The purpose of this paper is to answer three questions of the case study. The text is strictly associated with the prosperity of alliances; therefore the term “strategic alliance” will be explained in the first instance. Furthermore, the business tool such as PESTLE, which is utilized to analyse the airline environment will be highlighted. It will be proven that the airlines prosperity strictly depends on political, legal, economic, social, technological and environmental factors. In addition, the alternative strategy for airlines such as mergers will be introduced. The examples of the airline mergers such as Delta-Northwest and Air France-KLM will be emphasized. Finally, the shared management, which is applied by Star Alliance, will be critically evaluated.
Table of Contents
I. Executive summary
II. Introduction
III. Question 1
IV. Question 2
V. Question 3
VI. Conclusion
Objectives and Core Themes
The primary objective of this paper is to examine the determinants of airline prosperity by addressing three specific questions related to the strategic management and environmental influences within the aviation industry. The research explores how external factors and collaborative business models shape the competitive landscape and operational success of global carriers.
- Analysis of external environmental factors using the PESTLE framework.
- Evaluation of the impact of fuel costs and oil prices on airline profitability.
- Investigation into the strategic rationale and outcomes of airline mergers.
- Assessment of shared management structures and the role of strategic alliances.
- Examination of the effects of technological advancements and changing passenger behavior.
Excerpt from the Book
Airline mergers
The global airlines industry is one of the most competitive in the world. The prosperity of the airlines depends on the external factors such as oil prices, competition or government regulations. Therefore it’s significant for the airlines to join partnership or alliances to increase efficiency of the operations of the entire industry. The mergers constitute the example of the partnership, which enables to share costs, risks revenues and profit between each member. The mergers have transformed the global industry and created the rapid consolidation, which the industry is experiencing nowadays. DePamphilis (2013) highlights the importance of mergers in terms of gaining economies of scale and scope, thus’ profit and cost efficiency, management skills, operating and financial synergy or diversification can be accomplished. The reason, why e.g. Air France and KLM joined together was the introduction of the Low Cost Carriers, which could be a serious threat for the prosperity of the national airlines (Fageda, 2010). The Low Cost Carriers began to offer lower cost of fares therefore the national airlines were forced to drop the prices of the tickets on short haul domestic travels in order to remain competitive and make profit on the long –haul international routes. The mergers enable airlines to have access to the airports in different countries. To have access to many destinations is critical to gain more customers.
Summary of Chapters
I. Executive summary: This chapter outlines the purpose of the paper, which is to analyze the factors influencing airline prosperity and evaluate strategic responses like mergers and alliances.
II. Introduction: The introduction defines the concept of strategic alliances as a form of joint management and highlights their importance for achieving competitive advantages in a globalized market.
III. Question 1: This section utilizes the PESTLE framework to analyze how political, legal, economic, social, and technological factors influence airline operations and profitability.
IV. Question 2: This chapter examines the role of airline mergers in achieving economies of scale and scope, while debunking common myths regarding job losses and service quality.
V. Question 3: This part focuses on the concept of shared management within strategic alliances, exploring its benefits, challenges, and the impact of cultural differences on organizational effectiveness.
VI. Conclusion: The conclusion synthesizes the findings, reiterating that while strategic cooperation is vital for navigating market pressures, it must be balanced against potential risks like factionalism.
Keywords
Airline Industry, Strategic Alliance, Mergers, PESTLE Analysis, Fuel Prices, Shared Management, Competitive Advantage, Globalization, Air Transport, Operational Efficiency, Cost Optimization, Passenger Demand, Corporate Strategy, Risk Management, Aviation Technology
Frequently Asked Questions
What is the primary focus of this research?
This paper focuses on identifying and analyzing the key factors that contribute to the prosperity and success of airlines within the highly competitive global aviation industry.
What are the central themes discussed in the paper?
The central themes include the impact of external environmental factors (PESTLE), the strategic necessity of mergers, the role of shared management in alliances, and the influence of fluctuating fuel prices on airline profitability.
What is the main research question or objective?
The objective is to answer three case study questions centered on how airlines can maintain prosperity by navigating political, economic, and social challenges through strategic partnerships and operational adjustments.
Which scientific framework is used to analyze the business environment?
The paper utilizes the PESTLE framework, which categorizes external factors into political, economic, social, technological, legal, and environmental influences.
What topics are covered in the main body of the text?
The main body covers the dependency of airlines on government regulations and fuel costs, the strategic logic behind airline mergers, and the complexities of managing shared governance structures in international alliances.
Which terms best characterize this work?
The work is characterized by terms such as strategic alliances, mergers, operational efficiency, cost optimization, and global aviation competition.
How does the author view the impact of fuel prices on airline ticket costs?
The author notes that while lower fuel prices reduce operating costs, they do not automatically lead to lower ticket prices in the short term, as airlines prioritize paying down debt and infrastructure investment over immediate price drops.
What does the term "factionalism" imply in the context of shared management?
Factionalism describes a scenario where managers from different parent firms in an alliance view problems only from their own perspective, rejecting culturally dissimilar groups, which ultimately hinders consensus and management effectiveness.
What role do Low Cost Carriers play in the decision of national airlines to merge?
Low Cost Carriers exert competitive pressure by offering lower fares, which forces national airlines to seek efficiencies through mergers to remain profitable and competitive on long-haul routes.
- Quote paper
- Katarzyna Szydlowska (Author), 2017, International Business of the Airline Industry. Strategic Alliance and the Business Tool "PESTLE", Munich, GRIN Verlag, https://www.grin.com/document/421554
