The scheduled Airline Industry : Partnership and Globalization

MERGER AND ALLIANCES

ALLIANCES : When two or more airlines come together and pull their resources an airline alliance is formed

Advantages of airlines alliances for airlines Increased market reach Cost control More efficient supply of capacity Traffic feed Economies of marketing Technical advantages Shared CRSs

Motivations for airline alliances Access to benefit of another firm’s asset Reduced risk by sharing it Defence of current markets Trend towards globalization Survival

Code - sharing Code-sharing occur when one airline allows another to use its designator code, enabling the same service to be offered by more than one airline

Block seat arrangements Blocked space agreements are an extension of code-sharing concept whereby an airline leases a block of seats on the services of another airline on route it does not operate itself.

Wet-leasing Wet-leasing occurs when an aircraft is leased yet the crew, fuel and maintenance are all provided by the aircraft’s owner

MERGERS: Mergers involve one airline in taking an equity stake in another airline.

Example of Mergers: In the UK, BA was formed through the merger, in the early 1970s, of the following two state carriers: British European Airways and British Overseas Airways Corporation. In the USA, important mergers included those of Northwest with Republic and TWA with Ozark

Globalization What globalization means in an industry in which many of the major international airlines already service numerous destinations in the following way:

The ‘global airline’ seeks to supply its services in any world market where it sees an opportunity for profitable expansion. The objective of globalization is to improve competitive opportunities, to maximize new business openings, to enhance growth and to increase profitability.

Global Grouping The emergence of global groupings and the rise of the so-called mega-carrier are topical aspects of industry

Meaning of the global groupings Global groupings are about airline partnerships, they use the illustration of European, Asian and American companies’ attempt to consolidate their networks by entering into commercial agreements. The original alliances were mainly between two airlines.

LOW-COST CARRIERS Low cost carriers have had significant impact by lessening the distinction between scheduled and charter airline.

Indicative features of low cost carriers LCC = Low Cost Carrier, FFP =Frequent Flyer Programme, CRS= Computer Reservations System Direct distribution Ticketless travel Interline agreements Removal of the “ added value ” Simplified pricing structure Reduced service and entertainment level One-class travel

Continued... High-load factors Fewer booking restrictions Aircraft safety and comfort Lease v. buy departure points Reduced labour