) To The People!
11 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Booking Pattern
Booking Sequence: 1st flight - 2nd hotac simultanous 1st hotac - 2nd flight
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Online Distribution Split
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Channel Loyality
61%
26%
48% 46% 44%37% 37%
33% 33%
12% 8%
20
10
30
40
50
60
70
%
Shop
Buy
Search Engine Airline Online Tour Operator Friends & Destination Travel Agency Relatives Sites
Source: PhoCusWright Inc., Online Travel Shopping ans Buying Behavior
14 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Why Buying Online?
Ability to compare options myself Faster/saves time
Offers lowest prices Offers wider selection of suppliers
Easier/simpler to handle Offers more Frequent Flyer Miles
Source: PhoCusWright Inc., Online Travel Shopping and Buying Behavior
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Distribution & Product Trends
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LCCs vs Charter
Utilization
Frills
Fleet
Airports
Marketing/Retail
Network
Personell
Higher utilization,Lower TOW, lower A/P charges
Lower ancillary costs, lower com-plexity, add. revenue stream
Lower handling charges
Lower maintenance costs, lowerspares holding costs, lower training costs, lower crew costs
Superior Direct Marketing and Route Development competence
Lower complexity, higher reliability
Lower Fixed Labour Costs
LCC Advantage
17 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
European Airlines Unit Costs
Charter Airlinesmoving into theLCC market:
• cycle related costs +• marketing costs +• distribution costs +
LCCs moving into L/H markets:
• cycle related costs –• B/E fares +• market stimulation –• crew costs +
18 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Avg. Trip Length
British Airways Other FSAs easyJet Ryanair Other LCCs Charter
< 1 Day 1-2 Days 2-3 Days 3-4 Days 4-7 Days 7-21 Days > 21 Days
Source: CAA Passenger Survey 2005
UK Leisure Passengers (UK – EU and domestic) by airline, 2005
19 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Avg. One-Way Fares (UK-EU)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
250
200
150
100
50
0
Business
LeisureAv
g.
Fa
re i
n 2
00
5 U
KP
Source: CAA International Passenger Survey, Office of National Statistics
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Charter Volume Is Declining
21 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
UK-EU Passenger Taffic By Airline Type
Source: CAA
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In The US Stage Length Is Increasing
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Stage Length Is Increasing In Europe As Well
2000 2001 2002 2003 2004 2005
Source: Davy European Transport and Leisure, 15.2.2005, wwww.ryanair.com
2000 2001 2002 2003 2004 2005 2006
Avg. Stage Length Ryanair
Kilo
met
er
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2000 – 2005: Routes served in competion (white)Charter: - 50.6% (avg)Routes served by Charter only (yellow)-10.5% (avg)
2000 – 2005: Routes served in competion (white)Charter: - 50.6% (avg)Routes served by Charter only (yellow)-10.5% (avg)
Impact Of LCC Entry On Charter Routes
LON
> 4 f‘hrs
< 3 f‘hrs
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LCCs Eating Into Charter Markets
1748
69
118
232
2002 2003 2004 2005 2006
Ro
ute
s to
Sp
ain
Ryanair, easyJet, Volareweb, bmi Baby, Hapag-Lloyd Express, Germanwings, Sterling, SkyEurope, jet2
Ryanair, easyJet, Volareweb, bmi Baby, Hapag-Lloyd Express, Germanwings, Sterling, SkyEurope, jet2
Source: CH-Aviation
26 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Full Service Airlines
LCCs
Charter Airlines
Migration Of Business Models
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Full Service Airlines
LCCs
Charter Airlines
HybridsHybrids
Migration Of Business Models
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Short-haul routes
Long-haul routes
Non-businesspassengers
Price-conscious business
passengers
Quality-conscious business
passengers
Network Carrier
RegionalAirlines
Charter
LCCs
Source: Mercer Management Consultants 2003
Airline Business Models
!
?
29 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Fragmented Value Chain
Brochures Travel
Agency Transport Incoming Transfer
Tourist Guide
Hotel Beach
Yesterday: Highly complex integrated product chainYesterday: Highly complex integrated product chain
Essential?no
Essential?no
Essential?no
Essential?no
Essential?no
Essential?yes
Essential?yes
Essential?yes
Today: „Fragmented“ product chainToday: „Fragmented“ product chain
T/O required?no
T/O required?no
T/O required????
T/O required?no
T/O required????
T/O required?no
30 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Conclusion: Holidays Become Modular!
31 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Independent Holidays Are Overtaking Inclusive Tours
Source: CAA, IPS (Identification & Passport Services)
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Business Models Are Changing
Source: TUI, WTO Conference Syria, 2004
1998 - 2004 > 2004
33 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Web Site Performance
Web Site Performance = f(content, marketing budget….)Web Site Performance = f(content, marketing budget….)
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Conversion Rate (Visitors/Bookings)……~ 6-8%Transfer Rate (Bookings/Visitors)………………………………<30%Conversion Rate………………………………………………………………………~ 10%Bookings of Ancillary Products as % of total visitors………………………………………………..~ 0.2-0.4%
Vis
ito
rs
LCCs And Ancillary Products
35 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Vis
ito
rs
LCCs And Ancillary Products
?
36 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
TUIfly.com Web Performance
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Sponsored LCCs
Deutsche LufthansaDeutsche Lufthansa
DeltaDelta
UnitedUnited
British AirwaysBritish Airways
FSA LCC Subsidary Status
Re-integrated
???
???/sold
2002: sold Go2006: start BA Connect/sold
LOTLOT For Sale??
TUITUI +
+++
?
38 Aviation in Transition – The Future of LCC and Charter, 10th Aviation Conference, Hamburg, 14.- 16.02.2007 www.advolar.com ©
Thank you for your attention!