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Airlines - UK - September 2014

“The convergence of budget and full-service airlines has continued, with full-service airlines further unbundling fares to compete on top-line prices and low-cost airlines entering the long-haul market. Going forward, the development and efficient targeting of ancillary services will be a key driver in maintaining profitability for all airlines”.
- Rebecca McGrath, Research Analyst
This report looks at the following issues:

  • Why airlines should focus on increasing app penetration
  • How can airlines boost ancillary revenues?

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Market volume set to grow 19% by 2019
                • Figure 1: Volume forecast of total passengers uplifted at UK airports, 2009-19
              • Market share
                • UK low-cost airlines up by third since 2008
                  • Figure 2: Passengers uplifted worldwide by UK airlines, low-cost* and full-service**, 2008-13
                • Market factors
                  • Jet fuel costs projected to rise after slight declines
                    • More airlines to launch low-cost long-haul flights
                      • Inmarsat aims to bring affordable in-flight Wi-Fi to Europe
                        • 2014 airline disasters to impact industry
                          • Changes to be made to APD
                            • Companies, brands and innovation
                              • Top UK airlines continue to increase passenger uplift
                                • Budget airlines boost market share
                                  • Flybe launches new domestic service
                                    • Panasonic Avionics generates revenue through targeted ads
                                      • BA creates interactive campaign
                                        • United Airlines launches personal device entertainment system
                                          • The consumer
                                            • Almost half of people have taken a holiday flight in the last year
                                              • Figure 3: Purpose of flights taken in the past 12 months, May 2014
                                            • Half of fliers have taken a budget flight in last 12 months
                                              • Figure 4: Types of flights taken in the last 12 months, May 2014
                                            • Over a third booked directly through airline website
                                              • Figure 5: Booking method, May 2014
                                            • More than a third always check preferred airline website
                                              • Figure 6: Attitudes towards purchasing, May 2014
                                            • In-flight food still prioritised
                                              • Figure 7: Willingness to pay for in-flight features, any flight, May 2014
                                            • Complimentary Wi-Fi is key app feature
                                              • Figure 8: Interest in mobile app features, May 2014
                                            • What we think
                                            • Issues and Insights

                                                • Why airlines should focus on increasing app penetration
                                                  • How can airlines boost ancillary revenues?
                                                  • Trend Application

                                                      • Trend: Transumers
                                                        • Trend: Collective Intelligence
                                                          • Mintel futures: Generation Next
                                                          • Market Drivers

                                                            • Key points
                                                              • Air travel grows market share
                                                                • Figure 9: All overseas visits by air, sea and tunnel – volume, 2008-13
                                                              • Heathrow and Gatwick boost passenger uplift
                                                                • Figure 10: Passengers uplifted at UK airports, 2008-13
                                                              • Heathrow and Gatwick vie for expansion
                                                                • Jet fuel prices decline slightly but rise projected
                                                                  • Figure 11: Kerosene-type jet fuel monthly average spot price and US$:£ monthly average spot exchange rate, Jan 2008-May 2014
                                                                • Changes to APD reduces tax on long-haul flights
                                                                  • Ancillary revenues pivotal
                                                                    • Court ruling over compensation for flight delays
                                                                      • Low-cost long-haul
                                                                        • Regulation on in-flight technology usage eased
                                                                          • Inmarsat looks to create EU-wide 4G broadband network
                                                                            • 2014 airline disasters to increase costs
                                                                            • Who’s Innovating?

                                                                              • Key points
                                                                                • Flybe introduces new hop-on hop-off service
                                                                                  • British Airways launches interactive campaign
                                                                                    • Improvements to In-flight entertainment
                                                                                      • Gogo implements faster Wi-Fi
                                                                                        • Panasonic Avionic introduces targeted in-flight ads
                                                                                          • New seating class from Delta
                                                                                            • More efficient boarding processes
                                                                                            • Market Size and Forecast

                                                                                              • Key points
                                                                                                • Air travel up in 2013
                                                                                                  • Figure 12: Passengers uplifted at UK airports, 2008-19
                                                                                                • Fan charts
                                                                                                  • Figure 13: Volume forecast of total passengers uplifted at UK airports, 2009-19
                                                                                                  • Figure 14: Volume forecast of international passengers uplifted at UK airports, 2009-19
                                                                                                  • Figure 15: Volume forecast of domestic passengers uplifted at UK airports, 2009-19
                                                                                                • Forecast methodology
                                                                                                • Segment Performance

                                                                                                  • Key points
                                                                                                    • Visits to friends and family up 5.1%
                                                                                                      • Figure 16: Volume of UK residents’ air trips abroad, by purpose, 2008-13
                                                                                                    • Decline in non-scheduled flights continues
                                                                                                      • Figure 17: Passengers uplifted at UK airports, scheduled vs. non-scheduled flights, 2008-13
                                                                                                  • Market Share

                                                                                                    • Key points
                                                                                                      • Ryanair, easyJet and BA cement their leading market positions
                                                                                                        • Figure 18: Top ten UK-based airlines, by passengers uplifted globally, 2008-13
                                                                                                      • Virgin defends Little Red Service
                                                                                                        • UK airlines continue to boost fleets
                                                                                                          • Figure 19: Number of active aircraft, by airline, 2012 and 2013
                                                                                                        • UK low-cost airlines up by third since 2008
                                                                                                          • Figure 20: Total passengers uplifted worldwide by UK airlines, low-cost* and full-service**, 2008-13
                                                                                                      • Companies and Products

                                                                                                          • British Airways
                                                                                                              • Figure 21: Key financials British Airways Plc, 2012-13
                                                                                                            • Virgin Atlantic
                                                                                                                • Figure 22: Key financials for Virgin Atlantic Airways, Ltd, 2012 and 2013
                                                                                                              • easyJet
                                                                                                                • Figure 23: Key financials for easyJet plc, 2012 and 2013
                                                                                                              • Ryanair
                                                                                                                  • Figure 24: Key financials for Ryanair, 2013 and 2104
                                                                                                                • Monarch
                                                                                                                  • Figure 25: Key financials for Monarch Holding Ltd, 2012 and 2013
                                                                                                                • Flybe 
                                                                                                                  • Figure 26: Key financials for Flybe, 2013 and 2014
                                                                                                              • Brand Communication and Promotion

                                                                                                                • Key points
                                                                                                                  • easyJet continues to dominate UK adspend
                                                                                                                    • Figure 27: Top ten airlines, by UK top-line advertising spend, 2010-14
                                                                                                                  • Ryanair and British Airways boost spend in 2014
                                                                                                                    • Press remains primary channel, but TV spend up in first half of 2014
                                                                                                                      • Figure 28: Airline UK advertising spend, by media type, 2010-14
                                                                                                                  • Brand Perceptions and Social Media

                                                                                                                    • Brand perceptions
                                                                                                                      • Key brand metrics
                                                                                                                        • Figure 29: Key brand metrics, April 2014
                                                                                                                      • Brand map
                                                                                                                          • Figure 30: Attitudes towards and usage of brands in the airlines sector, April 2014
                                                                                                                        • Correspondence analysis
                                                                                                                          • Brand attitudes
                                                                                                                            • Figure 31: Attitudes, by airlines brand, April 2014
                                                                                                                          • Brand personality
                                                                                                                            • Figure 32: Airlines brand personality – macro image, April 2014
                                                                                                                            • Figure 33: Airlines brand personality – micro image, April 2014
                                                                                                                          • Brand usage
                                                                                                                            • Figure 34: Airlines brand usage, April 2014
                                                                                                                          • Brand experience
                                                                                                                            • Figure 35: Airlines brand experience, April 2014
                                                                                                                          • Social media and online buzz
                                                                                                                            • Social media metrics
                                                                                                                              • Figure 36: Social media metrics of selected airline brands, August 2014
                                                                                                                            • British Airways has the strongest online presence
                                                                                                                              • Ryanair bypasses Facebook account and communicates with audience solely via Twitter
                                                                                                                                • easyJet stands out from its direct competitors
                                                                                                                                  • Online mentions
                                                                                                                                    • Figure 37: Online mentions of selected airlines brands, 1st August 2013-31st July 2014
                                                                                                                                  • British Airways dominates conversation with spikes throughout the year
                                                                                                                                    • Ryanair mentions spike around coverage of Channel 4 documentary
                                                                                                                                      • Virgin Atlantic’s Google Glass trial prompts discussion
                                                                                                                                        • Topics of discussion
                                                                                                                                          • Figure 38: Topics of discussion around selected airlines brands, 28 July 2013-2 August 2014
                                                                                                                                        • The basics of travel take precedence
                                                                                                                                          • Entertainment likely to be strong part of long-haul offering
                                                                                                                                            • Figure 39: Topics of discussion around selected airline brands, by week, 28 July 2013-2 August 2014
                                                                                                                                          • Price remains constant as most talked about topic
                                                                                                                                            • New technology is coming, but has yet to gain traction
                                                                                                                                              • Analysis by brand
                                                                                                                                                • British Airways
                                                                                                                                                  • Figure 40: Topic cloud around mentions of British Airways, 28 July 2013 – 2 August 2014
                                                                                                                                                • What we think
                                                                                                                                                  • Ryanair
                                                                                                                                                    • Figure 41: Topic cloud around mentions of Ryanair, 28 July 2013 – 2 August 2014
                                                                                                                                                  • Ryanair has strong number of online mentions
                                                                                                                                                    • Ryanair’s focus on price is successful to a certain extent
                                                                                                                                                      • However, satisfaction suggests that brand could become even more successful
                                                                                                                                                        • What we think
                                                                                                                                                          • easyJet
                                                                                                                                                            • Figure 42: Topic cloud around mentions of easyJet, 28 July 2013-2 August 2014
                                                                                                                                                          • easyJet has fewer mentions than Ryanair
                                                                                                                                                            • What we think
                                                                                                                                                              • Virgin Atlantic
                                                                                                                                                                • Figure 43: Topic cloud around mentions of Virgin Atlantic, 28 July 2013-2 August 2014
                                                                                                                                                              • Virgin’s performance and brand image is stronger than online performance
                                                                                                                                                                • What we think
                                                                                                                                                                  • Flybe
                                                                                                                                                                    • Figure 44: Topic cloud around mentions of Flybe, 28 July 2013 – 2 August 2014
                                                                                                                                                                  • Flybe trouble dominates discussion
                                                                                                                                                                    • Flybe runs weekly #FlybeFriday competition
                                                                                                                                                                      • What we think
                                                                                                                                                                        • Monarch
                                                                                                                                                                          • Figure 45: Topic cloud around mentions of Monarch, 28 July 2013-2 August 2014
                                                                                                                                                                        • Holidays are main point of difference for Monarch
                                                                                                                                                                          • What we think
                                                                                                                                                                          • The Consumer – Flights Taken in the Last 12 Months

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Over half of people have taken a flight in last year
                                                                                                                                                                                • Figure 46: Purpose of flights taken in the past 12 months, May 2014
                                                                                                                                                                              • Seven in ten ABs took a flight
                                                                                                                                                                              • The Consumer – Types of Flights Taken in the Last 12 Months

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Half have taken a budget flight in last 12 months
                                                                                                                                                                                    • Figure 47: Types of flights taken in the last 12 months, May 2014
                                                                                                                                                                                  • Low-cost long-haul
                                                                                                                                                                                  • The Consumer – Booking Methods

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Over a third of consumers booked directly with an airline website
                                                                                                                                                                                        • Figure 48: Booking method, May 2014
                                                                                                                                                                                      • 25-34-year-olds prefer to book with an airline
                                                                                                                                                                                        • Figure 49: Booking method, by age, May 2014
                                                                                                                                                                                    • The Consumer – Attitudes towards Purchasing

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Three in ten consumers always use price-comparison sites
                                                                                                                                                                                          • Figure 50: Attitudes towards purchasing, May 2014
                                                                                                                                                                                        • Booking in advance
                                                                                                                                                                                        • The Consumer – Willingness to Pay for In-flight Features

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Six in ten would pay for an in-flight feature on flights under six hours
                                                                                                                                                                                              • Figure 51: Willingness to pay for in-flight features, May 2014
                                                                                                                                                                                            • In-flight food still key feature
                                                                                                                                                                                              • Seating a priority
                                                                                                                                                                                                • Younger people more willing to pay for In-flight entertainment
                                                                                                                                                                                                  • Figure 52: Willingness to pay for in-flight entertainment, by age, May 2014
                                                                                                                                                                                                • Higher prices for features on shorter flights
                                                                                                                                                                                                  • Figure 53: Average amount people are willing to pay for each feature, May 2014
                                                                                                                                                                                              • The Consumer – Interest in Mobile App Features

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • Complimentary Wi-Fi most appealing airline app feature
                                                                                                                                                                                                    • Figure 54: Interest in mobile app features, May 2014
                                                                                                                                                                                                  • Complimentary Wi-Fi would encourage half of 16-24-year-olds to use apps
                                                                                                                                                                                                    • Figure 55: Interest in complimentary in-flight Wi-Fi, by age, May 2014
                                                                                                                                                                                                  • Speedier check-in processes
                                                                                                                                                                                                    • The decline of loyalty
                                                                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                                                                        • Figure 56: Passengers uplifted at UK airports, 2008-19
                                                                                                                                                                                                    • Appendix – Brand Perceptions and Social Media

                                                                                                                                                                                                        • Figure 57: Brand usage, April 2014
                                                                                                                                                                                                        • Figure 58: Brand commitment, April 2014
                                                                                                                                                                                                        • Figure 59: Brand diversity, April 2014
                                                                                                                                                                                                        • Figure 60: Brand satisfaction, April 2014
                                                                                                                                                                                                        • Figure 61: Brand recommendation, April 2014
                                                                                                                                                                                                        • Figure 62: Brand attitude, April 2014
                                                                                                                                                                                                        • Figure 63: Brand image – macro image, April 2014
                                                                                                                                                                                                        • Figure 64: Brand image – micro image, April 2014
                                                                                                                                                                                                        • Figure 65: Share of conversation of selected airlines brands, 28 July 2013-2 August 2014
                                                                                                                                                                                                        • Figure 66: Topics of discussion around selected airlines brands, 28 July 2013-2 August 2014
                                                                                                                                                                                                    • Appendix – The Consumer – Flights Taken in the Last 12 Months

                                                                                                                                                                                                        • Figure 67: Flights taken in the last 12 months, May 2014
                                                                                                                                                                                                        • Figure 68: Flights taken in the last 12 months, by demographics, May 2014
                                                                                                                                                                                                        • Figure 69: Flights taken in the last 12 months, by demographics, May 2014 (continued)
                                                                                                                                                                                                    • Appendix – The Consumer – Types of Flights Taken in the Last 12 Months

                                                                                                                                                                                                        • Figure 70: Types of flight taken in the last 12 months, May 2014
                                                                                                                                                                                                        • Figure 71: Types of flight taken in the last 12 months, by flights taken in the last 12 months, May 2014
                                                                                                                                                                                                        • Figure 72: Flights taken in the last 12 months, by types of flight taken in the last 12 months – Destination, May 2014
                                                                                                                                                                                                        • Figure 73: Flights taken in the last 12 months, by types of flight taken in the last 12 months – Type of airline, May 2014
                                                                                                                                                                                                        • Figure 74: Flights taken in the last 12 months, by types of flight taken in the last 12 months – Class, May 2014
                                                                                                                                                                                                        • Figure 75: Types of flight taken in the last 12 months – Destination, by demographics, May 2014
                                                                                                                                                                                                        • Figure 76: Types of flight taken in the last 12 months – Type of airline, by demographics, May 2014
                                                                                                                                                                                                        • Figure 77: Types of flight taken in the last 12 months – Class, by demographics, May 2014
                                                                                                                                                                                                    • Appendix – The Consumer – Booking Method

                                                                                                                                                                                                        • Figure 78: Booking method, May 2014
                                                                                                                                                                                                        • Figure 79: Booking method, by flights taken in the last 12 months, May 2014
                                                                                                                                                                                                        • Figure 80: Booking method, by demographics, May 2014
                                                                                                                                                                                                        • Figure 81: Booking method – With the airline, by demographics, May 2014
                                                                                                                                                                                                        • Figure 82: Booking method – With a travel/booking agent, by demographics, May 2014
                                                                                                                                                                                                        • Figure 83: Other booking method, by demographics, May 2014
                                                                                                                                                                                                    • Appendix – The Consumer – Attitudes towards Purchasing

                                                                                                                                                                                                        • Figure 84: Attitudes towards purchasing, May 2014
                                                                                                                                                                                                        • Figure 85: Booking method, by attitudes towards purchasing, May 2014
                                                                                                                                                                                                        • Figure 86: Booking method, by attitudes towards purchasing May 2014, (continued)
                                                                                                                                                                                                        • Figure 87: Types of flight taken in the last 12 months, by attitudes towards purchasing, May 2014
                                                                                                                                                                                                        • Figure 88: Types of flight taken in the last 12 months, by attitudes towards purchasing, May 2014 (continued)
                                                                                                                                                                                                        • Figure 89: Attitudes towards purchasing, by demographics, May 2014
                                                                                                                                                                                                        • Figure 90: Attitudes towards purchasing, by demographics, May 2014 (continued)
                                                                                                                                                                                                    • Appendix – The Consumer – Willingness to Pay for In-Flight Features

                                                                                                                                                                                                        • Figure 91: Willingness to pay for in-flight features, May 2014
                                                                                                                                                                                                        • Figure 92: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Any flight, May 2014
                                                                                                                                                                                                        • Figure 93: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Any flight, May 2014 (continued)
                                                                                                                                                                                                        • Figure 94: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Flight under six hours, May 2014
                                                                                                                                                                                                        • Figure 95: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Flight under six hours, May 2014 (continued)
                                                                                                                                                                                                        • Figure 96: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Flight over six hours, May 2014
                                                                                                                                                                                                        • Figure 97: Types of flight taken in the last 12 months, by willingness to pay for in-flight features – Flight over six hours, May 2014 (continued)
                                                                                                                                                                                                        • Figure 98: Willingness to pay for in-flight features – any flight, by demographics, May 2014
                                                                                                                                                                                                        • Figure 99: Willingness to pay for in-flight features – any flight, by demographics, May 2014 (continued)
                                                                                                                                                                                                        • Figure 100: Willingness to pay for in-flight features – flight under six hours, by demographics, May 2014
                                                                                                                                                                                                        • Figure 101: Willingness to pay for in-flight features – flight under six hours, by demographics, May 2014 (continued)
                                                                                                                                                                                                        • Figure 102: Willingness to pay for in-flight features – flight over six hours, by demographics, May 2014
                                                                                                                                                                                                        • Figure 103: Willingness to pay for in-flight features – flight over six hours, by demographics, May 2014 (continued)
                                                                                                                                                                                                    • Appendix – The Consumer – Amount Willing to Pay for In-Flight Features

                                                                                                                                                                                                        • Figure 104: Amount people are willing to pay for each feature, May 2014
                                                                                                                                                                                                        • Figure 105: Amount people are willing to pay for each feature – Average, by demographics, May 2014
                                                                                                                                                                                                        • Figure 106: Amount people are willing to pay for each feature – Average, by demographics, May 2014 (continued)
                                                                                                                                                                                                        • Figure 107: Amount people are willing to pay for each feature – Flight under six hours, by demographics, May 2014
                                                                                                                                                                                                        • Figure 108: Amount people are willing to pay for each feature – Flight under six hours, by demographics, May 2014 (continued)
                                                                                                                                                                                                        • Figure 109: Amount people are willing to pay for each feature – Flight over six hours, by demographics, May 2014
                                                                                                                                                                                                        • Figure 110: Amount people are willing to pay for each feature – Flight over six hours, by demographics, May 2014 (continued)
                                                                                                                                                                                                    • Appendix – The Consumer – Interest in Mobile App Features

                                                                                                                                                                                                        • Figure 111: Interest in mobile app features, May 2014
                                                                                                                                                                                                        • Figure 112: Interest in mobile app features, by flights taken in the last 12 months, May 2014
                                                                                                                                                                                                        • Figure 113: Interest in mobile app features, by types of flight taken in the last 12 months – Destination, May 2014
                                                                                                                                                                                                        • Figure 114: Interest in mobile app features, by types of flight taken in the last 12 months – Type of airline, May 2014
                                                                                                                                                                                                        • Figure 115: Interest in mobile app features, by types of flight taken in the last 12 months – Class, May 2014
                                                                                                                                                                                                        • Figure 116: Interest in mobile app features, by demographics, May 2014
                                                                                                                                                                                                        • Figure 117: Interest in mobile app features, by demographics, May 2014 (continued)

                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                    • Aer Lingus Group Plc
                                                                                                                                                                                                    • AMR Corporation (American Airlines)
                                                                                                                                                                                                    • Archers Direct
                                                                                                                                                                                                    • Avro plc
                                                                                                                                                                                                    • British Airways Holidays
                                                                                                                                                                                                    • British Airways Plc
                                                                                                                                                                                                    • British Midland Airways Ltd
                                                                                                                                                                                                    • Cathay Pacific Airways Limited
                                                                                                                                                                                                    • Civil Aviation Authority
                                                                                                                                                                                                    • Competition Commission
                                                                                                                                                                                                    • Cosmos Group (Globus group of companies)
                                                                                                                                                                                                    • Delta Air Lines, Inc.
                                                                                                                                                                                                    • Finnair Oyj
                                                                                                                                                                                                    • FlyBE
                                                                                                                                                                                                    • Iberia, Líneas Aéreas de España SA
                                                                                                                                                                                                    • Japan Airlines Corporation [JAL]
                                                                                                                                                                                                    • Jersey European Airways (UK) Ltd.
                                                                                                                                                                                                    • Lan Airlines S.A.
                                                                                                                                                                                                    • Monarch Airlines
                                                                                                                                                                                                    • Monarch Travel Group
                                                                                                                                                                                                    • Qantas Airways Limited
                                                                                                                                                                                                    • Ryanair Holdings plc
                                                                                                                                                                                                    • Singapore Airlines Ltd
                                                                                                                                                                                                    • US Airways Group Inc.
                                                                                                                                                                                                    • Virgin Atlantic Airways Limited

                                                                                                                                                                                                    Airlines - UK - September 2014

                                                                                                                                                                                                    US $2,672.70 (Excl.Tax)