30 May 2010

Top 10 airlines almost all have relatively small home markets

When I saw the list of the top 10 airlines in the world announced by Skytrax as part of its annual World Airline Awards on 20 May 2010, I was immediately struck by the fact that I had recently compiled a short list of countries that contains virtually all of these airlines' home countries, the exception being Korea. This was my research last year into the ratio between airline industry RPKs and home market GDP (previous post).

Here is the list of the 2010 top 10 airlines with in brackets the ranking of their home market in terms of that ratio:

1. Asiana Airlines (19)
2. Singapore Airlines (4)
3. Qatar Airways (3)
4. Cathay Pacific (6)
5. Air New Zealand (7)
6. Etihad Airways (1)
7. Qantas Airways (8)
8. Emirates (1)
9. Thai Airways (13)
10. Malaysia Airlines (9)

There is even a rough correlation in some of the rankings.

A further correlation that would be interesting to examine would be whether there is a relationship between perceived product quality and profitability but to get a complete picture we run into the problem that Qatar Airways, for example, does not publish its financial position.

I note that all of these top 10 airlines are long-haul carriers and it has yet to be conclusively proved that a "no frills" approach to such services can succeed so the 10 airlines have to position themselves at the quality end of the market. Short-haul leisure travellers are more likely to be focussed on price rather than product quality.

A simple conclusion would be that to succeed in the international airline business outside of a large open aviation market and attract so much sixth freedom passenger traffic (the exercise of fifth freedom rights is relatively rare) an airline has to offer a high-quality product.

Might the flip side of that be that airlines with larger home market, protected by the lack of domestic competition because of the rareness of cabotage rights exchanges, tend to take customers in their home markets a little too much for granted? Or could it partly be explained by the fact that for other lower quality ranked airlines the ratio of short- to long-haul services is higher? Food for thought and perhaps further analysis.

1 comment:

Paul Walker said...


Doesn't all this tell us that the "local market" for airline these days is the world? The technology of airlines I would guess has returns to scale with high fixed costs and low marginal costs and thus expanding to the world market makes sense.