Passenger Experience

The Commoditization of Air Travel

commodity

According to IATA, global air passenger traffic is expected to reach 3.6 billion in 2016. This represents just under half of the total predicted world population for the same year. In other words, in just three years, one in two people world-wide will travel by air.

This growth in passenger traffic represents the culmination of changes in the air travel industry since the early days of commercial air travel.  The emergence of “low cost carriers” in the early 1970’s, together with the proliferation of the internet and resulting “price transparency” in the industry, have contributed to making air travel accessible to the mass market. Air travel has become a commodity, much like sugar, gold and coffee beans.

By definition, commodities are indistinguishable from each other. As commodities are transformed into goods, services and experiences, the added differentiation results in a corresponding price increase. For example, the coffee bean (“commodity”) becomes more expensive as it gets roasted and packaged (“good”), served at a diner (“service”), or possibly integrated into a silver service meal (“experience”). The price of the coffee follows the pattern of economic value progression (Figure 1a).

CommoditizationAirTravel

In aviation, however, the pattern is reversed: what started out as “experience” in the truest form (offered at a comparably high price point), has been transformed into a commodity with little differentiation and a low price point (Figure 1b).  It can be inferred therefore that, in order to increase profitability in aviation, one should look towards creating “experience” offerings.

Thus, in a market of largely undifferentiated products (i.e. air travel) the opportunities for increased revenue are tied to the provision of “experiences” in the airport environment.

Coffee bean example sourced from The Experience Economy.

Standard

7 thoughts on “The Commoditization of Air Travel

  1. At one point Southwest Airlines cabin staff would attempt (often quite successfully) to be entertaining during their routine safety announcments and at other times during the flight. Their effort actually made the flight more enjoyable and made me reflect more positively on the specific flight, the airlines (SWA), and the travel experience overall.

  2. Pingback: Why Passenger Experience Matters | inplaneterms

  3. Pingback: Bliss is fun and fun is nice, but at what price is bliss nice? | inplaneterms

  4. Pingback: Standing on the outside looking in | inplaneterms

  5. Pingback: Passenger Segmentation Trends | inplaneterms

  6. Pingback: The Osaka Experience | inplaneterms

  7. Pingback: Branding Inspiration: 5 Lessons Learned from Unique Company Brands

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s