Introduction

In the coming decade, airlines will have the opportunity to transform themselves from commoditised providers of transportation to full-trip coordinators that interact in an integral, more profitable way with travellers during every step of their journeys.

To do so, airlines will have to improve the customer experience, revive brand loyalty and undo the effects of years of cost-cutting. By adapting best practices developed by or refined in other industries and making the best use of existing technologies and the wealth of data travellers provide, airlines will be able to improve their return on investment (ROI), reduce costs and give customers more of what they expect of the total experience.

The Economist Intelligence Unit surveyed more than 100 airline executives and 800 passengers, as well as conducted in-depth interviews with 16 industry leaders and observers, in an effort to better understand the issues. Research has confirmed that customers want a more personalised and satisfying experience and that airline executives want more sustainable profit margins. Fortunately, these goals can be attained together.

Existing technologies such as in-flight Wi-Fi, mobile devices and social media can help the industry improve the customer experience at a manageable cost. Moreover, by adapting customer information management strategies from other industries, airlines can empower passengers by personalising air travel, making it pleasurable once again. By exchanging information with its customers in a more consistent and intuitive manner, airlines will be able to understand and actively respond to their customers’ needs and desires.

As airlines master these approaches, they will also be positioning themselves to vie for the role of full-trip coordinator — taking passengers from the booking process to and through the airport experience, on to the flight itself and beyond. Online travel agencies (OTAs) and the hospitality industry, as well as Big Data companies, such as Google, are already displaying an interest in this potentially lucrative role.

As this contest intensifies, the winners will be able to substantially improve the travellers’ experience — and be paid for it. Airlines slow to adapt risk being reduced to commodity suppliers and, therefore, to be mere links in a chain over which they have little control. The strategies outlined in this paper will help the airline industry respond to the heightened competition for domination of the travel value chain.

About the research: An Economist Intelligence Unit (EIU) customer and executive survey

To gain greater insight into changes and innovations that could usher in this new era for travellers, the EIU conducted parallel surveys of 100 airline executives and 810 air travel customers in August and September of 2013. Half of the executives hold C-level positions, with the rest being SVPs, VPs or directors. The regions of North America, Asia-Pacific and Europe are equally represented with 30% each, while Latin America, the Middle East and Africa make up the remaining 10% of responses.

About one-third of the companies represented in the survey report $1bn or less in annual global revenue, while 29% boast revenue of $5bn or more. Participants in the consumer survey were screened to include only individuals over 20 years of age who had travelled by air in the previous 12 months; the gender balance was near-equal (53% male and 47% female), with respondents spread across 18 different countries.

In an effort to better understand the issues facing airlines today, The EIU also conducted in-depth interviews with 16 industry leaders and observers. We’d like to take this opportunity to thank all those who shared their time and insights.