Strategic Alliances in Aviation Industry: An Assessment of perception of business travellers and benefits of international network development as derived by airlines operators Proposal Summary The proposed study is aimed at identifying the reasons and success factor of increasing alliances being witnessed in airlines sector. Strategic alliances have proven to be successful in other sectors like manufacturing and automobiles but the effectiveness of these alliances in aviation sector are a less researched area. The study will discuss the peculiarities of the sector and reasons that make alliances possible for development of an international network. The results will provide detailed information about the impact of strategic alliances on performance of companies and passengers and the level of satisfaction derived from the increased services after alliance. The secondary data will be used to analyse the profitability of airlines after entering into some kind of strategic alliance. We will focus on two major alliance in aviation sector namely Star Alliance and One World to reach the answers of research questions. (overall a good proposal where we are experiencing various alliances such as Etihad with Darwin Airline and Air Serbia ; Literature Review Since airlines have historically shown poor performance, it has been suggested that airline business is not cyclical business but bad business (Das, 2011). Indeed, the combined net profit margins of United States airlines, for instance, have typically been only about half of the Standard and Poor’s 500 list of industrial, utility and transportation companies’ net profit margins (ibid.). For several years the airline industry has been very turbulent and has been through financial... ... middle of paper ... ... 54-58 Kleyman, B. (2010), Managing Strategic Airline Alliances, Ashgate Publishing Latrou, K. and Oretti, M. (2007), The Airline Choices for the Future: From Alliances to Mergers, Ashgate Publishing Oum, T. H. and Park, J. H. (1997), Airline alliances: current status, policy issues and future directions, Journal of Air Transport Management, 3 (3), 133-144 Oum, T. (2000), Globalization and Strategic Alliances: The Case of Air Transport Management, Pergamon Press Rhoades, Dawna L. & Lush, Heather (1997), A typology of strategic alliances in the airline industry: Propositions for stability and duration, Journal of Air Transport Management, Elsevier, vol. 3(3), pages 109-114. Tiernan, S and Rhodes, D. (2008), Airline alliances service quality performance- Analysis of US and EU member airlines, Journal of Air Transport Management, (14) 2, pp. 99-102
It has stayed relevant to the market through its propelled philosophy of relationships to generate profits in the business. Since its establishment in Monroe, Louisiana the once tiny airline has stretched to greater heights serving in 6 continents. It has also established a distinguishable name among its competitors with a reputation of leading customer services. However, even as an established venture, the company needs to maximize its profits in order to stay in business and expand in to new territories beyond its conquered boundaries. A strategic analysis was carried out by our team to establish the company’s current situation. A SWOT analysis was performed to come up with three referenced, strategic alternatives. This alternatives are meant to act as a strategic guidance to the company in order to enhance growth. The strategic recommendation provided will improve and enable the business to cope with the competitors while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the
Retrieved June 17, 2015, from http://money.cnn.com/infographic/news/companies/airline-merger/ Lawrence, H. (2004).
... amid nations (Gerber 2002, p. 29). Although there has been a major decrease of barriers to trade liberalisation concerning flight amenities in the last century, there are imperative uncontrollable external factors a business must assess and weigh before entering international borders and becoming a prosperous globally identified firm (Ramamurti & Sarathy 1997). Qantas, a highly esteemed patriotic and iconic Australian brand has demonstrated accomplishment intercontinentally. The ultimate success of their business, in order to sustain competitiveness in their global market, will rely heavily on their continuous assessment of combined political and legal reforms, economic dynamics, sociocultural influences, technological modifications and environmental concerns and their interlocking marketing strategies to gain the most beneficial opportunities that come their way.
333-355. Hocking and Waud 1992, Oligopoly and Market Concentration' in Microeconomics 2nd Edition, Harper Educational Publishers, NSW, pp. 315-342. Kathleen Hanser, The Secret Behind High Profits at Low-fare Airlines'. a href="http://www.boeing.com/commercial/news/feature/profit.html">http://www.boeing.com/commercial/news/feature/profit.html/a> [accessed 15 May 2003]
As aviation matured, airlines, aircraft manufacturers and airport operators merged into giant corporations. When cries of "monopoly" arose, the conglomerates dismantled.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Alliance with Airbus: - May never be possible given their histories. Certainly isn’t good for the air travel industry.
Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
Lufthansa, one of the world’s biggest airliners, has divisions handing maintenance, catering and air cargo. Since the World War II the airline industry has never earned its cost of capital over the business cycle (Hitt, 2010). Most of the airline companies have either filed for bankruptcy or are being bailed out by their government. Lufthansa had also gone through these tough times, but had resurfaced to become one of the worlds most profitable airline company. The company adapted a transnational strategy, seeking to achieve both global efficiency and local responsiveness. Lufthansa’s monopoly in Germany came to a halt with the creating of the European Union. All the EU member countries become one regional and therefore the European competition became, an increasingly a local competition. Lufthansa created its regional Hubs, to cater for its domestic market. But the availability of substitutes such as bullet trains and the Euro tunnel, made is necessary for Lufthansa to create short traveling time, customizations and quality standards in the region to achieve a competitive advantage. But outside the EU there are no substitute to air travels as such all the flag carriers are competing in the market, the international airline industry is a highly competitive environment. A new force has also emerged in the world of air travel, in the form of three Gulf airlines with jumbo ambitions. Within a decade Dubai’s Emirates, Qatar Airways and Eithad from Abu Dhabi have between them carried the capacity of two hundred million passengers (Micheal, 2010). The company had to go global and therefore adopted the international corporate-level strategy, where Lufthansa will ope...
The underlying argument or reasoning behind Ohmae's opinion that strategic alliances, or entente, are the only way forward for all companies competing globally. "Globalization mandates alliances, makes them absolutely necessary." (Ohmae, 1989). The author has supported this viewpoint, that globalization makes strategic alliances necessary as vehicles for customer-orientated value, with four issues facing today's companies: 1. The Californization of Need; 2. The Dispersion of Technology; 3. The Importance of Fixed Costs, 4. Dangers of Equity.
Additionally, deregulation and liberalization has accompanied the globalization of the airline industry, so that companies have had to compete against each other in new markets, as well as to gain entry into new territories. The rise of low cost local and regional airlines has made the competitive environment difficult to maneuver for large, formerly-state-subsidized national carriers. This has resulted in the need for strategic alliances between airlines in order to attempt to protect market shares and profits (Friehe and Curti, n.d.).
To buttress the implication of the model, Porter explained why the airline industry is the least profitable amongst industries owing to the high threat of the competitive forces. The airline industry players compete heavily on price. Most custom...
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.