Asia’s aviation sector is experiencing a triumphant return after three challenging years of Covid-19, with record-breaking earnings at airlines like Singapore Airlines and Cathay Pacific. However, amidst the celebration, there is a pressing issue that airlines need to address: luggage.
As passengers start flying again, many have discovered that their frequent-flyer points have expired or their travel patterns have changed. Airlines must focus on retaining these returning passengers. Fortunately, there is a cost-effective solution emerging from two unrelated developments in the aviation industry.
In April 2020, passenger demand plummeted by 99% as governments shut their borders. To cut costs, airlines began parking their planes in Australian and Spanish deserts. Cathay Pacific, for example, had 44% of its passenger fleet on hiatus by the end of 2020. As a result, passenger capacity was significantly reduced, leading to an increase in aircraft utilization compared to pre-pandemic levels.
While passenger numbers declined, cargo demand rose, driven by online shopping for gadgets and pandemic supplies. This created a problem because approximately 50% of all air freight, including mail, usually travels in the belly of passenger aircraft. During the pandemic, this reliance on passenger flights for cargo transport became a weakness since many planes were grounded.
To adapt, airlines like Cathay Pacific converted passenger aircraft into hybrid freighters, known as “preighters.” By the end of 2021, Cathay Pacific had removed seats from seven Boeing Co. 777s. Freight revenues across the industry soared, with Singapore Airlines experiencing a doubling in cargo sales compared to fiscal 2019.
However, these trends are now changing. Falling shipping prices and an economic slowdown have made air freight less competitive, leading to lower freight rates. Surprisingly, instead of declining, passenger demand is increasing due to “revenge travel.” Singapore Airlines, Cathay Pacific, and China Airlines have all seen significant financial gains. Although many aircraft have been reintroduced, passenger capacity in Asia remains around 30% below pre-pandemic levels.
As more planes come online, airlines will not only have more seats available for passengers but also a significant increase in freight capacity. To address this situation, airlines can consider offering increased luggage allowances to passengers as a way to utilize empty cargo space. This can be used as a reward for loyalty, coupled with aggressive marketing campaigns to incentivize travelers to choose their airline.
Airlines understand the importance of loyalty, especially in a competitive and capacity-constrained market. Now is the time for them to leverage this asset by providing increased luggage allowances to passengers and ensuring a seamless travel experience as the world embarks on a renaissance of passenger travel.