Dear airlines, is it time for a rethink?

When companies external to travel say it’s time to embrace something new, it can often be taken with a pinch of salt.

But, when it comes from within the industry, maybe it’s time to sit up and pay attention.

Enter CAPA chief Peter Harbison who gave an aviation industry update at last week’s CAPA conference in Dublin.

His presentation laid out the three phases of disruption aviation has been through – sixth freedom, Gulf carriers and low-cost airlines – and positioned Big Data as the fourth.

Distribution strategies began to be upset during the LCC phase but Harbison’s point of view is that what’s happening now is different to what has gone before.

  • distribution is changing fundamentally
  • third parties are better at accessing and making use of data and, ultimately better at retailing
  • consumers are more in the driving seat

Harbison points to Amazon with a market capitalisation of around $450 billion – up $75 billion in the past six months.

“That’s just an indicator. Really if it wants to sit somewhere it’s going to sit somewhere.”

Then there’s Facebook’s marcap of $430 billion and Google’s at around $650 billion.

Within travel, there’s Priceline at $90 billion, Uber at $70 billion and Airbnb at $35 billion.

There are arguments both for and against attaching too much weight to the market capitalisation of a company.

But, what about when those companies are capable of eating your lunch – they have investment, agility when it comes to tech development and data on your customers.

The nearest airline is Delta, which as Harbison points out “just manages to outflank Airbnb” with its $37 billion marcap.

“There’s internal squabbling about who’s right and who’s wrong while those outside the tent are ready to swoop.”

It’s fair to say that it’s about more than just drawing comparisons between the market valuations of carriers versus these asset-light, data-rich companies but there are other fundamentals also challenging airlines.

As Harbison points outs:

“Compared with these big bears, airlines have very small numbers. And, they are focused on just about everything else other than looking after the customer and don’t have the time or resources to be investing in big data analytics that the others have.”

Related reading:

Google (not the GDS) is the new enemy in airline distribution

NB: Reporter’s attendance at the CAPA conference was supported by Travelport.

NB2: Airlines image via Markus Mainka for Big Stock.

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