Uncovering Market Insights

Addressing Changing Market Dynamics Using Advanced Market Intelligence

Today’s business environment requires airlines to assess large amounts of data to understand their own and competitors’ markets – data that is scattered across multiple sources and hard to procure. New technology offers a set of Web-based solutions that provides commercial-planning departments with worldwide market-data sets and advanced visualization and analytic capabilities to increase productivity and market insights.

Today, airlines must have access to large amounts of data to understand the markets they serve, as well as those of their competitors. This level of data can be hard to acquire and is generally spread across various sources. An airline’s commercial-planning department needs access to multiple types of market data, such as flown traffic, advanced bookings and schedules, from a single source.

Airlines incorporate this data into their business strategy in a variety of ways, including:

  • Tracking current performance and potential market size;
  • Identifying new revenue opportunities through network expansion, codeshare agreements and agency performance;
  • Segmenting passenger travel behavior in business and leisure markets;
  • Gaining insight into competitor’s performance.

To best monitor competitive performance, airlines need to understand variables such as markets served, schedules and yield, as well as how these variables change in response to a market event, for example, when a new carrier enters a market.

Is the introduction of a new route stimulating new demand in a market, or is it simply causing a shift in airline share?

With an increase in supply (capacity), airlines should monitor shifts in two key demand variables: traffic and average fare.

For example, they should determine if the additional capacity in the market is putting downward pressure on the average fares of incumbent carriers. This has a direct impact on each airline’s share before and after the new entrant.

Most Lucrative Country Pairs

The Western Europe-North America market was one of the largest international markets in 2014. It carried more than 50 million passengers both ways and grew 5.6 percent since 2013. To better understand the dynamics within this market, it is necessary to identify the most lucrative country pairs based on traffic, growth and revenue.

Market data can also be used to assess a carrier’s motivation for entering a market. Does the new entrant see this as an opportunity to capture local traffic or as a connecting market to higher-yield flow traffic? An analysis of onboard composition of the flight will help understand an airline’s strategy.

Using Global Demand Data within Sabre AirVision Market Intelligence, the case study below examines changes in market dynamics when Emirates entered the JFK-MXP (John F. Kennedy International Airport and Milan-Malpensa Airport, respectively) market and seeks to understand why this market was attractive for Emirates.

JFK-MXP Top Country Pair

In 2014, Great Britain-United States was the largest Western Europe-North America market. Though the Italy-United States market was the third largest in Western Europe-North America, it achieved the highest growth at 8 percent between 2013 and 2014. In addition to traffic growth in the JFK-MXP market, capacity increased since 2013, and will continue to expand this year.

Emirates Enters The JFK-MXP Market

In 2014, North America and Western Europe represented the largest domestic air traffic markets, carrying more than 967 million passengers. Since 2013, domestic traffic in North America has grown at 6.8 percent, and Western Europe has seen 10.5 percent growth. International traffic between these two regions is one of the largest international markets, carrying more than 26 million passengers each way and growing 5.6 percent since 2013.

A closer look into the Western Europe-North America market requires identifying the most lucrative country pairs based on high traffic, growth and revenue. The largest country pair, Great Britain-United States, exceeded 12 million passengers in 2014. This is almost twice as big as the next largest pair, Germany-United States. Despite having relatively lower traffic, the Italy-United States market saw particularly high growth between 2013 and 2014, at almost 8 percent.

In addition to traffic growth in the JFK-MXP market, capacity has increased since 2013 and will continue to expand this year. Capacity growth is first driven by adding frequency to existing routes. Alitalia, for example, increased capacity by approximately 10 percent between 2013 and 2014.

Emirates Top JFK-MXP Carrier

After introducing a JFK-MXP route in October 2013, Emirates carried more traffic than any carrier operating in this market – more than 180,000 passengers in 2014. This was achieved despite having an average fare far higher than the competition in the market.

Capacity growth is also driven by the introduction of new routes, stimulating demand in the market.

In October 2013, when Emirates entered the JFK-MXP market, the route increased 2014 capacity by close to 33 percent, from 521,000 to 795,000 seats both ways. During the first full year of service, Emirates operated with a load factor of 67 percent and carried 186,000 passengers – the largest of the four carriers in the JFK-MXP market. This was achieved despite having an average fare far higher than the competition in the market.

A look at airline share before and after Emirates entered this market shows a year-over-year decline in share for American Airlines at 15 percent and Delta Air Lines at 13 percent. Alitalia did not experience the same loss in market share. This could be the result of a significant drop in average fares, which declined by 35 percent after Emirates entered the market.

Emirates Leads JFK-MXP Market

After Emirates entered the JFK-MXP market, American Airlines and Delta Air Lines both saw more than 10 percent decline in share. Alitalia’s share only declined by 4 percent; however, this could have been a result of a 35 percent drop in average fares.

Local Versus Flow Traffic

While 64 percent of the traffic on this route is all local, Emirates created extra market connectivity to South East Asian and European markets through the remaining 36-percent flow traffic. These flow markets contributed to more than 48 percent of the revenue earned by Emirates. In India, for example, the market size increased by more than 12 percent by introducing a flight to Milan.

Emirates used the new JFK-MXP route as an opportunity to add capacity between Western Europe and the United States. This allowed the airline to capture not only local traffic but the more lucrative flow traffic to Europe and Asia.

The large volumes of data require visualization-driven analysis within a solution to increase productivity and inform business decisions. As indicated in the analysis of Emirates entering the JFK-MXP market, Sabre AirVision Market Intelligence provides airlines with the insight to make well-informed decisions based on changes taking place in the market.

In today’s competitive landscape, this level of data gathering and analyzing is critical to the overall success of an airline. Market Intelligence is Web-based and supplies airlines with market data sets and progressive visualization and analytic capabilities to increase productivity and market insights.

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