Here’s Why The Online Travel Players Should Focus More On Their Air Ticketing Businesses
The year gone by has been especially good for the air traffic business with around half the world’s total population, that is, 3.7 billion people, traveling by air. The online travel leaders, Priceline and Expedia, have only around 1% and 5% of the total online travel market’s share of air ticket sales. The percentage is higher at 10% for China’s OTA leader, Ctrip. Along with the rise of low cost carriers, the demand for air travel will keep on growing and hence, it is high time that OTAs focus on this segment more in the future.
What Were The Trends Observed In Air Traffic Sales In 2016?
- According to International Civil Aviation Organization (ICAO), 3.7 billion people have traveled by the world’s airlines in 2016 reflecting a 6% y-o-y growth. However, the growth rate was a bit slower than 2015 (7.1% y-o-y growth).
- The key to this growth was the rise of the low cost carriers (LCC) who carried over 1 billion passengers, accounting for 28% of total air traffic passengers.
- The growth spread across regions were as follows: Middle East (11.2%), Asia (8%), Latin America (6.5%), Africa (5.7%), Europe (4.3%), and North America (3.5%). ICAO also reported that over 50% of international tourists traveled by airplanes.
- The growing presence of LCCs especially in the emerging nations was a big driver for the growth of air traffic passengers.
- North America led the way when it comes to domestic flights accounting for 43% of the total domestic flights. Asia Pacific followed with 40% mainly due to the growth of domestic travel in China and India.
- The growth in air traffic and the significant dampening of fuel prices helped in the growth of operating profits for the airlines, which ICAO estimates to be around $60 billion in 2016, $2 billion higher than that of 2015.
Where Do The OTA Leaders Stand Currently?
- According to our estimates, over 50% of global air tickets are sold online, and the number is expected to increase to over 60% by the end of our review period.
- Online travel agencies’ share of online airline bookings is around 50% of the total tickets sold. Though even market leaders such as Expedia and Priceline have only around 6% and 1% respectively of the total OTA airline bookings share, with the growth of air traffic, we can expect their focus on this segment to increase in the future.
Ctrip Is Gearing Up For A Bigger Air Ticketing Market Share
- Ctrip, China’s OTA leader, enjoys around 10% of online travel agencies’ air ticket market share. This is the highest among all the leading OTAs.
- Recently, Ctrip bought leading metasearch engine, Skyscanner, for $1.7 billion to further expand its share in the air ticketing market.
- Ctrip had also acquired a majority stake in Travelfusion, a U.K. based travel distribution system in 2015. Travelfusion operates from London and Shanghai and its client base mostly comprises of low-cost airlines. The company wanted to utilize the fact that low-cost airlines generally witness higher volumes of sales. Ctrip’s strategy was to gain a significant share of the international travel market through low-cost carriers, and a high volume of travel transactions.
- The Travelfusion and Skyscanner team are both based in the U.K. and the two teams will be working on the synergy to improve the customer experience and provide a greater array of services to both businesses and customers. Ctrip’s global reach in the airline booking market might significantly increase due to this synergy.
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Have more questions about Ctrip? See the links below.
- What Is Ctrip’s Revenue And EBITDA Breakdown?
- How Has Ctrip’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- Ctrip Q4 2015 Pre-Earnings Report
- What Drove Ctrip’s Revenue Growth And Led To Its EBITDA Decline Over The Last Five Years?
- Ctrip: Year 2015 In Review
- Ctrip Q1 2016 Earnings Preview
- Where Can Ctrip’s Growth Come From In The Next 5 Years?
- Which Two Segments Are The Biggest Contributors To Ctrip’s Growth?
- How Fast Is Ctrip’s Hotel Revenue Growing?
- How Can Ctrip’s Expansion In Geographies Like The U.S. Impact Its Share Price?
- How Did The Brexit Decision Impact Ctrip So Far?
- Ctrip Q2 2016 Earnings Preview
- Ctrip Continues Growing Though Its Bottom Line Remained Dampened Due To Investments
- What Drove Ctrip’s Packaged Tour Business In Q2 2016?
- Reasons Why We Upgraded Ctrip’s Stock Price By Almost 20%
- Why Did Ctrip Acquire SkyScanner?
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Ctrip
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