1. What are the Biggest Challenges and Opportunities Facing the Aviation Industry During the Next Year?

Consolidation could continue to be a central theme in 2013 as airlines plot a course to greater profitability. A merger between US Air and American Airlines could significantly reshape the domestic airline industry and have a ripple effect globally. In this scenario, other carriers may look to bulk up through partnerships or mergers to strengthen their competitiveness against other industry titans and better insulate themselves against volatile fuel prices, softening demand in some regions or other potentially turbulent market conditions.

2. What's the Current State of the Industry?

Global carriers are refocusing their attention on the growing Middle Eastern market. Activity picked up significantly this fall with Qatar Airways joining the American Airlines and British Airways Oneworld alliance, and Air France-KLM partnering with Etihad Airways from the United Arab Emirates. L.E.K. believes that the uptick in partnership activity between Western and Gulf carriers foreshadows even more activity in the coming years. Western and Gulf partnerships that can demonstrate the advantages of their combined service in 2013 could find themselves leading the race to grab share in this affluent region.

3. What Burning Issues are Senior Executives Facing?

The stakes have never been higher for personalizing the travel experience. Many U.S. carriers are working to catch up to their international competitors by continuing to invest in infrastructure that will lay a foundation to truly evolve their offerings in the years ahead. Merchandising will continue to lift carriers’ revenues and underpin their financials, and airlines that don't get their ancillary revenue programs on target are vulnerable to losing sales and customers.

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