Airline Industry to Face Rapidly Expanding Competition, According to PwC US

4 June 2014

PwC US said it has released Tailwinds, its annual report on the airline industry. The report reveals that the industry can expect more aggressive competition from low-cost carriers, airlines in the Middle East, and joint ventures increasing international flights.

With a successful year in growth and operating income in 2013, the overall industry picture is favorable, but with competition on the rise, driving efficiencies by becoming a “connected airline” can help airlines better navigate the landscape and stay ahead.

According to the report, global airline revenues are expected to have reached a new high of USD708bn in 2013, driven by increased passenger revenue resulting from more flights and scheduled passengers. Additionally, LCCs continued to gain global market share, increasing to over 25 percent in 2013, restraining the yields of the legacy carriers. Airlines also saw operating expense relief in 2013 due to lower fuel prices, while there has been an uptick in labour and maintenance costs. Airlines will continue to face rising labour costs due to expected growth in the demand for pilots and maintenance technicians.

For the remainder of 2014, the report expects the LCC model to likely evolve in western markets, and the concept will gain more traction in Asia as carriers target nearby emerging markets in the region. Middle East carriers are likely to become more of a competitive threat on international routes, as they are well-funded and have lower fuel costs and an advantageous geographic position. Additionally, Middle East carriers have placed a record number of orders for new wide-body aircraft for the next decade, signaling their intended expansion. Competition is also likely to increase as airlines push for more JVs and antitrust immunity agreements (ATIs) to target international growth. Airlines in Asia are using the LCC model in JVs to capture more traffic, and more airlines will pursue new JVs and ATIs to be able to offer more direct flights on international routes. PwC´s report also notes that carriers are likely to remain capacity disciplined relative to previous cycles.

PwC US helps organizations and individuals create the value they´re looking for. Its website is at http://www.pwc.com.

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