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Long-haul Airlines - UK - June 2009

Until the second half of 2008 long-haul airlines were enjoying a boom period, spurred on by the affluence of key consumers and trends in favour of exploring further, experiencing more and tasting the exotic to an ever greater degree. The impact of the recession has, however, had the predictable effect. Passenger numbers are down and a raft of long-haul airlines have reported poor recent results. Capacity is under pressure, with many operators choosing to park aircraft in the hope of a recovery to come.

There are, however, factors working in long-haul’s favour. The euro vs pound exchange rate, for example, has thrown assumptions of ‘cheap’ European trips into stark relief, and emphasised the value-for-money that can be achieved through flying further afield. The fall in oil prices from 2008’s high had eased pressures, with fuel surcharges removed/reduced in most cases. However, ranged against these are some troubling clouds on the horizon. Air Passenger duty will rise in November 2009 and November 2010, oil has (recently) begun to rise in price again and swine flu has been declared a global pandemic.

This report investigates these issues and more, providing an overview of the market, examining core trends in supply, key strengths and weaknesses, consumer trends and the developments that are impacting on the marketplace.

Key issues:

  • How are long-haul airlines performing in the recession? How is long-haul air travel doing in comparison to short-haul?

  • What are the long-term trends in long-haul air travel, and will these tougher economic times change consumer behaviour?

  • Who are the key long-haul airline users? What do consumer demographics indicate for the future of long-haul airlines?

  • What will the effects be of the impending change to Advanced Passenger Duty (APD)? And how is the future of oil going to affect long-haul airlines? What are the other factors that will have particular impact?

  • How does the holiday market affect long-haul airlines? And what of premium travel (first and business class)?

  • Will (can?) low-cost long-haul work?

  • How do people book long-haul flights? Is this changing?

  • What do people think makes for a good long-haul airline? Which companies provide this?

  • Are environmental concerns a factor to long-haul airlines? And are consumers worried about the ‘green’ impact of flying long-haul?

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Table of contents

  1. Issues in the Market

      • Key issues:
        • Definitions
          • Abbreviations
          • Future Opportunities

            • Relaxation requested
              • Stress Society
                • Child’s play
                  • Sunning on Empty
                    • The first bite is with the eye
                    • Market in Brief

                      • The long-haul picture
                        • Clouds on the horizon
                          • Well-off, connected and unconcerned
                            • The long and the short (and the cheap) of it
                              • Flying in to the future
                              • Internal Market Environment

                                • Key points
                                  • Recessionary impacts
                                    • Figure 1: Domestic and overseas holiday volumes, 2004-09
                                    • Figure 2: Domestic and overseas holiday expenditure at current values, 2004-09
                                    • Figure 3: Average spend per trip, 2004-09
                                  • Which airport?
                                    • Figure 4: Passenger movement (scheduled and non-scheduled) at UK airports, 2004-08
                                    • Figure 5: Aircraft movement at UK airports, 2004-08
                                  • Regional repercussions
                                    • Figure 6: Overseas journeys, by region, 2004-08
                                    • Figure 7: Top 15 holiday destinations 2008, by number of visits, 2004-08
                                  • Who goes?
                                    • Figure 8: Percentage of adults booking UK and overseas holidays, 2004-08
                                  • Air Passenger Duty
                                    • Environmental (non) impact
                                      • Long-haul low-cost
                                        • Pigs might not fly
                                          • Impact of Open Skies
                                          • Broader Market Environment

                                            • Key points
                                              • Confidence returning?
                                                • Figure 9: Consumer Confidence Index, April 2008-April 2009
                                                • Figure 10: Trends in personal disposable income and consumer expenditure, 2004-14
                                              • High fliers
                                                • Figure 11: Forecast adult population trends, by socio-economic group, 2004, 2009 and 2014
                                                • Figure 12: Forecast adult population trends, by lifestage, 2004, 2009 and 2014
                                              • Ageing along
                                                • Figure 13: Trends in the age structure of the UK population, by gender, 2004, 2009 and 2014
                                                • Figure 14: UK household sizes, 2004, 2009 and 2014
                                              • Internet penetration
                                                • Figure 15: British internet penetration at home/work/place of study or elsewhere, by gender, socio-economic group, age, region and working status, 2004-09
                                              • Spending priorities favour holidays
                                                • Figure 16: Expenditure priorities for the year ahead, January 2009
                                              • Exchange rates
                                                • Figure 17: Sterling exchange rates at 31 March, 2005-09
                                              • Oil on the up
                                                • Figure 18: Crude oil prices, 2004-09
                                            • Competitive Context

                                              • Key points
                                                • Long vs short
                                                  • Figure 19: Long-haul vs short-haul all visits, by air volume and expenditure, at current prices, 2004-09
                                                  • Figure 20: Long-haul vs short-haul all holidays, by air volume and expenditure, at current prices, 2004-09
                                                • The price is right?
                                                  • The Comfort Zone
                                                  • Strengths and Weaknesses

                                                      • Strengths
                                                        • Fuel prices
                                                          • Euro exchange rate
                                                            • Aircraft improvements
                                                              • Open Skies
                                                                • Low-cost possibilities
                                                                  • Weaknesses
                                                                    • Dollar exchange rate
                                                                      • Air Passenger Duty
                                                                        • Economic climate
                                                                          • Reliance on oil
                                                                            • Environmental pressure
                                                                            • Who’s Innovating?

                                                                              • Key points
                                                                                • Routes
                                                                                  • Technology
                                                                                    • Environmental
                                                                                      • In flight features
                                                                                        • Corporate agreements
                                                                                        • Market Size and Forecast

                                                                                          • Key points
                                                                                            • Figure 21: Passengers uplifted – all vs long-haul, 2004-14
                                                                                          • Past
                                                                                            • Present
                                                                                              • Future
                                                                                                • Factors used in the forecast
                                                                                                • Segment Performance

                                                                                                  • Key points
                                                                                                    • Far away holiday; no business here
                                                                                                      • Figure 22: Long-haul air used for method of travel, last/last but one holiday, 2004-08
                                                                                                    • Long-haul airport use
                                                                                                      • Figure 23: Airports used for long-haul flights in the last 12 months, 2004-08
                                                                                                    • Factorisation
                                                                                                      • Figure 24: Most important factor when choosing which airline to fly with on holiday, 2004-08
                                                                                                  • Market Share

                                                                                                    • Key points
                                                                                                      • Delta is alpha dog
                                                                                                        • Figure 25: All passengers carried by selected long-haul airlines, 2004-08
                                                                                                        • Figure 26: Number of active aircraft, 2008
                                                                                                    • Companies and Products

                                                                                                      • Key points
                                                                                                        • Alliances
                                                                                                          • Figure 27: Airline alliances, June 2008
                                                                                                        • British Airways
                                                                                                          • Virgin Atlantic
                                                                                                            • Singapore Airlines
                                                                                                              • AirAsia X
                                                                                                                • Emirates
                                                                                                                  • Qatar Airways
                                                                                                                    • Thai Airways
                                                                                                                      • Qantas
                                                                                                                        • Delta Air Lines
                                                                                                                          • bmi
                                                                                                                          • Brand Elements

                                                                                                                              • Key points
                                                                                                                                • Brand map
                                                                                                                                    • Figure 28: Attitudes and usage of long-haul airline brands, May 2009
                                                                                                                                  • Brand qualities of long-haul airline brands
                                                                                                                                    • BA above the rest, but Virgin not far below
                                                                                                                                      • Figure 29: Personalities of various long-haul airline brands, May 2009
                                                                                                                                    • Experience of long-haul airline brands
                                                                                                                                      • BA most-flown, but long-haul flights mostly not recent
                                                                                                                                        • Figure 30: Consumer usage of various long-haul airline brands, May 2009
                                                                                                                                      • Brand intentions for long-haul airline brands
                                                                                                                                        • Virgin Atlantic, Emirates and Qantas most likely to be considered
                                                                                                                                          • Figure 31: Consideration of various long-haul airline brands, May 2009
                                                                                                                                        • Brand satisfaction for long-haul airline brands
                                                                                                                                          • Go East for excellence
                                                                                                                                            • Figure 32: Satisfaction with various long-haul airline brands, May 2009
                                                                                                                                          • Brand commitment to long-haul airline brands
                                                                                                                                            • Virgin is first choice
                                                                                                                                              • Figure 33: Commitment to various long-haul airline brands, May 2009
                                                                                                                                            • British Airways
                                                                                                                                              • What the consumer thinks
                                                                                                                                                • Figure 34: Attitudes towards the British Airways brand, May 2009
                                                                                                                                              • bmi
                                                                                                                                                • What the consumer thinks
                                                                                                                                                  • Figure 35: Attitudes towards the bmi brand, May 2009
                                                                                                                                                • Emirates
                                                                                                                                                  • What the consumer thinks
                                                                                                                                                    • Figure 36: Attitudes towards the Emirates brand, May 2009
                                                                                                                                                  • Virgin Atlantic
                                                                                                                                                    • What the consumer thinks
                                                                                                                                                      • Figure 37: Attitudes towards the Virgin Atlantic brand, May 2009
                                                                                                                                                  • Channels to Market

                                                                                                                                                    • Key points
                                                                                                                                                      • Figure 38: Method used to book last holiday overseas, by those who flew long-haul, 2004-08
                                                                                                                                                    • Online on the up
                                                                                                                                                      • But offline lives on
                                                                                                                                                      • What Holidaymakers Look For

                                                                                                                                                        • Key points
                                                                                                                                                          • Kicking back under a cloudless sky
                                                                                                                                                            • Figure 39: Key factors looked for in a holiday, April 2009
                                                                                                                                                          • Sun over lounging for young and old
                                                                                                                                                            • Getting away
                                                                                                                                                              • Mid-haul marketing
                                                                                                                                                              • Who Flies Long-haul?

                                                                                                                                                                • Key points
                                                                                                                                                                  • Figure 40: Flights taken in the past three years, April 2009
                                                                                                                                                                • Long-haul Londoners
                                                                                                                                                                  • Mid-haul much the same
                                                                                                                                                                    • Scheduled vs chartered
                                                                                                                                                                      • Mid-haul appeal for middle class
                                                                                                                                                                        • None/never flyers
                                                                                                                                                                        • Attitudes Toward Long-haul Airlines

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Figure 41: Attitudes towards long-haul airlines, April 2009
                                                                                                                                                                          • Price, low-cost and families
                                                                                                                                                                            • Time to fly
                                                                                                                                                                            • Targeting Opportunities

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Target groups
                                                                                                                                                                                  • Figure 42: Long-haul airlines target groups, April 2009
                                                                                                                                                                                  • Figure 43: Attitudes towards long-haul airlines, by target groups, April 2009
                                                                                                                                                                                • Fans (28% of adults aged 15+ or 14.3 million adults)
                                                                                                                                                                                  • Price-led (23% of adults aged 15+ or 11.7 million adults)
                                                                                                                                                                                    • Disliked (19% of adults aged 15+ or 9.7 million adults)
                                                                                                                                                                                      • Unengaged (29% of adults aged 15+ or 14.8 million adults)
                                                                                                                                                                                        • A relaxing flight
                                                                                                                                                                                          • Figure 44: Factors looked for in a holiday, by target groups, April 2009
                                                                                                                                                                                        • Target destinations
                                                                                                                                                                                          • Figure 45: Any overseas flights taken in the past three years, by target groups, April 2009
                                                                                                                                                                                      • Appendix – What Holidaymakers Look For

                                                                                                                                                                                          • Figure 46: Most popular factors looked for in a holiday, by demographics, April 2009
                                                                                                                                                                                          • Figure 47: Next most popular factors looked for in a holiday, by demographics, April 2009
                                                                                                                                                                                          • Figure 48: Least popular factors looked for in a holiday, by demographics, April 2009
                                                                                                                                                                                      • Appendix – Who Flies Long-haul

                                                                                                                                                                                          • Figure 49: Most popular flights taken in the past three years, by demographics, April 2009
                                                                                                                                                                                          • Figure 50: Least popular flights taken in the past three years, by demographics, April 2009
                                                                                                                                                                                      • Appendix – Attitudes Toward Long-haul Airlines

                                                                                                                                                                                          • Figure 51: Most popular attitudes towards long-haul airlines, by demographics, April 2009
                                                                                                                                                                                          • Figure 52: Least popular attitudes towards long-haul airlines, by demographics, April 2009
                                                                                                                                                                                      • Appendix – Targeting Opportunities

                                                                                                                                                                                          • Figure 53: Target groups, by demographics, April 2009

                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                      • Air Canada
                                                                                                                                                                                      • Air France
                                                                                                                                                                                      • Air France-KLM Group
                                                                                                                                                                                      • AirAsia
                                                                                                                                                                                      • Airbus S.A.S.
                                                                                                                                                                                      • All Nippon Airways Co Ltd
                                                                                                                                                                                      • AMR Corporation (American Airlines)
                                                                                                                                                                                      • Arsenal Football Club
                                                                                                                                                                                      • Asda Group Ltd
                                                                                                                                                                                      • Association of British Travel Agents (The)
                                                                                                                                                                                      • BCC
                                                                                                                                                                                      • British Airport Authority
                                                                                                                                                                                      • British Airways Plc
                                                                                                                                                                                      • British Chamber of Commerce
                                                                                                                                                                                      • British Market Research Bureau (BMRB)
                                                                                                                                                                                      • British Midland Airways Ltd
                                                                                                                                                                                      • Cathay Pacific Airways Limited
                                                                                                                                                                                      • Civil Aviation Authority
                                                                                                                                                                                      • Co-operative Group
                                                                                                                                                                                      • Confederation of British Industry
                                                                                                                                                                                      • Delta Air Lines, Inc.
                                                                                                                                                                                      • Deutsche Lufthansa AG
                                                                                                                                                                                      • Emirates
                                                                                                                                                                                      • European Tour Operators Association
                                                                                                                                                                                      • Fédération Internationale de Football Association
                                                                                                                                                                                      • Freeview
                                                                                                                                                                                      • Government Actuary's Department (GAD)
                                                                                                                                                                                      • Iberia, Líneas Aéreas de España SA
                                                                                                                                                                                      • IKEA
                                                                                                                                                                                      • International Air Transport Association
                                                                                                                                                                                      • ITV plc
                                                                                                                                                                                      • J. Sainsbury
                                                                                                                                                                                      • Market & Opinion Research International (MORI)
                                                                                                                                                                                      • Marks & Spencer
                                                                                                                                                                                      • Northwest Airlines Corporation
                                                                                                                                                                                      • OAG Worldwide Limited
                                                                                                                                                                                      • Office for National Statistics
                                                                                                                                                                                      • OneWorld
                                                                                                                                                                                      • Qantas Airways Limited
                                                                                                                                                                                      • Qatar Airways
                                                                                                                                                                                      • Ryanair Holdings plc
                                                                                                                                                                                      • SAS AB
                                                                                                                                                                                      • Scandinavian Airlines
                                                                                                                                                                                      • Singapore Airlines Ltd
                                                                                                                                                                                      • SkyTeam Airline Alliance
                                                                                                                                                                                      • Somerfield
                                                                                                                                                                                      • Star Alliance
                                                                                                                                                                                      • Tesco Plc
                                                                                                                                                                                      • Thai Airways International
                                                                                                                                                                                      • U.S. Department of Transportation
                                                                                                                                                                                      • Virgin Atlantic Airways Limited
                                                                                                                                                                                      • Virgin Group Ltd.
                                                                                                                                                                                      • Virgin Holidays
                                                                                                                                                                                      • Waitrose
                                                                                                                                                                                      • Wm Morrison Supermarkets
                                                                                                                                                                                      • World Health Organization
                                                                                                                                                                                      • XL Leisure
                                                                                                                                                                                      • Zoom Airlines Ltd

                                                                                                                                                                                      Long-haul Airlines - UK - June 2009

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