Airlines which fail to adapt to Generation Z could miss out on “USD 45 billion” by 2030

Airlines that have successfully installed connected cabins have an immediate opportunity to win USD33 billion in market share from competitors. That is the conclusion of new economic modelling from the London School of Economics and Political  Science (LSE) in association with Inmarsat, the world leader in global mobile satellite communications.

“Sky High Economics – Chapter Three: Capitalising on Changing Passenger Behaviour in a
Connected World” examines the global shift underway in passenger demographics, behaviours and attitudes to loyalty. It underscores an immediate need for airlines to innovate in order to
stay relevant in a competitive industry landscape, identifying USD33 billion in share shift ‘up for grabs’ today for those developing the digital inflight experience that passengers are seeking.
This opportunity equates to six % of the total annual commercial passenger aviation market.

Passenger demographics

Today, the airline industry is experiencing a period of exceptional change. Within the next decade, Asia Pacific will see the first truly digitally native generation, Generation Z (born between 1997-2012) become the largest group of air passengers of over 450 million,
surpassing the Millennials by 41%.

Paired with this demographic shift, digital disruption on the ground is driving expectations of inflight experience, and redefining attitudes to airline loyalty. According to the LSE research,
Millennials (the largest passenger group today, born between 1981-1996) value loyalty less than any previous generation – a trend set to continue with younger generations.

Opportunity

Sky High Economics identifies a market of close to 450 million passengers worldwide, currently uncommitted to any airline loyalty programme, who would switch their allegiance in favour of an airline offering high-quality inflight Wi-Fi.

This forecast is modelled using data from frequent flyer schemes, which reveal a market split
into active, engaged frequent flyers (13%) and less engaged, brand-agnostic passengers
(87%). Less engaged travellers – many of whom are younger flyers with new expectations of travel – present the largest opportunity for airlines to take market share.

Today, 12% of less engaged passengers are willing to switch allegiance to an airline that offers reliable Wi-Fi, worth USD33 billion in share shift for airlines already offering the service to take from competitors. This sum is predicted to grow to USD45 billion in the next decade, by which time Generation Z is expected to be the airline industry’s largest customer base.

Driving loyalty

Sky High Economics identifies several modern drivers of airline loyalty in a digital world,
encompassing engaging inflight experiences from e-commerce to premium content,
personalisation before, during and after the flight, and making the flight a more significant
component of the wider customer journey.

Dr Alexander Grous (B. Ec, MBA, M.Com, MA, PhD.), department of media and
communications (LSE) and author of Sky High Economics, said: “The next decade presents
both a huge opportunity and challenge for the global aviation industry. The technology and
infrastructure are ready to meet the expectations of always-on travellers and it is up to airlines
to seize this opportunity now, or risk falling behind their peers – to the tune of USD33 billion
today, and USD45 billion by the end of the next decade.”

Philip Balaam, president of Inmarsat Aviation said: “Within the next two decades, Asia Pacific will be driving most of global air passenger traffic. In a region where internet connectivity is increasingly becoming commonplace, we anticipate passengers will expect their on-the-
ground habits and preferences to be replicated even when they are in the air.

“Enhancing loyalty while accessing new revenue streams”

Whilst securing airline customer loyalty may seem more challenging than ever before, airlines can stay relevant and remain a preferred choice over its competitors by adapting to the needs of the vastly changing demographic of passengers. Offering high-bandwidth Wi-Fi will be key
to satisfying the ‘always-on’ passengers of tomorrow.

He continued: “High-bandwidth Wi-Fi with consistent coverage is essential to meet the demands of data-hungry passengers – but adopting the technology is just the start. The real
opportunity exists in making inflight Wi-Fi an enabler for tailored passenger experiences,
enhancing loyalty while accessing new revenue streams.”