Full-Service Carrier Market

Market Overview

The global full-service carrier market size was valued at USD 215.04 billion in 2022. It is estimated to reach USD 335.03 billion by 2031, growing at a CAGR of 5.05% during the forecast period (2023–2031). In recent years, there has been a surge in air passenger traffic, mainly due to a surge in per capita income, and it is expected to reach pre-pandemic levels soon, thereby boosting the global market. The growth in business travelers who demand comfort and luxury while traveling is also augmenting the expansion of the global market. Moreover, the airlines operating in this market are establishing new travel routes to cater to the growing air passenger traffic, creating market growth opportunities.

A full-service carrier (FSC), also known as a legacy airline or full-service airline, is a conventional air carrier that provides ancillary services at no additional cost to the passenger, in contrast to low-cost carriers (LCCs), which charge extra for all additional services. FSCs typically provide services such as onboard catering, baggage allowance, in-flight entertainment, seat assignment, and other comforts (blankets, travel kits, etc.), depending upon the airline and duration of the flight.

Most FSCs provide a range of benefits, including access to airport premium lounges, connecting flights, multi-class service, and membership in loyalty programs. Additional distinctions between FSCs and LCCs encompass the utilization of primary airports rather than secondary ones, a more intricate process for reserving and purchasing tickets, a more diversified distribution network comprising resellers, and more. With a focus on customer comfort and convenience, these airlines strive to provide a premium travel experience; however, passengers may be required to pay a higher fare than low-cost airlines.

Market Dynamics

Global Full-Service Carrier Market Drivers

Rising Air Passenger Traffic

The airline industry has observed a significant increase in air passenger traffic due to rising per capita income, growing urbanization, and a decrease in overall air travel costs. For instance, in 2021, air passenger traffic grew gradually compared to 2020, mainly due to the robust COVID-19 vaccine programs in several regions, which helped the governments ease air travel regulations. As per the International Air Transport Association (IATA), passenger demand (revenue passenger kilometers or RPKs) fell by 58.4% in 2021 compared to 2019. This decline represented an improvement compared to 2020 when full-year RPKs were down by 65.8% versus 2019.

In addition, compared to July 2022, total traffic in July 2023 increased by 26.2%, as measured in revenue passenger kilometers or RPKs. Traffic has returned to pre-COVID levels by 95.6% on a global scale. Passenger demand is expected to reach pre-COVID-19 levels by 2024 in several major aviation markets worldwide. Thus, the surge in air passenger traffic is expected to drive the market over the forecast period.

Growth in Business Travel

The tourism industry's business or corporate travel sector caters to individuals traveling for professional or occupational reasons and the associated tourism services. The meetings industry, which includes business events, conferences, congresses, trade fairs, and exhibitions, is also encompassed within this sector. In 2021, the World Travel and Tourism Council (WTTC) reported that business travel constituted 20 percent of worldwide tourism expenditure. In the aforementioned year, an estimation indicated that the global expenditure of business travelers exceeded 740 billion U.S. dollars.

Notably, Chinese tourists emerged as the foremost contributors to this expenditure, occupying the top position in business travel spending. Business travelers require comfort, flexibility, and amenities like in-flight entertainment, premium cabins, and lounges frequently booked from full-service carriers. This is expected to boost the global market.

Global Full-Service Carrier Market Restraint

Intense Competition from Low-cost Carrier (LCC)

Intense competition from low-cost carriers (LCCs) and regional airlines is encountered in the market. Low-cost carrier (LCC) airlines frequently provide tickets at cheaper rates, thereby compelling full-service carriers to contend on price and potentially eroding their profit margins. According to Statista, the market share of low-cost carriers in the global air travel industry experienced a twofold increase over the past decade. Specifically, in 2020, low-cost airlines represented 35 percent of the total seat capacity available worldwide. Hence, the dramatic increase in the share of low-cost carriers will hinder the full-service carrier market growth.

Global Full-Service Carrier Market Opportunities

Establishment of New Route Networks

The augmentation of route networks and the capacity to cater to diverse destinations can be a significant catalyst for full-service carriers. The ability to establish a worldwide presence and provide convenient connectivity has the potential to attract a broad range of customers. For instance, in December 2022, Vistara, a prominent full-service airline in India, commenced operating non-stop flights connecting the cities of Pune and Singapore. As per the statement provided by the company based in Gurugram, the airline intends to offer flights on this specific route four times a week, utilizing its A321neo aircraft.

In response to adding a third Boeing 787-9 aircraft, Vistara also augmented the daily frequencies to Frankfurt and Paris from Delhi in November 2022. The airline has announced plans to conduct six flights per week on the Delhi-Frankfurt route, with an increase in frequency to five times per week on the Delhi-Paris route. Therefore, establishing new international routes is expected to create opportunities for the global full-service carrier market.

Regional Analysis

Based on region, the global full-service carrier market is bifurcated into North America, Europe, Asia Pacific, Latin America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global market shareholder and is expected to expand substantially during the forecast period. The air traffic in the North American region is continuously surging. For instance, IATA reported that although North American airlines' full-year passenger traffic decreased by 65.6% compared to 2019, the region still held the world's largest proportion of passenger traffic (RPK), accounting for approximately 32.6% of global RPKs. Similarly, according to the US Bureau of Transportation Statistics, the airlines in the U.S. carried 674 million passengers in 2021, which increased by 82.5% compared to 2020 (369 million passengers). Therefore, the massive air passenger traffic will drive the market.

Additionally, a full-service carrier provides a variety of amenities and services to accommodate a broad spectrum of passengers. A solid infrastructure is essential for an airport to deliver a smooth and effective experience. Therefore, airports are gearing up with expansions and infrastructure investments to better position themselves to tackle the projected increase in demand. As a result, government investments were also witnessed in the region. For instance, the government of Canada announced support packages for investment in upgrading the infrastructure at Toronto Pearson International Airport in March 2022, with new funding for critical infrastructure projects. As part of this, the airport is expected to receive more than CAD 142 million from Transport Canada's Airport Critical Infrastructure Program. Such expansion projects are estimated to boost the regional market growth.

In the Asia-Pacific region, air travel has expanded dramatically due to an increase in airlines and passengers. For instance, according to data issued by the Directorate General of Civil Aviation, domestic air passengers in India significantly increased by 46.5% year-on-year in September 2022, reaching 103.55 lakh passengers. This figure represents a notable surge compared to the 70.66 lakh passengers recorded during the same period in the previous year. According to the civil aviation regulator, the number of passengers transported by domestic airlines increased from 531.11 lakh in the corresponding period of the previous year to 874.24 lakh during January-September 2022, indicating a significant yearly growth rate of 64.61%. This is expected to augment market expansion.

Furthermore, the initiatives taken by key regional players are strengthening their market position in the international market. For instance, in March 2023, Vistara, a full-service airline, commenced operations between Dammam and Mumbai, Saudi Arabia, offering a daily non-stop service. This development further broadens the airline's international reach in the Gulf region. Vinod Kannan, CEO of Vistara, characterizes Dammam as a significant administrative center in Saudi Arabia and the domicile of a substantial Indian diaspora. He asserts that the airline's decision to incorporate Dammam into its expanding global network is consistent with its objective of fortifying its influence in the Middle East. Such expansion initiatives are driving the market expansion.

Europe is among the most famous tourist destinations in the world, which is boosting the global market. It is anticipated that the presence of major airlines such as Virgin Atlantic, British Airways, and Lufthansa, which are expanding global connectivity by introducing new destinations, will result in market expansion. British Airways announced an additional 13 new routes in 2021, of which 12 are from London and one from Germany. Such new routes will encourage airlines to enhance their services, driving the market.

Segmental Analysis

The global full-service carrier market is segmented by services and applications.

Based on services, the global full-service carrier market is divided into in-flight entertainment, checked baggage, meals, beverages, comforts, and others. 

The term "in-flight entertainment" (IFE) pertains to the range of entertainment that is accessible to passengers of an aircraft while they are in flight. Passengers were introduced to the initial personal audio device in 1985, followed by the introduction of noise-canceling headphones in 1989. Demand for improved IFE was a significant determinant in the design of aircraft interiors throughout the 1990s. Before that time, passengers were limited to viewing a headphone socket-equipped airplane displaying a film on a screen located at the front of the cabin. Currently, the majority of aircraft are equipped with private IFE TV displays. System safety, cost-effectiveness, software dependability, hardware upkeep, and user compatibility are all design considerations for IFE. Airlines typically use content service providers to oversee their in-flight entertainment.

Based on application, the global market is segmented into domestic and international aviation.

International full-service carriers consist of numerous airlines, including Emirates, Lufthansa, British Airways, and Singapore Airlines. These airlines accommodate an array of customers, including business class passengers desiring premium amenities and economy class passengers desiring a more comfortable and all-encompassing air journey. International aviation promotes economic expansion by facilitating the cross-border transportation of people and products. Moreover, international aviation is an indispensable component of the worldwide business environment. The capacity for rapid travel facilitates international business expansion and investment. These factors will stimulate international aviation expansion, thereby contributing to the market's growth over the forecast period.

Recent Developments

• August 2023- Vistara, a joint venture between the Tata Group and Singapore Airlines and the country's full-service airline, announced the addition of a Maldives service to its international network.

• September 2023- The Tata Group's initiatives to consolidate Air India and Vistara into a single full-service carrier advance received recent endorsements from the Competition Commission of India and continued Air India's fleet modernization and aircrew expansion.