Government Regulations, Challenges, Impact On Airline Business Revenues


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Government Regulations, Challenges, Impact On Airline Business Revenues

By Eddy Metcalf

January 11, 2012 - Government regulation regarding airport security, emissions and taxes is one of top issues negatively impacting global airlines’ revenues over the next 18 months. This is according to a bi-annual Sabre Airline Solutions survey of executives at nearly 80 regional and global airlines worldwide who were asked to rank what positively and negatively impacts airline revenue.  

Many airlines from around the world are opposed to the recently launched EU Emissions Trading Scheme (ETS), which requires airlines flying into European airspace to pay for carbon emissions. A number of airlines worldwide have also faced a number of proposed or new airline taxes which threaten to increase the cost of air travel considerably, depressing travel demand in an already unstable economic environment. This is the first time that Government Regulations has ranked in the top three challenges that will negatively impact an airline’s business revenues.  

“Airlines already invest significantly to reduce their carbon emissions, so rather than imposing one-off taxes and compliance schemes that hamper this investment, governments would be better served having more sustainable policies, such as incentives for the research and development of alternative fuels, and adopting policies around NextGen air traffic control,” said Sam Gilliland, chairman and chief executive officer of Sabre.  

In the past year, airlines and U.S. airport security officials have also come under fire by passengers for increasingly lengthy airport security measures, which also threaten to dampen air travel demand.  

“Travel plays such a critically important role in a healthy global economy and we should all be focused on finding ways to make travel easier and more accessible without compromising security and the health of the industry,” Gilliland said. “While some global governments are grappling with how to solve economic problems, they must remember to not bite the hand that feeds them. Airlines are significant contributors to regional and global economies – making it more costly and difficult to travel will only add to fiscal hardships – not solve them.”  

Airline industry leaders, including Gilliland, have voiced their concerns with U.S. government officials in an attempt to spur reform. In his role with the U.S. Travel Tourism Advisory Board, Gilliland put forth recommendations for a Trusted Traveler Program that would see frequent travelers move through airport security quicker. Gilliland also recently put forth recommendations for a new energy policy that would help drive less reliance on fossil fuels.


Challenges having the greatest negative impact on airline revenues:  

•Fuel prices – 81%
•Government Regulations – 72%
•Airport/Passenger Security – 59%

Fuel price concerns continue to top the Sabre survey with 69 percent of airline executives surveyed specifically identifying Fuel Price Instability as the biggest challenge facing airlines. Fuel purchase management and fuel hedging management were most often identified as the primary issues related to fuel price instability.  

Challenges having the greatest positive impact on airline revenues:  

• Revenue/Yield – 81%
• Customer Loyalty and Retention – 81%
• IT investment – 76%

Airlines surveyed by Sabre recognize Customer Loyalty/Retention as important to increasing revenues but there was a sharp decline over the past two years in the number of airlines that view customer loyalty and retention as a chief challenge for them. This comes in stark contrast to recent consumer surveys conducted by a variety of organizations that have shown complaints about poor airline customer service have significantly increased.


Regional Results - A larger percentage of airlines in Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) indicated government regulations as a significant negative challenge. Latin America carriers viewed Network Planning and Scheduling among their top three challenges compared to airlines in other regions which rated that operational issue much lower. More survey respondents in APAC and North America rated Labor Management as a top challenge as compared to their counterparts in EMEA and Latin America.  

Seventy-seven of the top 200 airlines worldwide were among survey participants. Airlines surveyed included various business models and carrier types including global network carriers, low-cost carriers, regional/domestic carriers. Airlines from every major geographic region are also represented including carriers based in Asia-Pacific, Europe, Latin America, Middle East and North America.  

Sabre Airline Solutions provides technology solutions to the global aviation industry. It operates the industry’s largest Software-as-a-Service (SaaS) business, with its innovative reservations system, commercial planning and operations software used by more than 300 airlines and over 100 airports around the world.

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