The competitor landscape
The airline industry remains highly competitive, with more competition than ever before in a number of our market segments.
Domestic and shorthaul
We face competition on the ground and in the air. There is a clear relationship between shorter rail journey times and the ability of train operators to capture a bigger share of the total air/rail travel market. For example, between 2004 and 2007, rail journey times between London and Manchester decreased by 17 per cent and the train’s share of the total market grew by 20 per cent.
The development of Eurostar services has had a significant impact on air travel. With Eurostar now based at St. Pancras International and journey times cut by up to 25 minutes, customers will experience greater benefits from travelling into city centre terminals by train.
Furthermore, increased awareness of the environment is affecting demand in this market.
In the air, competition in shorthaul is mostly coming from the budget airlines, who will soon account for more than half of the London market. These carriers are now planning to increase their fleets significantly, but only a small proportion of this growth seems destined for the London markets, with focus shifting towards intra-European services.
Traditionally, full service airlines have had two cabins, with a premium and an economy cabin. In recent years, there has been a move away from this configuration, with some airlines removing premium cabins and others shifting to a hybrid three class offer.
Private jets
Demand for private charter airlines meeting the needs of business travellers is increasing. These services are premium/luxury standard and entirely flexible, offering a fast and efficient service from smaller airports.
Longhaul
The quality and number of competitors has grown in the last five years. Competition will continue to increase.
While our traditional markets such as the UK and the US will continue to be strong, new ones, particularly India and China, look likely to grow. The rise of the Gulf, as a destination and as the home of key competitors, is expected to intensify. We are also starting to see the first successful steps towards airline consolidation in Europe with the mergers of Air France/KLM and Lufthansa/Swiss.
Mainstream competitors have begun to invest in their products, focusing on inflight entertainment and new seat technology. New aircraft, in particular the Airbus A380, will offer opportunities for further product upgrades.
Full service carriers continue to invest in special facilities for premium passengers, in some cases creating dedicated premium terminals.
Premium-only carriers
The operation of premium-only services became a high profile activity in 2005 with the almost simultaneous launch of the US carriers Eos and MAXjet with a focus predominantly on the London-US market, especially London-New York.
Despite their appeal to consumers, these carriers have not proven commercially sustainable and have both collapsed in recent months.
Low cost longhaul carriers
Dedicated low cost airlines still remain a rarity in the longhaul segment, and most are linked to charter or tour companies. Indeed, it could be argued that existing charter airlines have already been serving the low cost longhaul segment for some years.