Research Overview

The privatization trend in aviation has picked up pace globally during the last 2 decades. Historically, a majority of airlines and airports were part of the public sector, and focus remained mostly on providing connectivity and affordability. However, the travel experience was often less prioritized. Changing market dynamics have made the passenger experience much more central to the travel industry, and service providers can no longer ignore this shift.

Airports that traditionally had a monopoly on travel are finding it difficult to maintain their profitability with the entrance of the low-cost carrier model. Airlines operating on the LCC model operate on a thin margin, which forces them to optimize operational costs as much as they can to maintain their margins through high volumes of travel. But optimizing operational costs alone is not sufficient to ensure margins or to fight the competition, which is why both airports and airlines are finding innovative ways to ensure profitability.

The personalization of services and focus on travel experience are the 2 major aspects where airlines and airports can generate the ancillary revenue streams that form a considerable percentage of overall revenue. Privatization plays a significant role in achieving operational efficiencies and profit margins without compromising safety requirements and conflicts of interest. Airports, airlines, and all industry stakeholders must analyze their desired actions and results to fully understand the structural changes required in privatization.