According to a recent McKinsey Quarterly article there are great opportunities for cost savings in the airline industry. But my granny (or anyone else who has ever been on a budget airline) could have told you that. Why are McKinsey presenting solid business reportage as strategic insight? Reading the summary, it looks like they’ve missed the main point of how budget airlines are changing the industry.
The reason budget airlines are truly significant is not just that they are cheaper and more operationally effective. If this were the case, we’d see lots of budget airlines flying motley fleets of aging smaller planes whose capacity was tailored to the routes being served.
But this isn’t what we’re seeing. We’re seeing the budget operators acquiring standardised fleets of 737’s and A320’s. They attempt to build a large enough volume of passengers between outlying airports in order to justify having a full-size jet on the route. Big airlines are continuing to use small aircraft to serve small numbers of high-paying business travelers from similar airports.
Another way to put it is that traditional airlines build their business from the front of the plane (where the business travelers sit), and the budget airlines build their business from the back of the plane (where the large volumes of customers come from).
It is this switch in emphasis from going after business passengers to getting as many passengers as possible that is really changing all parts of the aviation industry.