INTRODUCTION
With the exception of 2009, airlines made money every year from 2010 to 2018 while registering modest operating margins of 5.5%. They also recorded improvements across key performance indicators (KPIs):
- Passenger traffic expanded by almost 80%, growing from 2.5 billion passengers in 2009 to 4.4 billion in 2018, as a result of air travel becoming more affordable and accessible.1
- Passenger load factors rose by 5.8%, from 76.1% to 81.9%, with airlines becoming better at managing capacity to meet demand growth.2
- Flights increased by 47%, but the average fuel consumption per Available Seat Kilometer (ASK) dropped by 20.9%3 due to fuel efficiency programs and more fuel-efficient, newgeneration aircraft.
Over the past 10 years, therefore, the aviation industry has grown steadily while becoming consistently profitable, significantly safer, and considerably more efficient in managing capacity and fuel consumption.
Nevertheless, substantial operational challenges remain that cost airlines approximately $74.2 billion per annum or roughly 1.5 times the industry’s operating profit for 2018. These challenges are holding back airlines from achieving higher profits, safer and more punctual operations, and pose a major threat in the event of an economic downturn in the future.
More importantly, however, operational challenges were responsible for underperformance across the full spectrum of airline operations in 2018:
These inefficiencies will only intensify in a rapidly growing industry; over 8.2 billion passengers and 47,000 aircraft will be moving through the aviation ecosystem by 2037. This white paper investigates the financial impact of operational challenges on airlines worldwide while attempting to quantify the cost savings and productivity gains enabled by new integrated platforms, software applications and technologies such as cloud computing, big data insights and analytics. It considers digital investments made to date and determines that if airlines had invested in further digitization, they could have reduced global inefficiencies by up to 34%, saving nearly $25.3 billion in the process.
[1, 2, 3 IATA]
