The aviation industry in Asia-Pacific is witnessing remarkable growth driven by a surge in air travel demand, and as European airlines have been experiencing tough competition from state-backed Asian carriers (that offer cheaper fares and greater connectivity), many operators are now having to cut back on routes to Asia.
We are already seeing leading airlines, such as Lufthansa, Air France-KLM, and Virgin Atlantic terminating or reducing their direct flights to many major Asian economies, and if we take the German carrier as an example, we see that their direct flights to Asia have decreased from 14 to only 2 destinations – Singapore and Bangkok. Earlier this summer Lufthansa has even called on the European Union to take action, stressing that European airlines are facing extremely unequal competition from Chinese airlines as well as those in the Gulf and on the Bosphorus.
To call on the public sector is absolutely a must, however, we cannot sit and wait for new industrial policies to take place. The developments in the Asia-Pacific aviation landscape will for sure not wait, and the private sector needs to be bolder when looking for alternatives, otherwise, many airlines risk losing market share in promising, competitive, and exciting regions.
Addressing the Unequal Competition
Even though many costs (such as fuel and aircraft ownership) don’t vary much by region, European carriers are constantly experiencing challenges such as increased taxes and fees, high regulatory requirements, additional climate policy requirements, and inadequate infrastructure. Sweden e.g. is paving the way in Europe for better regulations by abolishing the aviation tax in the country, but in general Europe still struggles with other political conditions that weaken international competitiveness for European airlines.
China, for instance, is a country that has been playing a key role in shifting the global aviation industry. As the country’s local carriers haven’t experienced strict sanctions or ban on overflying Russian airspace, a significant number of foreign carriers have lost market share to China as they had to scale back operations in the country.
In the past, foreign airlines held the majority of international capacity, reaching a peak of 60% in June 2009. However, there has been a transition, with Chinese airlines now holding a dominant 62% share of the market, while foreign carriers have experienced a decrease to 38% of the market share (Source: Cirium).
Another key player is India, which expects to see a significant rise in air passenger traffic in the coming years, positioning the country as the third-largest civil aviation market. With a burgeoning market estimated to be worth $40 billion by 2027, and Indian consumers becoming more aspirational on their spending patterns, the country presents lucrative growth prospects that have already been understood by many aviation stakeholders. The German carrier Lufthansa has recently announced to be working towards a metal-neutral joint venture with Air India on routes between India and Europe, among other initiatives to secure strategic advantage in the region, showing that they understand what is at stake.
“There is indeed an imbalance exacerbating international competition to the detriment of European carriers in Asia, resulting in many of them being thrown out of the game – before getting the chance to play. We cannot wait for changes in regulatory policies. Airline operators need to shift the mindset in order to survive” says Espen Høiby, CEO at AAP Aviation.
When trying to enter challenging markets, other factors that come into the equation – together with the ones mentioned above in this piece – are operational resources, local expertise, and labor costs. In a market where the end customer truly sees the value for money and expects the highest value-for-money service, maintaining key routes while ensuring the highest standards on competitive pricing, seems to be almost impossible. But we dare to say that it is not.
Creating New Opportunities Instead of Fighting Over Existing Ones
The big European carriers are actively responding to the challenges in Asia-Pacific by trying to adjust their operations mainly through the implementation of partnerships with other airlines, an approach that puts them in a position where the circumstances shape the strategy and bind them to the environment.
This is because at the same time as partnering with other airlines (competitors) may be a fast way-out to get some air over the surface, it can also represent a risk when it comes to preserving brand identity, service concept and company standards. Preserving all those aspects of an airline e.g. in a country like India (with a population of 1.4 billion, 28 states and 8 union territories, and thousands of spoken languages) means having to access real local expertise, with professionals that not only understand the country’s multicultural background but also have experience from international airlines, enabling them to perform with a natural respect for both the airlines’ service concept and cultural expectations within the country.
These are aspects hard to keep when partnering with your competitors, but an opportunity we have been able to offer our clients through our Total Crew Management™ model – that enables airlines to reverse traffic by leveraging our local bases in various countries in Asia-Pacific, and access a diverse talent pool around the globe.
Since 2013 we have been encouraging the industry to reevaluate the traditional operational model and shift towards more sustainable and cost-effective practices, as we saw the need to provide airlines a new way to engage, employ, and empower their crew members, while unlocking new opportunities for growth, efficiency, and competitiveness in the dynamic aviation landscape.
As the market in Asia-Pacific continues to evolve, it prompts a critical question: Is adopting crew management solutions the best way forward for airlines aiming to stay competitive? The evidence suggests that those who anticipate and adapt may well secure a significant edge in this demanding, expanding, and exciting market.
