A short while ago I declined for personal reasons yet another invitation to discuss the year ahead in air travel on a TV program.

But there are problems with the prediction season that is such a media ritual at the start of each year even if studio or camera time is impracticable.  The format on broadcast media wants ‘it all’ in about a minute.

That’s one of the strong points of television and radio, in that it cuts through clutter.  But it also inhibits detailed discussion of something as difficult as air travel clairvoyancy.

Any year ahead prediction, whether its for this year, or next, is at risk of ambush by plagues, terrorism, volcanic ash, and the collapse of ponzinomics in societies where growth is essentially funded by growing debt faster than the capacity of governments, enterprises and consumers to secure the risk or service the repayments.

(If there is such a severe economic collapse the fate of airlines will be the last thing on the minds of most people, and our airports will fall silent as dust and bird droppings cover the squadrons of abandoned jets.)

The immediate future is also at risk of management failures, exemplified by that of London’s Heathrow Airport, which cut back on the snow clearing capacity to the point where a trivial fall crippled scheduling world-wide.

Or the discovery by Qantas management that believing in power by the hour engine deals in which the airline saves on the need to have to be bothered with the engineering, design and maintenance details means losing  control over brand quality, or at its highest, risking the lives of 469 people out of the blue.

Which brings us to a first prediction, which is that the concept of virtual airlines, in which just about everything is outsourced, even pilot training, is  going to come under serious review in the year ahead.

If this prediction is correct it comes with a consequence for the pressure to consolidate airlines, which is Prediction 2.

And this is that airlines will be driven more strongly toward physical than virtual consolidation.  An example of physical consolidation, and a rather successful one, is Air France KLM.  An example of virtual consolidation is that being undertaken by Virgin Blue with Etihad, and if approval is given, with Delta.

Make no mistake, the Virgin Blue strategy is very sound at the immediate consumer benefit level. But it doesn’t solve the inherent medium term issues of reducing operational costs in maintenance or flight standards than can be addressed by physical consolidation. And we have no reason to believe Virgin Blue is unaware of this for a moment.

Qantas is pursuing a novel, and not necessarily popular strategy toward physical consolidation through offshoring jets and jobs to a base in Singapore and the expansion of the trans border low fare franchising of Jetstar into Asia.

Prediction 3 is that this Qantas strategy, which completely guts the purpose of the Qantas Sale Act, will advance in 2011, and that unless Virgin Blue finds an answer it is in medium term peril.

Prediction 4 is that consumers will detest the Qantas strategy, thus giving Virgin Blue the time it needs to devise an effective medium term response.

Prediction 5 is that the inherent slowness of the pace of change, unpleasant change, in Qantas, will continue to not only shrink its customer base in favor of Virgin Blue, but the likes of Singapore Airlines, Cathay Pacific and Emirates, all of whom have made smarter product choices and sell competitive fares for what are often much faster one-stop flights to a wide range of destinations of growing importance.

Prediction 6 is that an ‘end-game’ strategy of consolidation between Qantas and Singapore Airlines will come more into focus and be, like any other large consolidation scenarios, of hypnotic fascination throughout 2011, however that is not to say it is going to happen this year or next, or for quite some time.

Prediction 7 is to be alert for the wild card entry of a new major investor into Virgin Blue (or Virgin Australia, or whatever) during the year.  And, for that matter, for as many years as one cares to look into the future.

Prediction 8 is that the protests of the disentitled will continue to rise in 2011.  Frequent corporate account flyers have no control over the impetus of their employers through their travel managers to drive down travel and entertainment costs with lowest-fare-of-the-day policies, which means to-hell-with-the-frills.

As a consequence, barring economic collapse, we will see a resurgence in business travel, but in increasingly uncomfortable or cheaper seats, with no respect for the wishes of those addicted to frequent fly points.

If it has its way Qantas will also ensure that the discomfort spreads to more costly seats with its return to a loathsome seven across format in a no legroom business class cabin in its A330s. Except that Virgin Blue will ruin that ploy with seriously better product options, and the race to offer premium excellence may well end the year in a exciting draw for a hand full of rich individual travellers while the rest of us get squeezed even harder.

Prediction 9 is that the penny will start to drop louder than ever over the inherent debasing of frequent flyer programs by carriers world wide into selling opportunities rather than reward programs.

Consequently , Prediction 10 is the high probability that a Woolworth’s customer who has deliberately spent (say) $ 75,000 on groceries and related petrol purchases in the Everyday Rewards scheme will, in front of the television cameras organised by an ill-fated PR unit, redeem a free flight to the Gold Coast, and wait in the check in queue surrounded by Aldi shoppers who bought seats on the same flight for $60 and spent $7,500 on groceries and their petrol wherever it was cheapest.

Prediction 11 is that the current management team at Boeing will be forced to resign over its chronic and inexcusable inability to bring to market in worthwhile form the 787 Dreamliner and 748 (or ultimate 747) models.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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