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Reinventing The Airline Business: No Frills Ailines.

7910 words - 32 pages

1. The marketplace is changing radically as a result of major societal forces such as technological advances, globalization and deregulation. Customers increasingly expect higher quality and service and some customization.? How can this statement be justified based on the facts presented in the case study?2. Does the new model of reinventing the airline business give a sustainable competitive advantage?1.Executive SummaryIn 1978, only 275 million people took to the skies - a number that more than doubled to 600 million in 1997. Over those years, the number of competing airlines soared from 39 to 95 and adjusting for inflation, airline tickets are 37% cheaper today than they were before deregulationThe demand for international air transportation is a joint function of:*the business environment*the flow of tourists*the demand for airfreightWhile The main drivers for the acceleration of traffic are:*the rise of world GDP*globalization*increasing world trade and investment*higher percent of retired persons*liberalizationInternational tourism receipts and arrivals have been growing every year. During the decade 1990-2000 the number of tourists increased from about 450 million to 700 million. The increase in leisure travel is also caused by a rise in the percent of old age persons.The introduction of an open competitive aviation market in Europe has broadly been a success. The arrival of low fare carriers such as EasyJet, Debonair and Go illustrates a market in which competition is taking hold, and benefiting the passengers.The reduction in labour costs, combined with other methods of cost reduction such as Outsourcing and Franchising have shown to have decreased airline costs. The more radical strategy of 'No-frills' operations has been the most significant post-deregulation development and are now seen as benchmarks for firms to compete with.The single aviation market within the European Union has seen substantial growth amongst smaller and medium-sized scheduled airlines. The most noticeable instances of new entrant competition have been in the domestic markets and those larger EU states which, prior to the Third Package, had the most restrictive attitudes towards competition with their national carriers.2.The Airline Industrya.The marketThe airline industry is a $3.5 trillion a year business. The total scheduled air traffic carried by the 716 scheduled passenger service airlines and the 91 scheduled all freight service airlines from 185 contracting states of ICAO (International Civil Aviation Organization - http://www.icao.int ) amounted in 2000 to about 1,647 million passengers and to some 30.2 million tons of freight.*In 1945 the number of air passengers was meager 9 millions*It was 59,000 million in 1954*514,496 millions in 1974*1,027,856 millions in 1987In the year 1994) the 29 member airlines of the Association of European Airlines (http://www.aea.be) used a fleet of 2,225 airplanes to fly 311 million passengers and 5 million tons of freight...

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