Interview: Sami Fahad Al Rushaid
What are the market trends on strategic alliances?
SAMI FAHAD AL RUSHAID: Most airlines are open to opportunities that strengthen their bottom line; this may be more acute in times when the airline and aviation industry as a whole feels that cooperation, rather than direct competition, serves both short and long-term goals. Many airlines are looking at their alliances, while exploring the possibility of expanding their portfolio of agreements with other carriers in various world regions. Codeshares are traditionally strategic in terms of long-term, commercial business plans, and Kuwait Airways is currently in negotiation with two subcontinental airlines, in addition to seeking agreements within both Europe and the US. Open skies agreements have two, often competing, elements that are conducive to their success; the principle of an idea and its practical application. That is to say, open skies only work, in practice, if they can be aligned with airport infrastructures that can support it or if there are mutually agreeable time slots available. Also, open skies agreements are not always reciprocal for both parties, so it can be a long process to come to an arrangement that works practically, commercially and operationally. In principle, few would argue against open skies, but the application and agreement of terms is where most energy is spent.
How are airlines meeting climate change standards?
AL RUSHAID: I think it’s fair to say that the EU’s Emissions Trading Scheme (ETS), or the practice of purchasing carbon credits, has come to be understood as both inherently flawed and imbalanced for certain airlines, whether they be domestic European airlines or smaller non-European airlines with older aircraft that face more punitive costs, making them less competitive. Therefore, the Climate Change Agreement of the International Civil Aviation Organisation (ICAO) stepped in; first with recommendations and now a new agreement. This is a step in the right direction. It is important to take a fair approach to offsetting the industry’s carbon footprint, and there should be wide support for this across the industry. It’s possible for many airlines to avoid passing on any related ETS costs to passengers; however the impact of the new ICAO agreement remains to be seen.
How do carriers add value to revenue streams?
AL RUSHAID: In many ways the business models surrounding ancillary revenue streams and services are what separate low-cost carriers (LCCs) from legacy carriers. To this end, the issue of added value should really be addressed within the two distinct business models rather than compared directly. The onus is very much on the legacy carriers to demonstrate added value through pre and on-board experiences, aircraft products and services on offer. In this area a legacy airline distinguishes its relevance and justifiable costs over the acceptably lower expectations of the LCC passenger. Of course, in a highly competitive environment that includes LCCs, it is down to the legacy carriers to develop unique offerings while establishing loyalty to the brand. This can be done through investment in the aircraft themselves as well as investment in the customer experience, from the check-in process to time spent on the ground. For its part, Kuwait Airways, in the immediate term, will prioritise adding value and efficiency to existing routes, with emphasis placed on improving customer service and the overall passenger experience. Over the next five years, however, Kuwait Airways will engage in an aggressive aircraft acquisition programme that will see 35 new aircraft join the fleet: 25 from Airbus and 10 from Boeing. Additionally, in May 2017 Kuwait Airways shifted to a new booking, ticketing and reservations system – the Amadeus Altea Suite – with the departure control systems set to be introduced from June. Developments in IT and business processing systems are playing a key role in enhancing services that companies can offer, and will allow for greater passenger customisation and create new ancillary revenue streams that will add value for passengers.
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