Who said travel tycoons don't need startups?
Although establishing an airline is most probably not what you are aiming for as a travel entrepreneur, the aviation industry has plenty of room for innovative solutions that can change the rules of the game.
The aviation industry bar in the region is rising as it finds itself competing on an international level - Turkish Airlines, Emirates, Etihad and Qatar Airways rank amongst the world’s top 30 (as of 2012), with Emirates at number four.
According to a 2014 Air Transport Action Group report, air transport supports two million jobs and $116 billion in GDP in the Middle East. If current trends persist, each of the four airlines is expected to double its fleet size by 2020.
Talking to Wamda, Bernard Dunn, president of Boeing MENA and Turkey, said “the Middle East will require 60,000 pilots and 66,000 technicians in the next 20 years”. All to accommodate an extra 237 million passengers flying to, from and within the region.
Why should travel corporations care about startups?
The aviation industry’s growth in the region is anticipated to be huge, currently at 14.2 percent of international traffic, they surpass North America who are at 13.4 percent.
A Wamda Research Lab report shows that only 25 percent of the aviation corporations interviewed are anticipating technological disruption in the next three to five years. However, the majority of those interviewed are looking forward to partnering with startups nonetheless.
Although disrupting airlines as a whole is far fetched, almost all segments of the industry including booking, crash alerts and the nitty gritty details of the on-board passenger experience are continuously bombarded with new technology. In turn this raises demand for ancillary services such as mobile travel, in-destination products and services, tours and activities, and travel advertising.
Matt Zito, founder of the US based Travel Startups Incubator, says that travel corporations are bridging their way to startups “because they’re seeing that if they don’t open up, become a little bit more transparent and take the risk, they are going to get beat by their competition and/or another company could take market share from them”.
James Hogan the CEO of Etihad Airways realises the threat: “The world isn’t changing - it’s already changed,” he said in a statement. “Partnership and innovation are critical in a new globalised economy and success in an increasingly digital future depends on an ability to implement effective technologies and rethink strategy, culture and talent”.
From a startup point of view, Geet Bhalla, cofounder and CEO of Emirati online travel agency Holiday ME, cherishes his partnerships with airlines as he considers them to be mutually beneficial.
During an interview with him, Bhalla explained that his company acts as the airline’s marketing arm by generating more passenger traffic without falling into rate parity, while airlines offer him benefits and a value product that he moves on to his customers.
“There is a host of airlines in this market, predominantly the low cost carriers and a lot of full service carriers who need allies and partners in terms of online travel agents who can... help them fill seats,” he said.
On the other hand, Hani Dahlan CEO and founder of online travel portal Travel Sheikh has a grimmer view. Travel Sheikh is a Jordanian startup that, due to lack of funding, recently moved to Dubai. “We had many partnerships with Airlines,” Dahlan told Wamda, “and this is something I don’t recommend for any new comers to do”.
Dahlan believes that airlines perceive online travel agents as competitors rather than potential partners. “Airlines are trying by all means to eliminate online travel agents. They can partner with you when they are stuck, and in certain areas only,” he told Wamda.
The tangent between aviation and entrepreneurship is not strictly limited to travel corporation and travel startup players; there are other dynamics that include a spectrum of parties.
1. Travel corporation and travel startup
In 2015 Royal Jordanian partnered with Oasis500 to launch an innovation lab for travel startups. However the project seems to be lagging and is still not fully implemented.
2. Travel corporation and non travel startup
In April of this year, Boeing invested in a collaboration with Injaz al-Arab. Boeing has also worked with Planet Finance and Silatech to provide micro loans to Iraqi and Emirati startups.
Although such support is not necessarily travel oriented, it still serves the interest of the corporation. “The private sector and small to medium enterprises are key to a growing economy and aviation is highly dependent on having a healthy economy,” explained Dunn.
Simultaneously Boeing is also working on attracting travel startups through its Startup Boeing team which assists entrepreneurs in launching their own airlines.
3. Non-travel entity and travel startup
This month USAID’S Building Economic Sustainability Through Tourism (BEST) project gave a grant to the Jordanian travel startup TravoTech.
Examples of collaboration
Collaboration between travel corporations and startups could range from capacity building and CSR programs to more solid strategic investments. Examples include Jet Blue’s venture arm, Turkish Airline’s Invest on Board program, ANA’s partnership with Ashoka, and Lufthansa’s multi stages initiative Runway to Success.
Interesting aviation events that take place in the region include Abu Dhabi’s aviation and aerospace week, and the Arabian Travel Market.