The rapidly-changing aviation industry

It’s mixed emotions for the global aviation industry as the emergence of low-cost carriers has taken its toll on major legacy airlines that have once dominated the industry.

Over a short period of time, not fewer than 24 airlines have come and gone as casualties of cut-throat competition, oil prices, politics, and bad management. Several others are on the brink of falling, and some are crawling to recovery.

In 2001, for instance, American Airlines bought the financially-troubled Trans World Airlines, while in 2004, Alaska Airlines acquired Virgin America for the same reason.

In September 2005, America West and US Air merged to become US Airways. Thereafter, American Airlines and US Airways merged to form American Airlines under US Airways management.

In April 2008, it can be learned that Northwest and Delta merged to form the new Delta Air Lines.

In 2010, United and Continental joined forces in 2010 to launch United Airlines while AirTran Airways and Morris Air were acquired by Southwest Airlines on the same year.

Outside of the US, Air Canada was merged with Canadian Airlines, while Gol acquired Varig in Brazil.

All of these airlines were a product of unfortunate events, including bankruptcy, tight competition, and poor management. Some, however, struggle to survive.

Take for example Thailand and Malaysia’s flag carriers: Thai Airways International Public Company Ltd. and Malaysia Airlines, with the latter being subject to privatization.

In October this year, Thai Airways President Sumeth Damrongchaitham announced in a meeting with the airline’s staff that the company was suffering a crisis particularly revenue losses over a tight competition with budget airlines.

“The competition is very fierce this year. Thai is really in a crisis. Next year, it must do its best. If staff are still unaware and do nothing, they will not have enough time to fight back. Today very little time remains. Today there is no comfort zone. Everyone will die if the vessel sinks,” he was quoted as saying.

Following the announcement, the airline said that it was significantly cutting its expenses to help boost its profits, and this has subjected even the staff’s benefits.

Meanwhile, the Malaysia Airlines—owned entirely by the government—has been poised for privatization since 2014 after incurring a series of losses. A total of 20 investors were invited for the auction but only four have been shortlisted, including one of the world’s largest budget carriers, AirAsia Group Berhad.

In Iceland, Wow Air announced in March that it was immediately ceasing its operations after failing to secure investments from Icelandair and Indigo Partners, a private equity firm. Yet the company continued to operate.

Wow Air was only launched in 2012 and was known for its brightly-painted purple planes.

In September this year, century-old Thomas Cook airlines collapsed due to bankruptcy after failing to secure a £200 million rescue loan. It is only one of the 20 airlines folded or dissolved this year.

The stiff competition among airlines is evident in a series of promotions and frequent flyers’ programs that are being offered almost every one to two months. They strive to grab the loyalty of passengers and offer convenience and quality travel at the lowest value possible.

Gone were the days that such quality travel can only be afforded at a high fare, and gone was the fact that only the elites are eligible to fly. This is true particularly in the Southeast Asian region where low-cost carriers are significantly transforming the aviation industry.

According to Statista, low-cost carriers’ worldwide market share continued to rise to 31 percent in 218 from only 15.7 percent in 2006, and this was expected to increase further.

Today, the low-cost carriers are wearing smiles, and larger airlines are taking their toll. This means a lot about having to adapt to the rapidly-changing environment and to the new markets.