The Wright brothers never thought that their innovation would change the entire history of transportation and make it possible for people to go from one place to another quickly and safely. After that innovation, people even courier heavy tanks from one country to another. And the commercial part of this sector has become inseparable from the tourism sector. And it was possible because of loyal customers, scalability, professional employees, and many more, which we will learn in this airline industry swot analysis.
Airline Industry Overview
If we start with history, the “actual” airline, called DELAG, started its journey in 1909 with only four airships. And after five years, the first commercial flight took off on New Year’s Day, 1914, in St. Petersburg.
After 125 years, there are 25,578 aircraft worldwide providing services to millions of people. With more than 553K people working to serve and maintain the entire industry, the industry is growing rapidly with a loyal customer base even after many economic downturns and pandemics.
Competitors in Airline Industry
Qatar Airways | Singapore Airlines | Emirates | Japan Airlines | Turkish Airlines | Delta Air Lines | Southwest Airlines | British Airways
Did You Know?
The fuel consumption of a Boeing 747 is lower than an average vehicle or car. A car’s average fuel consumption rate is 25 mpg, whereas it’s 0.2 mpg for a Boeing 747.
Strengths – Airline Industry SWOT Analysis
Huge Revenue: With a revenue of $438 B in 2022, the airline industry has been more robust than before. The entire industry got hit during the pandemic and finally came back to making profits in 2023. Since the industry’s inception, the growth rate has been exponential, and it is going excellent with an 8.9% growth rate, and the expected revenue by this decade is to become $1.09 T.
Scalability: Whether it’s government, commercial or other small parts of the airline sector, the scalability is growing. Besides, in the last couple of years, the tourist and local airline industry has shown impressive growth rates, as more than 55% of the entire sector is standing on tourist destinations and tickets. The loyal customer base has helped the industry get on its feet with this much scalability.
Safest Transport: It is widely known, and stats show that airplanes are the safest, quickest mode of transportation. The accident rate is significantly low at 6.84 of every 100K flight hours in 2022, which proves the statement. Besides, more than 4.3 B people have safely reached their destination using 46 M flights in 2022, not to mention quickly.
Skilled Personnel: Whether a pilot, cabin crew, or someone who works on the ground, airline employees are more highly skilled and motivated than any other transport industry. The entire industry depends on them, and they are also given many benefits, and after the pandemic in 2020, the employees became the key to getting the industry back on track.
Loyal Customer Base: Airways’ customers are always loyal because of what the airline gives them, the overall safe and easy travel experience. As a result, the retention rate has returned to normal and more after the disastrous pandemic year, which crippled the entire airline industry. Without a loyal customer base, this industry wouldn’t be possible to thrive again.
Weaknesses – Airline Industry SWOT Analysis
Costly Infrastructure: The entire industry depends on healthy cash flow and capital availability. It’s not just the infrastructure but also the maintenance cost of the airports, planes, employees, etc. Besides, it takes years to plan and develop new infrastructure or something related, which is highly time-consuming, and the cost gets higher and higher with every year the development gets delayed.
Spoilage Rate: The cancellation rate of the tickets or the spoilage rate is higher than in any other transport sector. In 2022, the spillage rate was more than 20%, meaning more than 1K tickets were cancelled daily in the USA alone. And, in terms of plane delays, at least one of five planes was delayed in 2022.
High Entry Barrier: As the industry requires tons of capital, as well as a workforce, the sector automatically has set a high entry barrier. Therefore, there are many issues regarding poor services in third-world countries airlines services and being unable to stay up to the standard. As a result, many companies don’t improve services as they know there is less or no competition in those cases.
Unbalanced Revenue Model: The entire industry’s biggest chunk of the revenue depends on a single purchase: tickets, which are around 60%. The other portion is divided into two sectors, banks (specifically credit cards) and hotels. And about 15% of the ticket purchases are from business travel and more than 30% from tourist travel. As a result, the entire industry’s revenue falls off a cliff if anything happens, such as a pandemic.
Opportunities – Airline Industry SWOT Analysis
Economic Growth: The world economy has grown into a bigger one, and the standard of living of the people has also increased. The GDP per capita in the USA has risen to $39806, and so have all other developed countries. The research shows that the world GDP will increase, so will the per capita income, and people will travel more by air.
Tourism Industry: After the long covid-19 pandemic, the tourist industry has been going through a burst. In this year, 2023, the industry has already seen an all over 13.9% increase. As the safest and quickest transportation mode, the tourism and aviation industry rely on each other. As the tourism industry grows, so is the growth opportunity for the airline industry.
Market Expansion: There are enough opportunities for the industry to grow globally. Many countries have an insufficient infrastructure for the airplans but enough tourist attractions. Even some countries’ govt airlines don’t operate globally, which can be a cheaper option for the native country people. The management can grab these opportunities to grow.
Balanced Revenue Model: In order to balance out the entire revenue model, the industry needs to look at different angles besides financial institutes and the tourism sector. Taking in innovative technologies and other effective and efficient methods that can help ease the process and new opportunities can balance the portfolio and solve many other problems.
Threats – Airline Industry SWOT Analysis
Recession: The last big economic recession was in 2008, and the airline industry’s revenue dropped by $85 B. Besides, more than ten big airlines filed for bankruptcy, and 11 companies stopped their operations completely. After that, in 2020, the pandemic happened, and the industry faced another downturn. As another recession might be in the upcoming month or year, this is a significant threat.
Environment Issues: Environment issues are a big concern for all of us now, and everyone from their side is trying to lower carbon emissions. Even though the industry’s carbon production rate is not that high, around 2%, the emission rate is likely to increase by the next decade, which is a big concern for all of us.
Rising Cost: Every cost related to the airline industry is increasing, becoming a significant issue. In the last year, 2022, airline ticket prices have increased by 25% because of the rising price of oil and other fuel resources because of the Russia-Ukrain war. Besides, as the oil resources are depleting, the price will increase more in the future, and so the ticket price.
Seasonal Issues: The Rainy and winter seasons are not suitable for airplanes. As planes run from one country to another, and seasons and clouds could take unpredictable turns, flight delays and cancellations have become a threat. The stats show that in 2022, the total number of cancelled flights was 150,704, and delays were around 20%, mostly because of weather issues.
[Bonus Infographic] SWOT Analysis of Airline Industry
Recommendations for Airline Industry
Here are some recommendations for the airline industry for the coming years.
- The companies, management and governments should start working on diversifying the revenue portfolio.
- It is high time to expand to new markets and build better infrastructure for efficiency and effectiveness.
- Tourist travel should be more incentivised by governments, countries’ tourism management, and government airlines.
- Adopting new tech and other necessary tools to lower the cancellation and delay rate would reduce the overall cost and increase efficiency.
Frequently Asked Questions (FAQs)
What is the Smallest Airline?
A Scottish regional airline named Loganair is the smallest airline.
What is the Main Product of the Airline Industry?
The main product of the airline industry is air transport services.
Final Words on Airline Industry SWOT Analysis
The airline industry has gone through many ups and downs, faces recession and the impact of the pandemic and still stands strong with a loyal customer base, being the safest transport, huge revenue and skilled employees. These strengths will help overcome weaknesses and threats and grab opportunities.
References
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- Tourism enabler. (n.d.). Aviation Benefits.
- Aviation and Plane Crash Statistics. (n.d.). PSBR.
- Training is the key to industry recovery. (2022, April 1). IATA.
- Adams, K. (2022, August 22). 2022 Has Brought More Air Travel Delays and Cancellations — And Nearly Double the Risk of Having a Bag Mishandled. ValuePenguin.
- How Much Airline Revenue Comes From Business Travelers? (2022, May 26). Investopedia.
- The World in 2050. (n.d.). PwC.
- Global Tourism Industry – Market Research Report. (2023, February 1). IBIS World.
- Wikipedia contributors. (n.d.). List of government-owned airlines. Wikipedia.
- A Review of the Aviation Industry in 2008: 10th Edition. (2009, May 6). U.S. Department of Transportation.
- Manohar, A. (2023, February 16). Back Gold rates today at one month low on ease in US recession fears. Experts see more correction. Mint.
- The airline race for a breakthrough fuel to cut one billion tons of carbon is just starting. (2022, September 24). CNBC.
- Holzhauer, B. (2022, November 3). Airline ticket prices are up 25%, outpacing inflation — here are the ways you can still save. CNBC.
