February 14, 2017 | Written by: Steve Sedowski
Categorized: Airlines | Airports | Cognitive Computing
Global economic conditions, foreign exchange rate fluctuations, extensive government fees and taxes, environmental regulations, jet fuel prices, fixed asset utilization, intense competition, weather disruptions, mechanical difficulties, IT infrastructure obsolescence, security. These are some of the challenges faced by the adventurous and lionhearted airline industry participants. Those daring to venture into this energetic and ultra-important industry do indeed face many demands. However, will more than one of these demands ebb in the near future and become less taxing? If so, what does that mean for the airlines?
Less Turbulence Ahead?
It is well known that lower jet fuel prices have helped turn some air carriers’ bottom line from red to black. Now, it appears that other beneficial influencers are taking formation along the horizon that may deliver further catalysts to yield more financial success to air carriers. These influencers are materializing via the new U.S. Presidential Administration.
Reform Itinerary Considered
During the second week in February, President Donald Trump met with representatives of the airline industry in the State Dining Room of the White House and commented on how the U.S. airlines transport millions of people a day despite poorly equipped airports and a “…regulatory morass that’s a disaster.”
The President then asked the guests in attendance, “Give me suggestions that we can make [to make] your life easier and that you can employ a lot more people.” Regulatory reform, tax reform, and infrastructure investments were the recommendations.
Reform Cleared For Takeoff
The New Presidential Administration has has already targeted regulations, more than hinted upon implementing tax reform, and discussed overhauling the aviation infrastructure. The effects of such efforts will likely improve travel experiences and lower the financial burden not only for businesses that are based in the United States, but also for U.S. citizens, clearing the way for an economic resurgence.
Regulations Loosing Altitude
Regulations seem ubiquitous across all industries and the airlines are definitely well accustomed to significant ones. Federal, state, local, and foreign regulations are placed across many areas of an airline’s business, from price quotes to data security to underground storage tanks and numerous more among these. However, on January 30th, President Donald Trump signed an executive order – Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs – that according to Section 2. Regulatory Cap for Fiscal Year 2017:
“Unless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”
Adding to this is the fact that the President stated his administration wants to help the airlines realize certain goals “…by rolling back burdensome regulations.”
Thus, it appears that the answer to the question of, “Will conditions turn more favorable and allow Airlines to soar?” is – more than likely, yes, but we will have to wait and see.
Will Taxes Be Attacked While Improving Aviation Infrastructure?
President Trump has not been shy about criticizing the oppressive tax system, and in the same meeting mentioned above, within a few weeks it appears that a propitious announcement will be made regarding taxes and aviation infrastructure.
Also, the subject of fees imposed on travelers was brought forth during this meeting. An airline industry participant suggested raising the current $4.50 passenger-facility charge that is placed on every ticket. The President responded, “The problem is, I don’t like raising fees or taxes — I’ll be honest.” Acknowledging the fact that the U.S. Government is spending trillions of dollars in other countries when this money can be spent within America, the President stated, “The last thing we have to do is raise the fee.”
These statements portend to clearing skies for airlines, allowing them to take off for a better business environment.
What Will Airlines Do?
If regulation and tax reform are given clearance for take-off in the United States economic environment, and aviation infrastructure will be improved, then airines’ investment payload are likely to increase. This is due to the simple fact that less taxes means more money in one’s bank account, and with the President’s tax plan, both U.S. businesses and citizens will benefit. Thus, it is safe to say that if regulations and tax reform occur, spending will increase throughout the economy and traveling will feel the effects of this spending surge, increasing the demand for air travel. Prudent airlines will invest in essential business areas, areas that need modernization and areas that have the potential to produce the most profit including ones that improve experiences for both customers and employees.
In all likelihood, positive change is approaching fast in the airline industry. Thus, air carriers need to know not only where to invest but how. IBM has extensive experience with helping airlines do just that and succeed.
Airline Asset Management and Predictive Maintenance can help an airline avoid delays and cancellations while at the same time optimize maintenance labor hours and parts inventory.
IBM’s MultiNetwork Services can manage an airline’s WAN traffic that improves network capacity, reduces costs, and viewed via an intuitive dashboard.
IBM’s leadership in Cognitive computing can help an airline with proven solutions to increase revenue and manage capacity while at the same time improving a customer’s experience.
IBM’s leadership in the Enterprise Blockchain space can help an airline transform situations that involve multi-parties writing to their own, undistributed database, solve data synchronization issues, and build trust among various parties.
These are only a few of the possible airline solutions that IBM offers. Many more airline solutions exist within IBM’s extensive resources as well as airline solutions that can be designed and built by IBM for specific use cases.
IBM prides itself in the company’s ability to continually innovate and share its leading-edge knowledge with those who it partners with and serves.
Stay tuned for more innovative solutions from IBM that will traverse the Travel & Transportation landscape this year and beyond.