Ryanair Pest: European Airline Competition

Politically, there are operating restrictions, (timing, rotations and slots), which airlines have to work within. The benefits in joining an alliance, is that it makes otherwise unreachable routes, a reality. This also ties with slots, as each national carrier in their home cities, has the monopoly. Another political benefit is the joint route agreements, which all members of an alliance can utilise.

Economic

Capacity in Europe exceeds demand, which leads to rate wars, equalling lower yields for companies. Economically, alliances lead to a greater control on capacity, therefore reducing competition and increasing yields. Alliances also reduce the near term possibilities of airport expansion. By code sharing airlines are able to not only split costs but to offer services and enter markets, they might not be able to do on their own. This leads to less aircraft at airports, therefore less space is required, and is another way in gaining access to prime airports, which can expand further. Another factor is the cost of safety; alliances can share these additional costs on joint services. Globalisation has played part by making it easier for airlines across the world to join forces. Social These are strong from an employer staffing perspective. Airlines in alliance/code-share can reduce costs by utilising only one airline's staff. September 11th 2001, contributed to a major downturn in the airline industry, accelerated, and accentuated the current trend. It negatively affected consumer confidence and passenger numbers subsequently reduced. Passengers resorted to land substitutes or in business teleconferencing.

These social and technological factors are still very much affecting airline travel.

Other recent factors affecting the industry is heightened security, leading to increased costs, slower turnaround times and therefore lower utilisation of aircraft, and Health and Safety issues surrounding Deep Vein Thrombosis (DVT), which may force airlines to increase their current seat pitch, thus reducing the number of passengers that can be carried. Rising oil prices and airline rate wars have led to huge losses sustained by all airlines. Most airlines however do have hedging policies on fuel, which can limit these losses. In February 2001, most airlines introduced a fuel surcharge to both passengers and cargo tariffs. This surcharge lasted for ten months, until airlines were forced to withdraw, due to falling fuel prices, although this has now been reintroduced. Technological

Technology in this industry is fast moving and very expensive. Alliances, give the opportunity for joint investment ventures, such as shared check-in systems.