Airlines - UK - August 2017


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Mintel

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Airlines have enjoyed strong growth over the past two years. Cheap oil has kept fuel bills down, and the savings enabled airlines to cut fares. However, Brexit is casting a shadow on the industry. There are concerns over the Open Skies Agreement, airline ownership rules and declining consumer disposable income. However, while companies may cut back on business travel, holidaymakers should prop up the market as budget carriers slash prices to stimulate growth.
Table of contents

OVERVIEW
What you need to know
Scope of the Report
EXECUTIVE SUMMARY
The market
International passenger uplift
Domestic traveller uplift
Figure 1: International passenger numbers uplifted from UK airports, 2012-22
Figure 2: Domestic passenger numbers uplifted from UK airports, 2012-22
Figure 3: Total passenger numbers uplifted from UK airports, 2012-22
The consumer
No change in the proportion of consumers taking flights
Figure 4: Flight types taken, June 2016 and June 2017
The battle between low-cost carriers and full-service carriers
Figure 5: Airline types flown in the last 12 months, June 2016 and June 2017
Premium economy offers a more affordable alternative to business class
Figure 6: Classes flown, June 2017
Paying for ancillaries; nearly a quarter of long-haul passengers have paid for extras
Figure 7: Passengers who paid for extra services on a short-haul flight, July 2017
Figure 8: Attitudes towards paying for extra comfort on a long-haul flight, July 2017
Scope for easy-to-use rewards scheme
Figure 9: Attitudes towards flight services I, June 2017
Smart technology for dealing with delays and cancellations
Figure 10: Attitudes towards flight services II, June 2017
Hassle of claiming for compensation opens up doors for tech companies that automate the process
Figure 11: Attitudes towards flights, July 2017
What we think
ISSUES AND INSIGHTS
The battle between low-cost carriers and full-service carriers
The facts
The implications
Full-service carriers still dominate long-haul markets but low-cost carriers are gaining a foothold
The facts
The implications
Google Flights usage is still small, but industry players voice concern
The facts
The implications
Opportunities in the VFR (visits to friends and relatives) market
The facts
The implications
THE MARKET WHAT YOU NEED TO KNOW
Passenger forecast to slow over the next few years
Brexit Bumpy ride ahead for UK airlines?
Owners of Dublin-based Ryanair could face problems
Uncertain time for IAG
MARKET SIZE AND FORECAST
Passenger growth forecast to slow over the next few years
International passenger uplift
Domestic passenger uplift
Heathrow expansion gets the green light but plans have been scaled back
Figure 12: Passenger numbers uplifted at UK airports, 2012-22
Figure 13: International passenger numbers uplifted at UK airports, 2012-22
Figure 14: Domestic passenger numbers uplifted from UK airports, 2012-22
Figure 15: Total passenger numbers uplifted at UK airports, 2012-22
Forecast methodology
MARKET SEGMENTATION
Transport; air travel increases its market share
Figure 16: Overseas trips taken by UK residents, by mode of transport, 2014-16
Holiday flights account for two thirds of overseas trips, but VFR presents opportunities
Figure 17: Purpose of overseas trips, by air, 2015 vs 2016
A third of flights are taken between July and September
Figure 18: Number of trips by air, by quarter, 2015 vs 2016
Spain the top destination for passengers by some margin
Figure 19: Top 10 countries visited by UK residents, by air travel, 2015 vs 2016
Figure 20: Top 10 countries visited by UK residents, by all modes of transport, 2015 vs 2017
North African and Turkish markets suffering; but expansion suggests an improvement
MARKET DRIVERS
The weak Pound Positives for exports, negatives for holidaymakers
Figure 21: Pound Sterling versus euro and US Dollar, January 2016-August 2017
Low oil prices have benefited airlines but a rise may be on the cards
Figure 22: Europe Brent Spot Price FOB* (Dollars per Barrel), J 2014-May 2017
British Airways to impose GDS fees and to focus on NDC
Ryanair promises lower fares for consumers
BREXIT AND THE AIRLINE INDUSTRY
A bumpy ride ahead for UK airlines?
Airlines could face problems over ownership
Overseas segment Denied Boarding Regulation could be called into question
COMPANIES AND BRANDS WHAT YOU NEED TO KNOW
Traxo collects and updates travel data in real time
Start-up Volantio can help with the overbooking problem
Top three airlines see growth in passenger uplift
British Airways reputation takes a hit following the scaling back of onboard services
LAUNCH ACTIVITY AND INNOVATION
Traxo collects and updates travel data in real time
Lufthansa flight information is now searchable via Google Home
Start-up Volantio can help with the overbooking problem
Figure 23: Compensation for overbooked flights, July 2017
KLM Royal Dutch Airlines allows users to query with emoji
One-click payments can help boost chatbots
BRAND RESEARCH
Brands covered
Full-service airlines
British Airways
Virgin Atlantic
Charter airlines
Thomson Airways
Thomas Cook
Low-cost carriers
easyJet
Ryanair
Brand map
Figure 24: Attitudes towards and usage of selected brands, July 2017
Key brand metrics
Figure 25: Key metrics for selected brands, July 2017
British Airways and Virgin Atlantic brands associated with high quality
Figure 26: Attitudes, by brand, July 2017
Brand personality: Low-cost carrier easyJet seen as most accessible brand, while Ryanair viewed in a negative light
Figure 27: Brand personality Macro image, July 2017
Thomson Airways and Thomas Cooks family-friendly services viewed as welcoming and friendly
Figure 28: Brand personality Micro image, July 2017
Brand analysis
British Airways reputation takes a hit following the scale back of onboard services
Figure 29: User profile of British Airways, July 2017
Virgin Atlantic positioned to win disgruntled British Airways customers over
Figure 30: User profile of Virgin Atlantic, July 2017
Users of Thomson Airways most likely to recommend it to friends
Figure 31: User profile of Thomson Airways, July 2017
Thomas Cook viewed as safe, fun and vibrant
Figure 32: User profile of Thomas Cook Airlines, July 2017
easyJet remains the most popular budget carrier
Figure 33: User profile of easyJet, July 2017
Ryanairs negative reputation does nothing to dampen its passenger uplift
Figure 34: User profile of Ryanair, July 2017
MARKET SHARE
Top three airlines see growth in passenger uplift
Figure 35: Top 10 UK-based airlines, by passenger numbers uplifted globally, 2011-16
THE CONSUMER WHAT YOU NEED TO KNOW
No change in the proportion of consumers taking flights
Are 25-34s eschewing cattle class for a better in-flight experience?
Budget carriers benefit from short-haul volume
The battle between low-cost carriers and full-service carriers
Premium economy offers a more affordable alternative to business class
Paying for ancillaries; just under a fifth of passengers buy add-ons
Parents of under-16s open to paying for long-haul extras
Locking in a fare at todays price for a later booking
FLIGHTS TAKEN
No change in the proportion of consumers taking flights
Are 25-34s eschewing cattle class for a better in-flight experience?
Figure 36: Flight types taken, June 2016 and June 2017
FLIGHT LENGTH
Budget carriers benefit from short-haul volume
Figure 37: Flight length, June 2017
LOW-COST VS FULL-SERVICE
The battle between low-cost carriers and full-service carriers
Figure 38: Airline types flown in the last 12 months, June 2016 and June 2017
Figure 39: Total passenger numbers uplifted worldwide by UK airlines, low-cost* and full-service**, 2011-15
Full-service carriers still dominate long-haul markets
Figure 40: Direct connectivity outside of Europe, full-service versus low-cost carrier, 2007 and 2017
but low-cost carriers are gaining a small foothold
Consumers will have to put up with the negatives of flying low-cost long-haul
Figure 41: Total passenger numbers uplifted worldwide by UK airlines, low-cost* and full-service**, 2011-15
CLASSES FLOWN
Premium economy offers a more affordable alternative to business class
Figure 42: Classes flown, June 2017
Premium versus Standard Economy
Figure 43: British Airways Premium Economy vs Ryanair Business Plus
The rise of low-cost long-haul services
Figure 44: A comparison between Premium Economy on a Boeing 787-9, full-service carrier British Airways vs low-cost long-haul carrier Norwegian, May 2017
Encouraging leisure travellers to fly premium economy
Figure 45: Attitudes towards premium economy, June 2017
Figure 46: Price difference for a flight from London Heathrow to New York on Tuesday 18 July 2017, by Economy, Premium Economy and Business Class
FLIGHT BEHAVIOURS
Paying for ancillaries; just under a fifth of passengers buy add-ons
Figure 47: Flight behaviours, June 2017
Domestic business travellers spending on ancillaries; but possible market contraction on the horizon
Figure 48: Passengers who paid for extra services on a short-haul flight, July 2017
Nearly a quarter of long-haul passengers have paid for extras
Figure 49: Passengers who paid for extra services on a short-haul flight, July 2017
Figure 50: Attitudes towards paying for extra comfort on a long-haul flight, July 2017
Figure 51: Willingness to pay for extra services on a long-haul flight, July 2017
Google Flights usage is still small
Industry players voice concerns over Google
ATTITUDES TOWARDS FLIGHT SERVICES I
Parents of under-16s open to paying for long-haul extras
Figure 52: Attitudes towards flight services I, June 2017
Passengers open to using mobile airport apps
Figure 53: Attitudes towards flight services I, June 2017
ATTITUDES TOWARDS FLIGHT SERVICES II
Locking in a fare at todays price for a later booking
Figure 54: Attitudes towards flight services II, June 2017
Smart technology for dealing with delays and cancellations
Hassle of claiming for compensation opens up doors for tech companies that automate the process
Figure 55: Attitudes towards flight services II, June 2017
CHAID ANALYSIS AIRLINES
Methodology
Parents of under-16s most open to paying for long-haul extras
Figure 56: Target groups based on statements about airlines CHAID Tree output, June 2017
Figure 57: Target groups based on statements about airlines CHAID Table output, June 2017
APPENDIX DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
Definitions
APPENDIX MARKET SIZE AND FORECAST
Forecast methodology
Figure 58: Best- and worst-case forecast for total UK passenger uplift, 2017-22
Figure 59: Best- and worst-case forecast for international UK passenger uplift, 2017-22
Figure 60: Best- and worst-case forecast for domestic UK passenger uplift, 2017-22