E Commerce. Impact of Internet for the airline industry.

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Executive Summary

Aviation and air services industry is a large, competitive, and challenging industry, characterised by high capital and labour requirement, together with customer participation during transactions hence service fulfilment.

Providing great reach and the potential for rich interaction, the internet is a natural medium for travel transactions. Airlines are turning to e-commerce to keep business flying, and the reason they are focusing on selling tickets through their Web sites is that it is the cheapest distribution channel.

From the customers perspectives, Internet have revolutioned the way of buying flight ticket. Customers can now purchase their tickets directly from the airlines via the Internet using intermediaries and/or cybermediaries in order to find the possible cheapest ticket.

Moreover, online discount travel services, such as Priceline and Hotwire, allow airlines to dump excess inventory. They can use these channels, along with their own online specials, to drive traffic to less-popular routes, such as flights with inconvenient connections. Airlines are also using electronic channels to keep business travellers informed of potential delays and schedule changes.

Furthermore, Industry players use different technologies to differentiate their services to customers, to create customer loyalty, and serve them faster and in more convenient ways than their competitors do. Therefore, flight companies have developed some tools to communicate with their customers as in-flight broadband service and new mobile service,

Air Flight industry is moving into an environment characterized by an abundance of information - the new source of airfare information is the Internet, especially the WWW. Therefore any player in this industry needs to produce informative materials in digital form, which can be disseminated using the new information technologies.

1.0 Introduction

Few inventions have changed how people live and experience the world as deeply as the invention of the airplane. Until now, the airline industry has progressed to the position where it would be hard to think of life without air travel. It has shortened travel time and altered the concept of distance, making possible for people to visit and conduct business in places once considered remote.

A microcosm of the overall "dot-com" online business phenomenon, aviation e-commerce continues to evolve at light speed. Change is happening so fast, in fact, that you can't tell the players without a scorecard, or rather, a good search engine. (Esler, 2001)

Accordingly, the growth of the Internet and related technologies has resulted in drastic changes in the way business and consumers communicate, share information and conduct business. Forrester Research estimates that the business-to-business e-commerce market will grow from $43 billion in 1998 to $1.3 trillion by 2003 (www.partsbase.com). For the aviation industry, there is an issue that must be addressed in the Internet age that is to facilitate an integrated e-business environment among suppliers, customers and business partners in order to collaborate in creating a more efficient and profitable product life cycle.

This research project will describe and discuss about the extention of how the Internet is impacting and changing the industry, how it has affected the competitive strategies & behaviour of the firms, including indicate likely future outcome.

2.0 Industry Characteristics

Aviation is a global industry, owned and operated largely by private commercial companies, and forming a seamless network of manufacturing, airline operations, engineering design, sales, maintenance, repairs, customer services, finance, insurance, leasing, marketing, advertising, media and other activities (www.spacefuture.com, 2000). The aviation (air services) industry is characterized by high capital intensity, high fixed costs, and mobile assets, which drive competitors towards marginal...
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