COMMENT: More Flights ” More Passengers
Some interesting sets of statistics have emerged over the last week or so from two of the major players who supply the engine room for the air travel industry, SITA the telecommunications provider and OAG, the integrated source of the airlines” timetables. Both are positive, one demonstrating a fundamental change in the way we make our airline bookings with the other showing that the carriers have in the main finally got over the very serious problems associated with the Gulf War and SARS. SITA surveys ticket sales whilst OAG provides information on actual flights.
According to SITA in its annual IT Trends Survey (conducted in conjunction with Airline Business) direct ticket sales through airline branded web-sites have doubled in the last 12 months to be worth approximately US$50b a year and account for around 10% of total airline ticket sales. The survey shows that reservations through all web channels represent about 16% of total sales, growing from 10% last year and 6% in 2001. Just 10% of airlines, mainly budget carriers, are already selling the majority of their tickets online and traditional airlines aim to achieve this within the next two to three years.
Electronic ticketing (e-ticketing) continues to grow and now accounts for nearly 15% of ticket sales, compared to 11% last year. The carriers of North America lead the world, selling almost 40%of tickets through a variety of online channels and almost 60% of their total sales are now e-tickets.
The effect of this on the cash situation within the airlines is overwhelming. Instead of air travel being a credit business with carriers mainly receiving their income via the IATA clearing house towards the end of each month the revenue is now being generated at the time of booking. The budget airlines, the first to spot this trend, have built up huge cash mountains, a typical example being Buzz, probably bankrupt under the old situation but actually able to offer Ryanair funds when it was taken over. SITA says that the majority of airline tickets are still sold through travel agents supported by the global distribution systems (GDS), but this dominance is being challenged. The airlines are also extending their provision of additional travel services, such as car hire, insurance and hotel rooms. The argument now raging is how does all this impinge on the very effective Bonding scheme operated by the CAA with respect of holiday packages. Is it outmoded with other insurance available or should everyone join? When the really big airlines begin to reap the benefit of pre-travel payment the amounts involved could be unbelievable.
Figures published by OAG in its quarterly report indicate that the global airline industry is beginning to recover following a rollercoaster two years.
Worldwide, the number of scheduled flights is comparable with the same period in 2002. The UK market continues to perform strongly with flights to and from Great Britain up +6% largely driven by a strong budget sector.
Asia-Pacific has also fought back strongly from the SARS crisis, recording a +10% growth on flights to and from the region. China has seen a +21% increase in internal sectors and flights to and from China are down just ”3%, compared to a ”45% drop reported 3 months ago. The Middle East is also showing a healthy growth of +10% on flights to and from the region. Nearly 500 flights have been added compared with September 2002. The Americas as a whole continue to make the weakest recovery. Although US domestic flights are at the same level as September 2002 this is still ”12% down on September 2001 levels. Within Central and South America flights are down ”10% compared with September 2002. The slow recovery of the American market may explain why overall worldwide flight levels have failed to increase year on year despite the strong growth recorded in some areas of the global airline industry.
Transatlantic traffic is beginning to pick up, +2% on September 2002. However, figures remain down ”12% on September 2001 levels, over 700 fewer flights. The State Visit by President Bush to the UK in November will certainly assist in persuading the notoriously nervous US public that London is safe and not next door to Iraq. Certain Asia Pacific routes have been slower to recover: Flights between Singapore Changi to and from Western Europe are down ”3% and between Hong Kong and Western Europe scheduled flights are down ”2%. The transpacific routes continue to record losses in schedules following the devastating impact of the SARS virus.
The budget sector has continued to perform strongly and should be credited with buoying up the industry in the last two years. Low cost flights within Europe continue to show the largest increase with nearly 4,500 more flights, up +62% according to OAG. Low cost flights to and from the UK also continue to climb with an increase of +34%, more than 1,300 flights. Within the UK, flight levels have risen by +38%. Low cost flights in the Americas are steadily on the rise. In the US domestic market, the number of low cost flights has risen by +7%, up +5% on pre 9/11 levels. When compared with pre-9/11 data the phenomenal performance of the budget sector is even more apparent. Virtually all regions report incredible growth in this area. Low cost flights within Europe are up +176%, up +123% within Canada; up +272% within Pacific/Australasia and up +450% to and from Latin America compared to September 2001. It is not a boom time for the industry but in spite of everything the world continues to fly!