AIRLINE CATEGORY SURVEY Industry trends through the eyes of Economist readers
AGENDA 2 Survey sample and methodology 3 Overview: Economist readers and air travel 7 Focus 1: Business travel and freedom of choice 11 Focus 2: Premium flyers growing importance 18 Focus 3: Increasing competition and technology 25
SURVEY SAMPLE AND METHODOLOGY
OBJECTIVE 4 To explore three trends in the general airline market among Economist readers: 1) Cost-cutting and increasing lack of choice in air travel for work (and whether Economist readers are subject to the same restrictions) 2) The growing importance of premium cabin flyers (and what we can learn from our readers about what these flyers seek from air travel) 3) The increasing role of technology and level of competition in the market (and how Economist readers are faring in this new environment) We hope these findings will help our airline clients refine their messaging and communications, particularly within The Economist and among more affluent, well-traveled consumers.
ALL ABOUT THEIR THOUGHTS ON AIR TRAVEL 5 1,052 READERS FROM AROUND THE WORLD ANSWERED QUESTIONS COVERING THE FOLLOWING TOPICS: Flying behavior (# times flown, class flown) Likelihood to travel in first or business for business compared to before Use of technology in the travel process Approximate spend on air travel Degree of choice and influences/reasons Research/shopping methods Brand familiarity and opinions Frequent flyer programs Qualitative questions on the decision to travel for business, the state of air travel, and suggestions for improvement Responses were fielded over a one week period in May 2015.
6 386 N. AMERICA 327 EUROPE 51 ME & AFRICA 248 ASIA PACIFIC 34 LATAM REGIONAL SAMPLE TOTAL SAMPLE SIZE: 1,052
7 OVERVIEW: ECONOMIST READERS AND AIR TRAVEL
ECONOMIST READERS ARE PREMIUM AND FREQUENT FLYERS 8 74% 87% 54% Avg. # Flights* in P12 Mo. Domestic Business: 4.9 have taken a shorthaul or domestic work-related roundtrip flight in the past 12 months; 46% have taken a long-haul flight have taken a shorthaul or domestic round-trip leisure flight in the past 12 months; 51% have taken a long-haul flight usually fly first or business while traveling long-haul for work; more than half fly first, business class, or premium economy for longhaul leisure Intl (<6 hours) Business: Intl (6+ hours) Business: 2.8 1.9 Domestic Leisure: 2.1 Intl (<6 hours) Leisure: Intl (6+ hours) Leisure: 1.8 1.0 * Round-trip including non-flyers Q4/5: How many business/leisure round trips have you taken in the past 12 months?
9 NORTH AMERICA 1. United (93%) 2. American (91%) 3. Delta (89%) 4. Southwest (74%) 5. British Airways (65%) LATIN AMERICA* 1. American (97%) 2. United (88%) 3. LAN (82%) 4. Delta (79%) 5. Iberia (79%) EUROPE 1. British Airways (87%) 2. Lufthansa (81%) 3. KLM (74%) 4. easyjet (73%)** 5. Air France (72%) MIDDLE EAST & AFRICA 1. British Airways (88%) 2. Lufthansa (75%) 3. Emirates (75%) 4. American (71%) 5. Delta (67%) ASIA PACIFIC 1. Singapore (78%) 2. British Airways (71%) 3. Cathay Pacific (67%) 4. United (61%) 5. Qantas (61%) TOP AIRLINES FLOWN PREVIOUSLY BY REGION Q17: % Top Box (I have flown with this airline before) * Low sample; use with caution ** Low-cost airlines were only shown to regional respondents
UNITED IS THE TOP LOYALTY PROGRAM HOWEVER, EMIRATES MATCHES UNITED IN ITS SUCCESS IN CONVERTING PREVIOUS FLYERS TO ITS LOYALTY PROGRAM 10 Top Frequent Flyer Programs % PRIOR FLYERS in Loyalty Program % TOTAL RESPONDENTS In Loyalty Program 36 27 26 32 33 28 23 23 21 25 17 22 36 16 25 25 13 12 11 10 9 9 8 7 20 18 9 10 13 13 6 7 7 6 4 3 2 2 1 1 1 1 Other Unit. AA Delta BA Luft. Air Fr. Emir. None KLM Air Qant. Sing. Cana. Air Cath. Pac. Swiss. Iber. KAL LAN Turk. Air. Air Chin. ANA JAL Q19: With which of the following airlines are you a frequent flyer/rewards member?
FOCUS 1: BUSINESS TRAVEL AND FREEDOM OF CHOICE
BUSINESS TRAVEL MYTHS (AT LEAST WHEN WE RE TALKING ABOUT ECONOMIST READERS) 12 1. Travel for work is increasing, but so is cost-cutting which means business travellers are becoming less premium consumers, opting to fly coach and penny-pinching on fees¹ some employers are even turning cost-saving into a game² 2. Business travelers may not have a choice in the airlines they fly due to increasing barter deals³ and partnerships, and therefore should not necessarily be a primary target for advertising 1. USA Today, April 5, 2015: Business travel is back, perks are not 2. Financial Times, April 30, 2015: Everyone s a winner in the game to cut business travel costs 3. Harvard Business Review, Sept 12, 2012: The exploding business of bartering
ACTUALLY, TRAVEL FOR BUSINESS IS STILL SEEN AS ESSENTIAL IN MANY SITUATIONS ECONOMIST READERS STILL FLY 13 TRAVEL PROVIDES CONTEXT In-person, on-site information provides much greater context than teleconferencing, email, etc. THERE ARE NO SUBSTITUTES Telecons are poor for large groups or complex topics. FACETIME IS IMPORTANT Facetime with people involved is very important. Body language says a lot about the person; people are usually themselves in person. INFLUENCE OPINIONS Need to meet face to face and influence opinions. TRAVEL LEADS TO ACTION While teleconferencing is convenient, it adds a layer of anonymity and irresponsibility to follow through on some decisions. TRAVEL MEANS BUSINESS Any serious negotiation requires a trip. Q7: How do you make decisions to fly for business over alternatives such as teleconferencing, email, etc.?
AND PRICE IS LESS IMPORTANT THAN CONVENIENCE OR COMFORT IN ADDITION, EMPLOYER RESTRICTIONS ONLY IMPACT 1/3 OF RESPONDENTS 14 Positive Influences on Airline Choice (Travel for Business) Influences Would Cause a Switch if Not Provided 80 59 60 59 54 53 37 36 33 36 43 21 33 31 13 24 26 22 20 12 10 7 6 4 2 8 Fewer connect. Loyalty programs or points Seat comfort or options On-time reliab. Low price Flexible changes Superior in-flight service In line with req. or restrict. from my employ. Ground offerings Free food / drinks In-flight Wi- Fi Wide range of entertain. On-board lounge Q12: Which of the following positively influences your choice of airline for business travel? Q13: Which would cause you to switch to a different airline from your preferred or usual business airline?
In fact, many Economist readers are actually more likely to fly first/business class for work now than before; out of those respondents flying for work 10, 5, and 2 years ago 24% are more likely now vs. 10 years ago prior to the recession! 19% are more likely now vs. 5 years ago 15% are more likely now vs. 2 years ago
ECONOMIST READERS WHO FLY FOR BUSINESS RETAIN FREEDOM OF CHOICE 16 OUT OF ECONOMIST BUSINESS TRAVELERS: 92% have at least some choice in airline flown 69% are not affected by employer restrictions at all Q14: How much freedom of choice do you have when selecting a flight for business? Select all of the below that apply to you.
SUMMARY AND IMPLICATIONS 17 Economist business travelers remain an attractive target for advertising, despite general market trends in the opposite direction While there may be a general trend towards cutting costs and barter deals, Economist readers still see a need to fly for work, and aren t necessarily spending less than before Price is often less important than loyalty programs, comfort, and convenience, likely due to things like making it to a meeting on time and refreshed being more important than saving money In fact, a quarter of respondents who traveled for business ten years ago and are still traveling now say that they are actually more likely to travel first/business class now when flying for work On top of that, Economist respondents tend to have at least some choice in airline only 8% never have a say in the airline they fly, and only 31% cite any sort of restriction airline, class/cabin, or expense limit at all
FOCUS 2: PREMIUM FLYERS GROWING IMPORTANCE
Fees and a la carte systems are becoming more popular among airlines, leading to a greater divide between the front and back of planes. Premium consumers are now increasingly important to airlines bottom lines what do they want from their flying experiences?
EXTRA AMENITIES DO POSITIVELY INFLUENCE PREMIUM FLYERS HOWEVER, IT IS LOYALTY PROGRAMS, (SEAT) COMFORT, AND GOOD SERVICE THAT ARE MANDATORY 20 POSITIVELY INFLUENCES 1 ST OR BUSINESS CLASS CAUSES 1 ST OR BUSINESS CLASS TO SWITCH AIRLINES POSITIVELY INFLUENCES PREMIUM ECON CAUSES PREMIUM ECON TO SWITCH AIRLINES Loyalty Programs Seat comfort Flexible changes Service Ground amenities Loyalty Programs Seat comfort Service Seat comfort Flexible changes Employer restrictions (domestic or short-haul) Wi-Fi (domestic or short-haul) Loyalty programs (domestic or short-haul) Seat comfort Employer restrictions (domestic or short-haul) Wi-Fi (domestic or short-haul) On-board lounge (longhaul) Q12: Which of the following positively influences your choice of airline for business/leisure travel?
* Across business and leisure travelers who have flown in the past 12 months 97% OF FRONT CABIN FLYERS* BELONG TO A FREQUENT FLYER OR LOYALTY PROGRAM (VS. 89% TOTAL RESPONDENTS)
REGARDING LOYALTY PROGRAMS, PRIORITY BOARDING MATTERS MORE THAN AVERAGE TO PREMIUM FLYERS 22 % Citing Priority Boarding as a Reason to Join a Loyalty Program 55 70 62 72 66 67 62 60 58 Total Short-Haul Long-Haul for Work: Firstfor Work: First or Business or Business Short-Haul for Leisure: First or Business Long-Haul for Leisure: First or Business Short-Haul for Work: Premium Econ Long-Haul for Work: Premium Econ Short-Haul for Leisure: Premium Econ Long-Haul for Leisure: Premium Econ Q20: Which of the below would encourage you to join a particular frequent flyer/rewards program? (Select all that apply.)
HOWEVER, DESPITE PAYING MORE, PREMIUM FLYERS STILL PREFER REWARD POINTS BASED ON DISTANCE FLOWN 23 About a quarter of front cabin leisure travelers prefer reward points based on price paid (vs. 16% of total respondents), but half still prefer reward points based on distance flown, and the remainder have no preference. Q21: Do you prefer it when reward or frequent flyer points are based on distance flown or price paid for the ticket?
SUMMARY AND IMPLICATIONS 24 Premium cabin consumers are increasingly important as the gap in offerings between premium cabins and basic economy widens While extra amenities like lounges and chauffeurs are appreciated by premium cabin flyers, it is loyalty programs, seat comfort, and service that are mandatory in a customer experience In terms of loyalty programs, reward points and upgrades are important, but it is an appreciation for priority boarding that separates premium cabin flyers from economy flyers Therefore, while airlines like Singapore and Emirates do offer amenities that go above and beyond the standard, it is likely that their superior comfort and service are what drives premium cabin flyers to choose and rate them highly
FOCUS 3: INCREASING COMPETITION AND TECHNOLOGY
THERE ARE MORE COMPETITORS IN THE MARKET; CONSUMERS HAVE NOTICED 26 Low-cost has gained market share among both leisure and business travelers¹ In 2013, US low-cost carrier unit revenues exceeded those of legacy carriers on domestic routes In Asia and the Middle East, low-cost carriers outperform every other sector in the industry Low-cost carriers are growing in long-haul as well, with airlines like Norwegian and Wow entering the US market² MORE COMPETITION IN MANY ROUTES HAS LED TO BETTER VALUE FOR MONEY FOR TRAVELERS LIKE ME. ECONOMIST INSIGHTER On the opposite end of the spectrum, new premium offerings from airlines like Emirates, Qatar, and Singapore are drawing business away from local carriers in North America and Europe³ 1. The Telegraph, Nov 16, 2013: Low-cost airlines have come a long way. But who will win the battle? 2. Skift, March 4, 2014: Low-cost carriers continue to eat the world 3. AdWeek, October 12, 2014: Emirates is the world s most glamorous airline
1. LA Times, June 1, 2015: Delta blackout makes cheap airfare game even tougher 2. Chicago Tribune, May 22, 2015: Study: consumers benefit from fare-comparison sites 3. Skift, May 28, 2015: Passengers want simpler tech solutions from airports and airlines 4.. New York Times, March 18, 2014: Airlines use digital technology to get even more personal TECHNOLOGY IS MAKING THAT CHOICE APPARENT, BUT ALSO FACILITATING THE FLYING EXPERIENCE 27 INTEGRATION OF TECHNOLOGY INTO THE PROCESS HAS REMOVED MANY OF THE INCONVENIENCES OF FLYING. ECONOMIST INSIGHTER Comparison shopping is the norm, and many savvy travelers use price history and prediction sites to decide when to buy¹ The practice of using comparison sites is valued at $6.7 billion a year² Conversely, technology has helped both the industry and consumers by increasingly streamlining the flying process Smartphone interaction is on the rise, with tablet and smartphone bookings expected to rise to 37%, and mobile boarding pass use expected to be the preferred choice of 18% of passengers, by 2016³ For more premium flyers, technology is being used for greater personalization 4
RESPONDENTS OF ALL AGES ARE EMBRACING SMARTPHONES IN TRAVEL EXCEPT FOR 65+, BUT ESPECIALLY UNDER 35s 28 Smartphone Usage for Travel in Past 12Mo Under 35 35 to 44 45 to 54 55 to 64 65+ 80 74 75 68 7169 60 60 40 33 41 41 40 36 37 31 3234 22 21 50 40 33 28 28 27 21 16 17 12 12 9 10 6 2 Accessed a boarding pass Checked-in for a flight Booked a hotel room Booked an airplane ticket Reserved transportation on the ground None of these Submitted an expense report/claim for travel Q8: In the past 12 months, have you used a smartphone to perform any of the following for travelling?
HOWEVER, RESPONDENTS STILL SHOP USING AIRLINE WEBSITES EVEN IF A VARIETY OF SOURCES IS USED AND AVAILABLE 29 Used to Research, Check, or Shop Around in P12M Business/For Work Leisure 75 66 57 40 38 41 26 17 9 17 13 6 6 1 Airline websites Travel booking / discount sites Human travel agent Search engines (e.g. Google Flights) In-person friend, family, or colleague recommend. Reviews from friends or strangers on social media or review sites None of these Q11: Which of the following have you used to research, check, or shop around for business/leisure flights in the past 12 months?
In fact, the vast majority >75% of respondents using most other online and offline sources (booking sites, search engines, etc.) also use airline websites when researching or shopping for business or leisure tickets. Q11: Which of the following have you used to research, check, or shop around for business/leisure flights in the past 12 months?
AGE HAS AN IMPACT ON RESEARCH AND SHOPPING SOURCES 31 IN GENERAL, THE OLDER THE BUSINESS TRAVELER, THE MORE TRADITIONAL HIS/HER SOURCES IN LEISURE TRAVEL, MILLENNIALS ARE MOST LIKELY TO COMPARISON SHOP ONLINE, BUT ALSO CONSULT ADS AND FRIENDS A SUBSET OF LEISURE TRAVELERS ARE VERY INVOLVED IN RESEARCH, AND USE A WIDE RANGE OF SOURCES Q11: Which of the following have you used to research, check, or shop around for business/leisure flights in the past 12 months?
% Like or Prefer ECONOMIST READERS KNOW AND/OR LIKE SOME LOW-COST BRANDS AS MUCH AS TOP LEGACY CARRIERS 32 Familiarity vs. Favorability Size of bubble = % Flown Origin = Average Familiarity/Favorability Singapore 45 35 Cathay Pacific Lufthansa Emirates BA Southwest 25 KLM JetBlue Qantas Turkish 15 Air France Jetstar Airways 50 60 70 80 90 100 ANA JAL Air Canada LAN Korean Air Iberia 5 Air Asia Asiana China Eastern Air China Ryanair China Southern Spirit Airlines -5 Aeroflot Swissair easyjet Delta United American % Flown or Familiar With (Top 3 Box)
% Like or Prefer IN FACT, SOUTHWEST SCORES VERY WELL, ALTHOUGH CARRIERS WITH ULTRA- PREMIUM OFFERINGS ARE MOST LIKED 33 50 45 Familiarity vs. Favorability (Well-Known and Liked) (Size of bubble = % Flown) Singapore Emirates 40 35 Lufthansa BA 30 Cathay Pacific Southwest 25 Swissair Delta KLM JetBlue Qantas 20 easyjet United Air France 15 90 92 94 96 98 100 102 104 % Flown or Familiar With (Top 3 Box)
SUMMARY AND IMPLICATIONS 34 Technology is a double-edged sword for legacy airlines while it has allowed for greater convenience and streamlining, it has also made competition fiercer Economist readers seem to have adopted technology and smartphone usage in travel to a high degree They reported high levels of comparison shopping both online and offline; however, the vast majority of older respondents use airline branded websites as a research or shopping tool in conjunction with other sources, and there is a subset of (likely younger) respondents who check a wide range of sources listed As a result Economist readers are well aware of new entrants to the market many low-cost carriers rival legacy carriers in familiarity, and non-western airlines Singapore and Emirates top the charts in favorability Low-cost airline Southwest also enjoys high levels of favorability higher than all other US airlines listed in the survey