Airline Industry Analysis

Good Essays
Topics: Airline
Hhhhhh Structure
Only looking at passenger travel, maintenance and cargo not included.
Back in the days: Full Service Carriers (FSC) controlling the market (sometimes close to oligopoly). Afterwards, low cost carriers (LCC) entered the market, as well as charter airlines (CC) (cheap cause crappy times)
Change is costs (hubs and smoke vs point-to-point without a home base), based on several routes
Concentration became lower, amount of competition became bigger and market share distribution over larger amount of companies. Concentration looking at intercontinental flights changed less, mainly international and domestic flights.
Momentarily 240 airlines covering 84% of total passenger travel. Top 10 companies (many of them are mergers) cover almost 50% of all passenger travel.
The former leaders are aiming to regain market power and increase the concentration, by creating alliances and some even mergering.
Alliances: sharing prices, sharing frequent flyer programs Skyteam
2nd: integrated units (processes aligned) KLM-Northwest
3rd: Merger of shares Air France - KLM
4th: full merger
 South west and Airtran (pending)
 United and Continental (approved)
 Delta and Northwest (Oct 09)
 USAir and America West
 PP t ti l f Additi l R ti M otential for Additional Reactionary Moves
 Recent International Consolidation
 Lufthansa and Austrian
 Air France and KLM
 Air France/KLM and Alitalia (25% ownership)
 Lufthansa and Swiss
 China Southern and China Northern and Xingiang
 Cathy Pacific and Dragon
 BMI and Lufthansa
 International Strategic Investment in US Carriers
 Lufthansa and JetBlue
 Virgin and Virgin America

Entrance barriers
Deregulation
Deregulation makes it easier to enter, less restrictions and less power for competitors. Governments used to impose price restrictions and entry restrictions and they permitted carriers to serve specific routes.
Access to money
Ain’t easy to come up with the start-up

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