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01Investment drivers, challenges, and ambitions
Aviation is currently undergoing a once-in-a-generation evolution.
Not only are airlines of all sizes being asked to reduce the environmental impact of the sector, the way they engage with passengers is also being fundamentally rethought. Branded by the International Air Transport Association (IATA) as “possibly the most important transformational project of the next decade,” adapting the industry to the world of modern retailing, underpinned by a transition to Offers & Orders, will require significant investment from all industry stakeholders.
Over the long-term, these changes will move the passenger to the center of the ecosystem, offering travelers the chance to create trips personalized to their specific needs. Any aspect of the journey, from inspiration and planning, right through to booking, payment, and enjoying the flight, arriving at the destination and associated services, needs to be tailored to the needs of the passenger.
Today, travelers expect personalization, efficiency, and seamless engagement – and with the transformation to modern retailing, airlines are responding.
Airlines adapt to evolving expectations.
In response to this changing environment, half of airlines surveyed by Travel Technology Investment Trends are planning to make ‘moderate’ investment into their business in 2024, with the figure standing at 46% for LCCs and 54% for FSCs.
At the same time, some 89% of all airlines plan ‘at least’ moderate investment in their business, with FSCs again slightly more bullish than their LCC peers.
In total, 98% of all airlines will spend ‘the same or more’ on technology over the coming twelve months when compared to the prior year. A very significant 64% will spend ‘more’, while only 2% of LCCs will spend less and not a single FSC plans to reduce its investment in technology.
On average across the countries explored by Travel Technology Investment Trends, LCCs plan to increase investment in technology by 14.4% in the coming twelve months, compared to 12.2% at FSCs.
“It’s really great to see airlines investing more in technology this year.”
Cyril Tetaz
EVP, Airline Solutions
Amadeus
Investment drivers for the coming year.
A wide variety of objectives are behind these ambitious technology investment plans, with innovation, sustainability, and margin improvement topping the list of priorities.
Previously, aviation has led the way in several technical changes for the travel industry, including revenue management, high transaction systems, computerized reservations and online storefronts. Today, as technical change becomes increasingly urgent in the retailing space, airlines are working to seize new opportunities once again.
The top objectives driving investment for LCCs over the next 12 months are:
Innovation
Margin improvement
Revenue increase
Sustainability
Cost reduction
Improved traveler experience
In comparison, the top objectives for FSCs over the coming year are:
Innovation
Sustainability
Margin improvement
Revenue increase
Improved traveler experience
Interestingly, sustainability is a bigger investment driver for FSCs, while, perhaps unsurprisingly, reducing costs is more of a priority for LCCs.
This may reflect investments made by LCCs in modern, fuel-efficient jets, and the consequent argument they have a stronger sustainability story to tell.
Operational challenges for the coming year.
When questioned by researchers for Travel Technology Investment Trends 2024, airlines highlighted several challenges they face today, including the cost of operations, increased disruption, and fluctuating passenger demand. Effective deployment of new technologies could help to address these over the coming 12 months.
The top operational challenges for LCCs are:
High cost of operations
Staff shortages
Increased levels of flight disruption
The speed of technology change across the industry
Fluctuating passenger demand
The top operational challenges for FSCs are:
High cost of operations
Complex cross-border industry regulations
Increased levels of flight disruption
Supply-chain issues, e.g. obtaining aircraft parts
Fluctuating passenger demand
The challenges reported by airlines, both in the LCC and FSC sectors, are consistent with the themes that have characterized the industry over the past two-to-three years. Airlines face a challenging servicing environment as they strive to improve core operational performance to meet rapidly increasing demand.”
Holger Mattig
SVP, Product Management, Amadeus Airport and Airline Operations
