New competition in global air travel must not be stamped out by the entrenched interests of the legacy carriers, said James Hogan, President and Chief Executive Officer of Etihad Airways, in a speech last night.
Delivering the 2015 Brabazon Lecture at the Royal Aeronautical Society in London, Mr Hogan said the global industry should learn from the British, one of the first markets to embrace true competition and one in which innovation and new approaches could still be seen.
“Air travel is the lifeblood of the modern economy. But while the modern globalised economy has seen trade and tourism jump forward in leaps and bounds, the structure of our industry has shuffled forward only a few tiny steps.
“This is an industry which cries out for new competition, across many different markets; but it is one in which smaller operators can only operate in niche environments.”
To become a competitive global network carrier today is incredibly challenging, said Mr Hogan:
“More than ever before, scale is the single defining factor behind success for a network carrier.
“Scale means a network which can compete against the networks of legacy carriers, built up over decades.
“Scale means the ability to reach consumers with a brand promise across many different markets – profile and visibility that will deliver customers.
“And scale means the ability to strip down costs to competitive levels, through economies of scale throughout operations.
“That means this is an industry which requires a massive cost of entry to compete.”
Mr Hogan outlined Etihad Airways’ innovative model for growth, which has supplemented investment in organic growth with strategic equity partnerships. As a result, Etihad Airways has been able to compete against its much larger competitors, which have received decades of investment and government support.
He warned, however, that legacy carriers such as the ‘Big Three’ US airlines and Lufthansa, were doing their best to stifle new competition.
“Currently, the US carriers are investing tens of millions of dollars to attempt to stifle competition, and we have seen similar moves by some the larger European legacy carriers.
“The victim here is the customer.
“The cost is innovation.
“The way for aviation to flourish is through innovation. Innovation creates new ways of getting through the obstacles of a regulated, shackled industry. Here in London, you have many of the great aviation innovators on your doorstep – what BA is doing today, what EasyJet and Ryanair have done over the last 15 years and what bmi did over much of its life.
“This industry needs to encourage that innovation for the benefits it brings to customer choice and to real competition.
“New approaches will help this industry flourish into the future. We should not allow those new approaches to be stamped out by the entrenched interests of the legacy carriers.”