How has aviation shaped a generation?

Standard

Working, studying and partying abroad has never been easier, and it’s been Millennials who have benefited the most from this.

For much of my work, I tend to look at the travel industry and consider the way it is changing (though perhaps not as quickly as it should) to adapt to consumer trends, especially those led by the Millennial generation.

The air transport industry is certainly having to adapt, especially when it comes to the way it engages with consumers through marketing and customer service.

easyJet A319

Recently however, I received an invitation from the Air Travel Action Group (ATAG) – an industry association representing the world’s major aircraft manufacturers and airlines – to look at things from a different perspective. They wanted me to help answer the question: “how has aviation shaped the Millennial generation?”.

After all, over the past two decades, Millennials have been the first generation to

witness the arrival of ticket-less travel, the boom of low-co

st airlines and the simplification of travel formalities, as countries around the world have taken great steps towards removing visa requirements and passport checks. Air travel has certainly become a lot more affordable, completely altering Millennials’ approach to studying, working and of course, partying overseas. This has been

captured with much success and rolled out across Europe in easyJet’s recent tagline ‘Generation easyJet‘. Meanwhile, the boom in low-cost airlines across Southeast Asia has given many consumers (predominantly Millennials) their first taste of international travel. To these young consumers, airlines such as AirAsia aren’t only about transport – they’ve quickly become a lifestyle brand too, offering many other branded products and consumer services (something I’ve written about before on my own blog Gen C Traveller).

However, while all these things have helped to shape Millennials’ attitudes towards global mobility, looking ahead, the picture isn’t necessarily so rosy. In fact, I believe that in the future the air transport industry faces major challenges in connecting with this generation, both as customers and employees.

Today, air transport is becoming more about getting from A to B than from having an exclusive experience, yet that’s what Millennials will spend their money on, if they feel it’s worth it. With tough schedules and long hours, air transport could struggle to meet the expectations of Millennial employees who look more for compassion and flexibility from their employers.

FC_ATAG_AviationBenefitsBeyondBorders

All of this, and more is set out in a two-page article in ATAG’s annual report Aviation Benefits Beyond Borders which was released recently in New York and has already hit the headlines. It’s available for free direct download here (see pages 69-71). 

Meanwhile, if you’d like some practical tips on marketing to Millennials, check out thefree guide I produced with my colleagues at Toposophy.

This post originally appeared on the Toposophy Insights blog. Take a look atTopsophy.com/Insights

“Now everyone can fly!” – Low Cost Carriers and Millennial Travellers in Asia

Standard

Low-cost carriers (LCCs) have soared to new heights thanks to booming demand from young Asian travellers looking to take their first break, joining the ranks of other young people who consider these exciting new brands as part of their lifestyle.

[From The Rise of the Young Asian Traveller, released in August 2014 by the Pacific Asia Travel Association, here’s an article I wrote to sum up why it is young people especially who are flocking to LCCs – a phenomenon that’s giving The Rise of the Young Asian Travellerthe traditional legacy carriers so much cause for concern. You can find out more about the report here.]

[Article starts]

Across the globe low-cost carriers have re-shaped the traditional airline business model and have significantly changed the competitive dynamics of the air transport industry. Consequently they are now the dominant force in most short-haul markets in Europe and Asia[i]. While in Europe, low-cost carriers (LCCs) became established in an already mature market, Asian low-cost airlines have grown thanks to the rise of the world’s most rapidly expanding middle class (a process described earlier in this report)[ii].

The result has been the creation of a range of markets that are ready to embark on inter-regional travel with fervour. With a model based principally on low fares, LCCs make air travel accessible to a whole new market. Besides, the region’s geography often means that air travel isn’t so much luxury as a necessity; despite the wide-ranging rail and road building initiated by governments across Asia, the offer of cheap, fast and flexible air travel has proved an irresistible temptation for business and leisure travellers alike.

Low cost airlines now account for more than half of all airline capacity in Southeast Asia, and in 2014, more than 10 new budget airline start-ups are expected across Asia[iii]. In the Philippines, LCC operations (international and domestic) account for as much as 61% of all airline capacity, while in Indonesia and Malaysia the figures are 53% and 48% respectively. LCC capacity is expected to increase even more dramatically in the next decade[iv].

Projected Growth of Southeast Asian LCCs in 2014 ranked by fleet size[v]

Rank Carrier LCC Group Fleet on 1 Jan 2014 Projected fleet on 31 Dec 2014
1 Lion Air Lion 94 105
2 AirAsia AirAsia 72 76
3 Cebu Pacific Air Independent 48 48
4 Thai AirAsia AirAsia 43 35
5 Wings Air Lion 34 27
6 Tigerair Tigerair 33 25
7 Citi Link (Garuda) 32 24
8 Indonesia AirAsia AirAsia 30 30
9 Nok Air Nok 26 22
10 Malindo Lion 23 11

Source: Capa Centre for Aviation

LCCs and the Asian Millennial traveller

With the Millennial market, the growth of LCCs appears to be self-perpetuating. Clearly LCCs have proved to be a hit in countries with large, young populations of first-time travellers. Attracted by low fares, flexible online booking options and a strong fresh-faced brand image, for many Asian Millennial travellers LCCs offer their first experience of flying, and of international travel. Figures suggest that the experience is becoming addictive. The following factors may help to explain why:

  • Low fares – As the name suggests, low-cost carriers cut out the non-essentials and pass these lower costs on to consumers in the form of lower ticket prices. Research has consistently shown that LCCs attract a younger traveller, often willing to compromise on ‘extras’ such as in-flight meals, greater cabin comfort or checked-in baggage in order to get a cheaper fare. Low fares can encourage young people to take the leap and make their first trip away from home with friends, or colleagues. The introduction of three low cost carriers in Japan in 2012 led to an overall annual growth in domestic traffic of 8.7% (an additional 2.6 million passengers) the highest seen for 20 years[vi]. Pricing is generally highly flexible with LCCs, allowing customers to pick and choose single leg journeys to suit their travel itinerary.
  • Web-based sales and travel management – The Malaysian carrier AirAsia, was the first airline in Asia to introduce online booking, payments and ticket-less travel. It was also the first carrier in the world to offer SMS booking. LCC’s heavy reliance on the internet for their full range of services (booking, checking in, bag tagging, meal reservation and more) with the demographic that spends most of their waking hours online. Put simply, the millennial generation, as the first generation that has grown up in the era of the internet is a generation that is extremely comfortable with making online purchases and using the tablet or smartphone as an essential travel companion. For consumers who don’t have ready access to the internet or means of paying online, LCCs have also found innovative ways of selling tickets through dedicated booths in shopping malls or post offices.
  • Convenience through dense network and friendly schedules – LCCs have worked hard to shape their schedule to passengers looking to take a weekend break or even travel for business. They have also worked to compete with ferry and rail routes offering faster travel times, increasingly to primary hub airports. Faster turn-around times for aircraft mean that more flights can be offered during the day. Furthermore, the expansion of the LCC route map, particularly in Southeast Asia, has been particularly impressive with airlines ‘discovering’ a whole host of secondary destinations.
  • Strong branding. Today flying with a LCC is not just about paying for a seat on an aircraft. LCCs are rapidly becoming lifestyle brands just like consumer electronics, food or drinks, or fashion labels, expressing personal taste and becoming a part of every-day consumption patterns. LCCs commonly use their brand in a clever, often cheeky way, presenting a youthful, fun image and of course engaging heavily with consumers where they are to be found most – on social media. In addition to offering flights, LCCs are rapidly extending their brand to a whole range of other services; insurance, hotel booking, online retail, even movie rental.
  • Brand loyalty is another question… Young consumers are famous for their tendency to switch brands quickly according to what is cheap and/or fashionable. As flag-carriers are quickly discovering, traditional loyalty programmes, considered the ‘cornerstone’ of consumer loyalty are going through upheaval[vii]. Increased transparency of frequent flyer programmes brought about by modern technology, and shifting preferences among travellers for finding, booking and taking advantage of awards while travelling make it harder and harder for legacy carriers in particular to engage with a demographic that is adept at finding special offers online and comparing products for perceived value in a matter of seconds. To a lesser extent LCCs are finding this too – though they are more able to compete on their key branding element of low prices.

Southeast Asia already has a high LCC penetration rate – the LCC capacity share of total seats is approximately 56% – but the percentage for North Asia is still low at 9%. This is mainly attributed to tight government regulation on air passenger transport which favours the established flag carriers in the region. Some commentators have also questioned whether travellers in Northeast Asia, used to high-end services offered by the established carriers will take so keenly to the no-frills approach favoured by low-cost airlines.

Where younger travellers are concerned, there is reason to expect rapid-take up of LCC seats when liberalisation takes hold and LCCs start-up. More affluent, aspirational travellers may still be attracted to fly with full service airlines, forcing these to differentiate themselves from the service offered by LCCs. The combination of flexible pricing, convenience and snappy branding that have attracted legions of young travellers from Southeast Asia to take to the skies for the first time however, will be a tough combination to beat.

 

References:

[i] O’Connell J.F. & Williams, G. (2005) Passengers’ perceptions of low cost carriers and full service airlines, Tourism Management 27 (6).

[ii] PATA Visitor Economy Bulletin, February 2014 ‘ASEAN Tourism and Air Liberalisation – Really ready for takeoff?’

[iii] Wall Street Journal, ‘Budget airlines look to Taiwan, Hong Kong’ 16 Dec 2013 online

[iv] ASEAN Network Forum (2013) Lifting the Barriers Roundtable: Aviation

[v] Capa Centre for Aviation, ‘SEA low-cost airline fleet to expand by almost 20% in 2014’ (11 March 2014).

[vi] CNN online: Don’t laugh: Vanilla Air, Peach and other budget airlines mean business (3 Sept 2013).

[vii] Skift, The Reasons Why Travel Loyalty Programs are Going Through Upheaval (27 Feb 2014).