The future of the airline industry until 2035 was reflected in a report published by the International Air Transport Association (IATA). IATA and a team of 20 airline decision-makers commissioned the research to School of International Futures (SOIF), an independent strategic foresight consultancy. The following is a summary of the aviation market forecasts developed in the document.
Intention of the study on the future of the airline industry
With the intention of forecasting the major risks and opportunities facing global commercial aviation, IATA’s Industry Affairs Committee (IAC), composed of 20 airline government affairs officers, commissioned the study at hand. Specifically, the Committee had three specific objectives:
- To anticipate the challenges and opportunities that will be addressed by the aviation industry and to make appropriate decisions to address them. Due to its status as a global industry, external factors that may influence international air transport are diverse; from technological advances to geopolitics, taking into account demographic and environmental ones. Undoubtedly, different currents of change affect the airline industry both positively and negatively.
- Encourage discussion among airlines and their allies. So that the study serves as a basis for thinking about future developments in the regulatory and business environment. This knowledge will give more certainty to strategic planning in view of the different scenarios envisaged in the research.
- Build agreement with governments to establish the foundations of growth for sustainable air connectivity. By adapting appropriately to regulations and preparing for the changes ahead, public administrations will ensure that citizens and national economies benefit from increased air connectivity. On the other hand, the aviation industry aims to be a strategic partner in meeting the United Nations Sustainable Development Goals by 2030.
Issues and factors influencing the future of the airline industry
During the study, IATA’s Industry Affairs Committee, together with approximately 500 industry professionals, gathered the industry’s views on the most important drivers of change that may affect aviation. In this regard, eleven key themes were identified where 50 drivers of change converge to impact the future of the airline industry between 2017 and 2035. In summary, these themes are:
These drivers of change in the future of the airline industry explore aspects of geopolitics including the role of international institutions and national governments. In addition, it also considers as geopolitics the degree of social peace or conflict and the level of cooperation between countries, as well as openness and trade. In this regard, there is particular concern about relations between the United States and China as well as between other regions. What will be the role of business and non-governmental actors?
Instability can have many origins: tensions in the Middle East, protectionism in a world of scarcity, or trouble spots around the world. Similarly, we must take into account factors such as transitions to democracies, levels of international cooperation, and the interventionism or inertia of states. How will shifts in economic leadership from the West to the East alter the established order?
Africa and Asia Pacific
Population growth, especially of the middle class in Africa and Asia-Pacific, will have an impact on the future of the airline industry. In this regard, the trend points to an increase in travelers from non-traditional markets. Will the airline industry be prepared to meet these new demands?
Historically, the development of airlines has been strongly influenced by governments, whether through regulation, infrastructure investment or direct support to companies. It is not surprising that this relationship will continue, even when there is greater private sector participation. But what will the link between government and airlines look like? Also, how will civilian and military uses of aviation be regulated? The repeal of foreign ownership restrictions, cross-border consolidation and freedom of travel could benefit the airline industry. However, in which nations will protectionism predominate over free markets?
The environment and the future of the airline industry
More and more citizens are recognizing the impact of human activities and in particular CO2 emissions on climate change, and there is a growing awareness of water, food and resource constraints. There is also greater awareness of water, food and resource constraints. How should airlines address these issues in different circumstances in the short, medium and long term?
Privacy and trust
It is obvious that Big Data, automation and IoT will facilitate the exploitation of new opportunities in the airline industry. These technologies are transforming marketing, as well as monitoring devices and people in real time. In order to take advantage of the opportunities that these new technologies offer us, the airline industry must favor user data privacy and user data control requirements.
Values and communities
As new generations such as millennials and generation Z integrate into the aviation market, the population is aging and the aviation user base is diversifying. Will we see intergenerational divides? What demands will diversity and an aging population place on the aviation industry? Along these lines, mobility and health, entertainment and connectivity will take center stage. Will new users demand greater sustainability or transparency in interactions from companies? What will be the industry’s attitude in the debate on these issues?
Technology and data in the future of the airline industry
It is worrying for the future of the airline industry that it can react to the digital transformation of other sectors and not lead its own process. Disruption to existing airline models will come from energy advances, new transportation options, data management and transparency as well as new manufacturing tools and quantum computing. At the same time some technologies, such as video calling and video conferencing platforms are already limiting the need to travel. Over short and medium distances, how will new modes of rapid transport such as the hyperloop influence the way passengers and goods are transported?
On the other hand, the incorporation of big data, predictive analytics, more powerful connectivity, processing power and storage open up opportunities for businesses and consumers. Data management and analytics will enable airlines to anticipate and adapt to changes in supply and demand in real time.
Security and borders
Open skies policy, airspace management, border restrictions, migration and the role of the military are the key issues in security and borders. Threats of terrorism and cyber-attacks will limit open borders, but also impact the safety and security of the aviation sector. Will the industry be able to cope with new forms of terrorism driven by democratization and technological development?
The questions here are diverse; will airlines remain stand-alone businesses or will they move to integrate with other companies? Where will future revenues come from, such as non-aeronautical revenues between airports and airlines? Will the sharing economy and technology influence the business model to facilitate alternative travel? Will options such as air cruises, slow travel and social travel consolidate? How will digitalization affect the supply chain and aircraft lifecycle? What is the future of air cargo?
IATA’s four scenarios foreseen for the future of the airline industry
The product of a pre-study exercise with industry representatives in 2016, they posited four possible scenarios in the future of the airline industry:
In this scenario, the world is witnessing a shift of economic power to the East. In parallel, alternative institutions are emerging. At the same time, open and democratized access to information driven by citizens, companies and institutions is already a reality.
The aviation sector should support the performance of existing international institutions to ensure global standards. It will also be essential to work with new institutions to expand and reform existing legislation. Many travelers are willing to pay more for low-risk flights. Accordingly, airlines will also be willing to reduce risks.
In this case, open access to information and the development of big data, as well as predictive analytics and intelligence (AI), have a positive impact on society.
Air travel will be accessible, but in line with the Climate Resettlement Initiative, some countries may implement travel restrictions in order to meet sustainability goals. In addition, more and more people from Africa and Asia will be traveling for the first time. This implies increased pressure on aircraft and infrastructure in the future of the airline industry.
The world is rearranging itself into resource trading blocs. Movements between regions would be limited because of inequalities between resource-rich and resource-poor nations. Similarly, data asymmetry between nations is manifesting itself and governments are increasingly using data to control and monitor their citizens.
A contradictory, but peaceful world, because China and the US would work together to open up international trade. In this context, companies play a decisive role in the economy.
The future of the airline industry, between uncertainty and optimism
As we can see from this summary of the scenarios that will influence the future of the airline industry, there are opportunities and challenges that the aviation industry must face. Seen in this light, the choice can be no other; the airline industry as a whole, (airlines, airports, service companies and related public bodies) must have a common goal to face the new challenges of the airline industry in the wake of the coronavirus while jointly taking advantage of the positive opportunities that present themselves.