The Airline Industry Value Chain

Topics: Airline, Low-cost carrier, Service Pages: 6 (1745 words) Published: January 15, 2007
Airline industry value chain

Inbound logistics
Primary activites
•Stock control – airlines must store and handle fuel, food, and drinks. Stock is managed to ensure reductions in stock turnover, thus reducing costs and wastage. •Route selection – airlines must choose their flight routes. These will be selected upon desired routes, and deals negotiated with the airports. Airports are selected for their prime location, to allow consumers to get to their desired location. This then entails the scheduling of flights and crew. •Passenger services system – software which allows the airlines to function "comprehensive passenger reservations, inventory control, fares, ticketing, and departure control functions" ( 2006). This allows airlines to reduce their costs of wages and paper transactions, and maximize utilization. •Yield management – this allows the airlines to compare their available seats against demand for particular flights to price the tickets accordingly. This has been particularly prevalent in recent years for airlines, particularly low cost carriers such as Ryanair whose prices for a flight vary greatly.. •Aircraft acquisition – airlines must negotiate deals with aircraft manufacturers to acquire planes. For instance Ryanair use a standardized airplane which allows them to reduce their staff training costs, as well as their maintenance costs. Support activities

•Firm infrastructure – budgets, accounting, regulatory compliance, legal issues, public relations •Human resources – flight, route and yield analyst training •Technology development – computer reservation systems, in-flight systems, flight scheduling systems, yield management systems •Procurement – information technology communications

•Ticket counters – airlines must operate ticket counters to get their passengers onto their airplanes. Some passengers may find at the counter that they can't get on the flight as the airlines oversell tickets for their flights to allow for passengers canceling or not turning up for the flight. This is aimed to ensure that airlines keep maximum flight capacity. Airlines must compensate any passengers who cannot get on a flight they have a ticket for. •Gate operations – airlines need to get their passengers onto their flights and therefore their planes onto the runway, working alongside airport management. Efficiency and punctuality are key factors determining the effectiveness of gate operations, as passengers wish to spend as little time waiting around as possible. Low cost airlines also need to ensure punctuality as they rely on quick flight turnovers •Aircraft operations – checking and maintenance of aircrafts, spare parts etc. used when and where necessary. •In-flight service – staff supply passengers with service requirements, these include; food, drinks, cushions, assistance etc. The airlines may also have onboard entertainment such as the showing of movies. This is the main focus for customer satisfaction for the traditional airlines, whereas the low cost carriers place little emphasis on the more luxury aspects, charging passengers for any additional services such as food etc •Baggage handling – this is generally a function managed between the airlines and the airports. Baggage handling can be a critical factor for airlines choosing particular airports, as importance for quick movement of baggage is important to ensure passengers are not waiting around, and that the flights are kept on schedule. •Ticket offices – these give airlines the opportunity to make direct sales and transactions with customers. This is an alternative to travel agents cutting out the middleman whilst providing advice and assistance for customer's queries. Support activities

•Firm infrastructure – budgets, accounting, regulatory compliance, legal issues, public relations •Human resources – pilot training, safety training
•Technology development – computer reservation systems, in-flight...

References: Scholes,K. et al. 2005 Exploring Corporate Strategy. 7th Edition. Harlow: Prentice Hall
Grant, R. 2005. Contemporary strategy analysis. 5th Edition. Oxford: Blackwell Publishing
Hooley, G. et al. 2004. Marketing strategy and competitive positioning. 3rd Edition. Harlow: Prentice Hall.
McNamee, P. 1999. Developing strategies for competitive advantage. Revised Edition. Oxford: Pergamon 2006. Virgin Blue selects Ibs ' AIRES passenger service system. [online] Available from; [accessed 15/12/06]
Videcom. 2006. Videcom Airline Reservation Service. [online] Available from; [accessed 15/12/06] 2005. No more lost luggage: Airlines go for RFID. [online] Available from;,3800003425,39130986,00.htm. [accessed 15/12/06]
British Airways. 2006. Euro Traveller. [online] Available from; [accessed 15/12/06]
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