Airline is a front door to one of the most complex ecosystems in modern business. Behind every boarding pass lies an intricate choreography of manufacturers, air traffic controllers, alliances, regulators, airports, technologies, and partnerships converging to move the worlds and make global aviation possible.
The fact that it is so complicated also stems from the fact
that the airlines global failure rate is a staggering 87.5%, with over 21000
airlines that existed since 1900 and a little over 3000 airlines operate
globally today.
Complexity is fascinating not because it resists understanding,
but because each layer unravelled reveals another, equally intricate and intriguing
beneath it.
So in the quest of unravelling some of the complexities, I
am intending to start a series of posts covering Airline ecosystem.
Airlines Core functions include:
- Network
& Schedule Planning: Is the process by which airlines decide where,
when, and how often to fly. It involves selecting routes, matching
aircraft types, balancing short-haul, long-haul, domestic, and
international demand, and coordinating with slots, bilateral agreements,
and alliances. It is a strategic blend of market demand forecasts,
competitor analysis, fleet availability, and regulatory constraints essentially
the blueprint that turns global demand for travel into a viable airline
timetable.
- Revenue
Management & Pricing: Is how airlines decide what each seat should
cost, and when. Moving away from fixed prices to dynamic pricing—adjusting
fares across fare buckets based on demand forecasts, seasonality,
competition, and booking patterns. The goal is to maximize yield and RASM
(Revenue per Available Seat Mile) by selling the right seat, at the right
time, to the right customer—while also layering in ancillary revenues from
bags, seats, meals, and upgrades.
- Sales
& Distribution: Is how airlines bring their product—the seat—to
market. Beyond their own websites and apps – Direct Flight, airlines rely
on Global Distribution Systems (GDS), Online Travel Agencies (OTAs), Travel
Management Companies (TMCs), and emerging standards like NDC (New
Distribution Capability) to reach customers. It’s the ecosystem that
determines where and how tickets are sold, how ancillaries are bundled,
and how airlines compete for visibility in a crowded digital shelf.
- Airport
Operations: Cover everything that happens on the ground to get flights
out safely and on time. This includes check-in, security, baggage
handling, gate management, boarding, and aircraft turnaround. It requires
close coordination between airlines, airports, ground handlers, and
regulators—balancing efficiency, safety, and customer experience in one of
the most time-critical parts of the airline value chain.
- Flight
Operations & Crew Scheduling: Ensure that every flight has the
right aircraft, pilots, and cabin crew in place—while complying with
strict duty time and rest regulations. It spans flight planning, dispatch,
crew pairings, rostering, and operational control, coordinating
minute-by-minute with airports and air traffic control. It’s the nerve
center of the airline, where safety, on-time performance, and regulatory
compliance come together to keep the system moving.
- Engineering
& Maintenance (MRO): (Maintenance, Repair & Overhaul)—Is what
keeps aircraft airworthy, safe, and reliable. It spans everything from
routine line checks before flights to heavy C- and D-checks, engine
overhauls, and compliance with airworthiness directives (ADs). MRO is both
highly regulated and capital-intensive, requiring precision, planning, and
predictive data to minimize costly Aircraft on Ground (AOG) events while
ensuring the highest safety standards.
- Cargo
& Logistics: Is the backbone of global trade within aviation,
moving everything from e-commerce parcels to pharmaceuticals, perishables,
and heavy machinery. Airlines carry freight in dedicated freighter
aircraft as well as in the belly cargo holds of passenger planes. This
ecosystem involves freight forwarders, integrators (FedEx, UPS, DHL), air
waybills, unit load devices (ULDs), and cold chain solutions. Efficient
cargo operations balance speed, cost, and compliance with strict dangerous
goods and security regulations—making it a critical revenue stream
alongside passenger travel.
- Customer
& Loyalty: Functions focus on shaping the travel experience and
building long-term relationships. Beyond service touchpoints like
check-in, boarding, and in-flight care, airlines use Frequent Flyer
Programs (FFPs) to reward and retain passengers. These programs—often
billion-dollar businesses in their own right—create value through tier
status (Silver, Gold, Platinum), mileage accrual, redemption partnerships
with hotels, car rentals, and banks, and exclusive perks like lounges and
upgrades. Loyalty is not just about rewarding miles flown—it is about
anchoring customers in an ecosystem that keeps them coming back.
- Finance
& Settlement: Ensures that the billions flowing through airline
systems are accurately tracked, reconciled, and reported. This includes revenue
accounting, settlement of interline and codeshare agreements, processing
through IATA’s (International Air Transport Association) BSP (Billing
& Settlement Plan) or ARC (Airline Reporting Corporation), and
handling special prorate agreements (SPAs) between partner airlines. It
also manages exposure to currency fluctuations, fuel hedging, and payment
systems. In short, it’s the financial backbone that turns every booking,
ancillary, and cargo shipment into recognized revenue and cash flow.
As Richard Branson once said: “If you want to be a
millionaire, start with a billion dollars and launch an airline.” The
economics are brutal, but the scale of opportunity is enormous.
Airlines may look simple from the outside, but every journey
we take is powered by thousands of interconnected decisions, partners, and
systems working in sync. And yet, this is just the surface. In the coming
posts, I will try and peel further layers—from strategy and vision, to capability
models and KPIs, to the innovation themes reshaping how airlines will fly into
the future.
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