In the fourth article in this six-series program, Gavin will address how destinations can start looking at new ways that they can interact with airlines to benefit from the continued boom in leisure travel, and also, as new plane types are being developed to fly further, how can a destination look to attract lift from source markets that would have been seen as ‘too-far’ when flying traditional narrowbody aircraft, or, ‘too-big’ for the traditional widebody plane?
Gavin’s previous roles have included development in British Airways, as well as consultancy projects for United Airlines, American Airlines, Qantas, and supporting the development of low-cost airlines to touristic destinations. Gavin has held a Board Position (CCO) at Portuguese airline SATA International and has been the advisor to the Board of Visit Portugal on air connectivity.
As a Professor, Gavin is responsible for programs spanning the commercial aspects of aviation and airports and works closely with Aeroclass on executive courses bringing DMOs and airports together for tailored learning programs that support route development for destinations.
Pre-COVID, the vision of airlines was clear – focusing on corporate travel. The monies made from high-yielding business tickets were the reason airlines could offer lower fares at the back of the plane. To support the business traveler, airlines had invested large sums of money in cabin configurations with a lot of fixed first, business, and premium economy seating. The game of travel was all about the corporate and how to offer a business experience that allows passengers to sleep and continue to work while traveling in the air.
However, the pick-up in corporate travel during 2023 was nothing like that noticed with leisure. So, airlines are now having to look differently at what their leisure proposition really is. The phrase ‘business class’ has become synonymous with premium travel, but many people flying in business are actually on leisure trips; they are tourists. The benefits of flexible ticketing and being able to work on board, both key benefits of business class, are not so important in the eyes of a tourist when considering spending x thousand more to travel. In essence, airlines need to take a closer look at what is the real leisure travel experience and what they need from an airline?
Adapting to the realities of the leisure traveler
With this in mind, two interesting cases have unfolded with airlines and the development of the leisure proposition. First, the Lufthansa Group took time straight after COVID to look at itself and realize that the leisure story was very strong. The airline quickly developed a subsidiary that would take a mix of short-haul and long-haul fleets from the parent, and brought Eurowings Discover to market, which then became Discover Airlines. Based out of Frankfurt and Munich, the carrier is operating a mixed strategy. Selling tickets via the normal global distribution system (GDS) channels and using Lufthansa’s platforms as well as being open and working with the German tour operators and travel trade, which are packaging-up holidays, and then buying a set of ‘blocked seats’ on a Discover flight to Mombasa or Zanzibar, respectively. This allows the airline to work on a traditional seat-only product, as well as being available to the travel trade.
Emirates has finally introduced a Premium Economy product on its A380 and B777 fleets. Some may say they are very late to the game, with the likes of British Airways (BA) developing its World Traveller Plus premium economy product back in the 2000s. The rationale for BA in those days was to have a product available when the corporates were looking to downgrade, or down trade; i.e., going from business to economy is a big drop in seat comfort. For corporate travelers looking to save money, premium economy was the alternative. Fast forward 20 years and the story is very different. Emirates is looking at those leisure travelers, tourists who want to treat themselves with a little more comfort on their long-haul holiday once a year.
Overall, leisure is still very strong and, as destinations seek a new type of tourist, the change in how airlines look at leisure is a great opportunity for route and market development strategies. Tourism boards should be noticing the ‘premium’ travel trends and pushing these insights to airlines when developing the ‘why you should fly’ business cases. The opportunity for the airline to get a higher yield per traveler is also beneficial as per seat sales are key for the commercial director of the carrier.
New aircraft that can fly further
The Airbus A321XLR has proven a remarkably popular choice with airlines since it was announced at the 2019 Paris Air Show. It is the longest-range variant of the A321neo family, with a range of 4,700 nautical miles, making the single aisle (3×3 seat layout) on par with widebodies (3x3x3 seat layout) when it comes to the range the plane can offer. So, an A321XLR can fly up to 10 hours, similar to an A330, the difference being we can fly with such distances with 160 people rather than 360 people.
So, who has been busy with orders? Well, Indian low-cost carrier IndiGo is one of Airbus’ biggest customers and has placed a massive order with the European manufacturer for its game-changing aircraft. At the 2023 Paris Air Show, IndiGo placed a record-breaking order for the A320 family aircraft. And from Mumbai and Delhi, 10 hours of flying brings most of Europe and Asia in the range of IndiGo, and opening routes to 2nd and 3rd tier cities with such services. For sure, the benefit of flying direct on less-dense routes with fewer seats makes for perfect airline economics. What is not good, however, is when we have too many seats and need heavy discounting to sell. The A321XLR will not have this problem.
Moving to the United States, as the largest airline in the world by fleet size, American Airlines (AA) has a massive appetite for this new aircraft. AA did not waste any time when it came to the A321XLR, placing an order for 50 aircraft of the type just a few days after it was announced in Paris five years ago. The order remains one of the most significant for the single aisle aircraft today. The vision for AA is to use such aircraft on European routes and look at developing smaller European cities from the carrier’s key Philadelphia hub. Presently, Philadelphia is a key base for connecting to Europe, with the B787 (Dreamliner aircraft) so taking smaller aircraft will allow AA to open many new 2nd and 3rd tier destinations across Europe.
Then there is a very large order from private equity firm Indigo Partners. While Indigo Partners is not an airline, it holds a controlling stake in a number of pretty big players in the industry, namely JetSMART, Frontier Airlines, and Wizz Air. Wizz will see a large proportion of the order, which comes in at just under 50 aircraft, coming its way. and it is assumed that many will be placed at the airline’s Abu Dhabi base and the newly opened Riyadh airport project. Much like IndiGo, Indigo Partners’ vision with Wizz is to compete against the new Indian-hub model and bring Europe and Asia to the Middle East. And, on September 10, 2024, Wizz announced that it will operate the A321XLR from the carrier’s Abu Dhabi and Jeddah bases. Abu Dhabi will be connected to Milan, and Jeddah to London, both of which have around eight hours of one-way flying time.
So, what does all of this mean for tourism and tourist boards? Well, it is quite clear. They can start fishing in markets that they have not been to before. Why? Because the traditional widebody was either too big for most airports or had too many seats that would mean less yield for the airline, resulting in a reluctance to serve certain destinations. But that will now soon change.
A premium experience with a single aisle
One of the great innovations offered by the A321XLR is its ability as a single-aisle aircraft to make long-haul flights while also providing a premium service at the same level as that enjoyed in widebody models, such as the A330s and A350s in Spanish flag carrier Iberia’s fleet.
Most airlines are looking at an interior of around 180 seats arranged in a business and economy cabin configuration and will include various improvements that offer greater comfort to passengers, such as larger overhead compartments, which can store up to 60 % more carry-on suitcases. Business class is based on 14 individual window seats with direct access to the aisle. In addition, the seats will offer maximum comfort, with a ‘full flat’ seat that converts into a bed, offering a strong sleep component with flights up to 10 hours.
So, the benefit of working longer journeys with the new aircraft ties in very well with the premium leisure traveler and the ability to travel to new destinations and therefore pick up source markets that were not normally on the airline’s radar. A win-win for all. Airlines need new destinations and destinations want to work with new source markets. It is the changing of the hardware that is instrumental in secondary and third cities in Europe looking to get direct flights from the US or for South-east Asian destinations to be working much stronger with the Indian outbound market.
For sure, we have great new opportunities with a 10-hour narrowbody aircraft. But as you can imagine, many airports and destinations will be knocking on the airlines’ doors to be on the initial route development list. Destinations need to prepare their business case, and present to the carriers, why should you pick us? In particular, the basis that premium leisure to the destination is very strong, and this works to the strengths and economics of the new plane… ‘less is more’. The airline can carry fewer people, buy high yielding, from a market that would not have been possible before. A game-changer for destinations.
Join us next month as Gavin looks at how destinations and airports can build better business cases to the airlines, as well as bringing key insights into how you manage incentives and marketing support to carriers when supporting new routes.
