Professional Documents
Culture Documents
Key
Issues
Airline
industry
consolida(on
in
Europe
since
1980s
leads
to
a
drama(c
change
in
ownership
and
structure.
Na(onal
ag
carriers
and
the
new
low-cost
carriers
redene
the
airline
business
in
Europe
through
mergers,
acquisi(ons
and
start-ups.
Priva(zed
open
sky
policy
developed
through,
rstly
priva(za(on,
cross-border
acquisi(ons
and
deregula(on,
and
most
recently
the
enforcement
of
the
Open
Sky
Agreement
between
the
EU
and
US,
increasing
global
compe((on.
The
opportuni(es
for
the
new
low-cost
carriers
and
consolida(on
of
na(onal
ag
carriers
bring
big
advantages
to
consumers
in
form
of
lower
air
fares,
more
des(na(ons
and
more
ights.
This
massive
change
however,
has
come
at
a
cost,
with
airline
bankruptcies
and
predatory
pricing
by
the
low-cost
carriers
changing
the
European
airline
industry
permanently.
Many
struggling
airlines
are
looking
for
strong
partners.
Due
to
demand
for
valuable
airport
slots
and
strategic
hubs,
the
strong
airlines
such
as
LuUhansa
and
Air
France
have
used
these
opportuni(es
to
expand
their
network
through
strategic
acquisi(ons.
Services airlines are predominantly former ag carriers/ na(onal airlines. They can have very dierent business models:
LuUhansa: -Strong mul( hub network (Frankfurt, Munich, Vienna) -Focus on the number of hubs - Largest number of strategic alliances through StarAlliance - Innova(ve services, through restructure and outsourcing to sister companies -Favourable cost structure, through keeping aircraU types to a minimum - Acquisi(ons of strategically similar airlines (SWISS, Austrian, Brussels) Air France/KLM: - wo coordinated hubs at developing airports (Paris and T Shipol) -Focus on the size of hubs -A powerful and large network of des(na(ons -Unique partnership with the North Atlan(c -Partner in the second larges airline alliance (Skyteam)
Services
Airlines
The
industry
remains
under
pressure.
According
to
industry
es(mates,
30
airlines
ceased
ight
opera(ons
in
2008
alone
due
to
the
economic
downturn.
The
pressure
on
the
avia(on
industry
to
consolidate
has
now
also
reached
the
growth
markets
of
Asia
aUer
Europe
and
North
America
(LuUhansa
Management
Report,
2008).
Porters
Five
Forces
Model:
An LCC is an airline that oers generally low fairs in exchange for elimina(ng many tradi(onal passenger services (budget airline guide, 2009) Typical low-cost carrier business model prac1ces include: -A single passenger class -A single type of plane (reduces training and servicing cost) - A simple fair scheme, such as charging one-way (ckets half that of return trips (typically fares increase as the plane lls up, rewarding early reserva(on) - unreserved sea(ng (encouraging passengers to board early and quickly) -Flying to cheaper, less congested secondary airports - Flying early in the morning or late at night to avoid air trac delays and take advantage of lower landing fees. - Fast turnaround (mes on the ground (allowing maximum u(liza(on of the aircraU) - Simplied routes, emphasizing point-to-point transit instead of transfer at hubs - Emphasis in direct sales of (ckets via internet (avoiding commission paid to travel agents and computer reserva(on systems) -Encouraged use of electronic (cket - Free in-ight catering and other complimentary services are eliminated, and replaced by op(onal paid-for in-ight food and drink (which represent an addi(onal prot source for the airline) - Unbundling of ancillary charges (showing airport fees, taxes, lugguage fee, as separate charges, to make headline fare lower)
Current Challenges
Conclusion
The
tradi(onal
airline
business
models
are
changing.
The
former
stand-alone
strategy
of
airlines
and
their
intercon(nental
hub
and
spoke
networks
is
outdated.
Challenges
emerge
not
only
from
internal
compe((on,
but
also
now
from
low
cost
carriers
at
the
low
end
and
business
avia(on
at
the
high
end
of
demand.
To
survive
the
airlines
must
acknowledge
and
understand
the
importance
of
down
sizing,
merging
and
equity
alliances.
This
will
bring
with
it
large
scale
consolida(on,
and
as
a
result
the
airline
industry
will
shape
up
as
a
market
structure,
which
experiences
great
consolida(on
and
only
a
few
mega
carriers.
The
European
airline
industry
is
entering
a
stage
of
real
maturity.
The
consolida(on
process
is
forecast
to
grow
and
the
number
of
independent
carriers
will
gradually
diminish
(Associa(on
of
European
Airlines
2008).
Interna(onal
alliances
are
forecast
to
con(nue
to
play
a
crucial
role
and
may
even
extend
in
scope
at
least
in
the
rst
few
decades
of
the
21st
century.
Part 2
Source: Roger Mar(n, 2009, The Design of Business Why Design Thinking is the Next Compe((ve Advantage
Source: Roger Mar(n, 2009, The Design of Business Why Design Thinking is the Next Compe((ve Advantage
The
Process
The
design
thinking
is
a
crea(ve
process
based
around
the
building
up
of
ideas.
7
Stages:
1. 2. 3. 4. 5. 6. 7. dene
research
ideate
prototype
choose
implement
learn
Design Thinking
Crea(ng ideas
Checking ideas
Other References: Tim Brown with Barry Katz, 2009, Change by Design, Harper Business Press, USA Roger Mar(n, 2009, The Design of Business Why Design Thinking is the next Compe88ve Advantage, Harvard Business Press, USA Thomas Lockwood, 2010, Design Thinking Integra8ng Innova8on, Customer Experience and Brand Value, Design Management Ins(tute, Allworth Press, USA
Thank you.