Air travel ‘lifeblood’ of new economy, says airline CEO

By: Yuji Vincent Gonzales - 9 years ago

“Air travel is the lifeblood of the modern economy.”

Thus said James Hogan, president and CEO of Etihad Airways, in his speech during the 2015 Brabazon Lecture at the Royal Aeronautical Society in London.

But Hogan said airlines must first embrace new competition in order to fully maximize the potential of the sector in driving the economy and its contribution to global trade.

Urging global players to set aside “entrenched interests,” Hogan said the industry is currently stuck with a regulatory system which “limits consolidation, competition, and consumer choice.”

“While the modern globalized economy has seen trade and tourism jump forward in leaps and bounds, the structure of our industry has shuffled forward only a few tiny steps,” Hogan said.

“This is an industry which cries out for new competition, across many different markets; but it is one in which smaller operators can only operate in niche environments,” he added.

But Hogan admitted that there are a lot of challenges that airlines must face before becoming a competitive global carrier.

“More than ever before, scale is the single defining factor behind success for a network carrier. Scale means a network which can compete against the networks of legacy carriers, built up over decades… That means this is an industry which requires a massive cost of entry to compete,” the CEO said.

Hogan said international carriers should learn from the British, being one of the first markets to “embrace true competition.” However, he also warned that big US carriers “were doing their best” supposedly to stifle new competition.

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“Currently, the US carriers are investing tens of millions of dollars to attempt to stifle competition, and we have seen similar moves by some of the larger European carriers. The victim here is the customer. The cost is innovation,” he said.

Highlighting the importance of new approaches, Hogan said it is through innovation that the aviation industry will flourish.

“Innovation creates new ways of getting through the obstacles of a regulated, shackled industry… This industry needs to encourage that innovation for the benefits it brings to customer choice and to real competition,” he added.