Interesting point really, hers my opinion based on many hair pulling nights:
Before the airline market was introduced (and I am generalising here, obviously there are exceptions), airlines would start with cheaper planes with less range, therefore building a good regional network. Then as they grew, the bought bigger planes and grew their network accordingly, often reaching a point early on where their connections meant that ‘their’ regional routes were served to the point of max available capacity.
This resulted in a rational and progressive strategy for expansion where all short, medium and long haul pax were being accommodated. This also meant profits were slightly higher.
Now, the introduction of the airline market has changed a few things (I am an advocate of the airline market, I think it’s great, I just haven’t figured out the best strategy to take though).
First of all, the market has meant airlines have an array of model, some just short haul, some just long haul. With the addiction of new languages, there are more people playing too. So now at major airports, you have 3-4 somewhat successful airlines, mostly with different models. Here are the two main drawbacks of this:
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Premature models based on financial constraints etc and initially profitable routes.
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Slots are taken up, resulting in very little room for these airlines to expand.
So you end up with airlines that don’t offer the same breadth of routes as say, 2 years ago. This means there is less transfer traffic, and some routes rely mainly (not entirely) on direct traffic. This means less pax taking up seats for that routes = lower prices with excess capacity.
I can no where near charge what I used to 2 years ago, because there are so many other seats going at lower prices. And if its a connecting flight, there are often cheaper alternatives via other hubs. Great for pax, not so much for airlines.
I think this will take some time to Lear up, but what you will see is that airlines with short term strategies will start losing passengers, and will have to overhaul their seats. Old big aircraft cost a lot of money to maintain, and when prices drop, it is difficult to get them into the green.
Solution, grow steadily but strategically. Aim for a long term strategy, give the customers a genuinely better product and you will succeed.
Again, just my pinion based on a non empirical analysis I’ve done in my spare time. Perfectly prone to errors and open to criticisms.