Home » Corporate »Headline News » Currently Reading:

Airline CEOs Gear Up for Innovation and Transformation, According to PwC

July 22, 2014 Corporate, Headline News No Comments Email Email

PwC today released results from its 2014 Global Airline CEO Surveywhich reveals top-of-mind issues of global airline CEOs and how they are planning to respond to important megatrends, such as shifting global economic power, technological advances and demographic changes that will impact the industry.

As the changing balance of economic power is expected to have a drastic effect on the industry in the next five years, the report, based on a global survey of International Air Transport Association (IATA) member CEOs, highlights the changes ahead for airlines in three key areas: organizational structure, technology and talent.

According to the report, 82 percent of airline CEOs are confident about industry revenue growth over the next 12 months as collective profit margins are forecasted by IATA to grow to 2.4 percent in 2014, up from 1.5 percent in 2013. However, this is still considerably lower than the 3.1 percent http://www.rembrandtbkk.com/from 2010, and CEOs are now focusing on a long-term planning horizon of five years or more to provide time to respond to the changing needs of their organizations.

“It’s an encouraging sign that on the 100th anniversary of commercial aviation, airlines are emerging from a difficult period with improved growth and profitability.  Over the next 20 years, the industry is expected to more than triple in size to meet the demand for air travel and cargo services, fueled by the fast emergence of a new middle class in developing countries,” said Jonathan Kletzel, U.S. transportation and logistics leader, PwC. “Previously, change, where it has come, has been incremental rather than transformational with only pockets of innovation, but the demand should encourage airline CEOs to explore a broader range of service and business models to innovate and drive competition on many different dimensions.”

63 percent of the respondents say they are developing strategies or have concrete plans for changes to their organizational structure and design. However, as CEOs recognize the need for such structural changes, they also feel their organizations are not well-prepared for change in their R&D/innovation, as 92 percent of respondents said they are concerned about their readiness to deliver, as well as human resources and talent at 86 percent, and information technology at 75 percent.

With organizational reform plans underway, better and more sophisticated use of data analytics will also help pave the way for airlines to transition from strictly capacity-driven pricing to customer-driven pricing based on a personalized mix of products and services. With 71 percent of airline CEOs planning for changes to their data management and data analytics, investment in such technologies will create stronger relationships between airlines and customers. “With these investments, airlines can make the ‘connected airline’ a reality, which will bring together airlines’ siloed operations by turning data into actionable information shared by all functions of the organization,” continued Kletzel.

Additionally, changing the balance of the workforce to match the evolving needs of the airline will be an important challenge for CEOs, and 88 percent of CEOs say changes to their talent strategies are underway, planned or in development. A global shortage in skilled pilots is already affecting airlines’ operations, and looking ahead, long-term market outlook forecasts indicate that almost 498,000 new commercial airline pilots and over 556,000 new maintenance technicians will be needed to fly and maintain new airplanes entering the world fleet over the next 20 years. Other leadership skills are also in demand and new skill sets will be required as airlines are increasingly focusing on merchandising and retailing strategies.

“Effective workforce planning should be a central element in airline strategies going forward, and airlines can tackle the pilot shortage threat by potentially securing agreements with regional and smaller airlines, partnering with local governments on developmental academies, or re-negotiating bargaining agreements to modify restrictive provisions,” said Kletzel. “To prepare for a new customer-centric business model, airlines should also increase recruitment of leaders from other industries to bring proficiencies in practices outside of the airline industry including social, mobile, cloud, analytics and retailing.”

In addition to the three key areas of organizational structure, technology and talent, other areas on the minds of airline CEOs include joint ventures (JVs), government regulation and infrastructure. Due to government policies that restrict cross-border mergers, only three percent of CEOs see mergers and acquisitions as a primary driver for growth in the coming year. However 18 percent of those surveyed see JVs as a key route to growth. Over-regulation in the industry also remains a concern of 92 percent of surveyed airline CEOs, as does inadequate infrastructure at 79 percent. While government policies toward airlines have become more liberalized, the industry still operates in a highly regulated cross-border market. To overcome regulatory barriers, genuine collaboration between the industry and governments would need to be combined with greater international consensus on alleviating policy barriers toward increased growth.

The 2014 Global Airlines CEO Survey results are based on a survey of 39 of International Air Transport Association (IATA) member CEOs.  For a copy of PwC’s 2014 Global Airlines CEO Survey, please visit: http://www.pwc.com/en_US/us/industrial-products/publications/2014-global-airline-ceo-survey.jhtml

Comment on this Article:







Time limit is exhausted. Please reload CAPTCHA.

Platinium Partnership

ADVERTISEMENTS

Elite Partnership Sponsors

ADVERTISEMENTS

Premier Partnership Sponsors

ADVERTISEMENTS

Official Media Event Partner

ADVERTISEMENTS

Global Travel media endorses the following travel publication

ADVERTISEMENTS

GLOBAL TRAVEL MEDIA VIDEOS