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Internationalization of Airlines

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Nuran Hosgit

on 5 June 2013

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Transcript of Internationalization of Airlines

Degree of internationalization
Capacity management

Diversification focus on full fare paying business traveler

develop alternative income streams Internationalization of Airlines Nhat Anh Chu, Merlin Harder, Nuran Hosgit, Katharina Küppers Table of Contents 1. Globalization Drivers
2. Emergence of International Markets
3. Competition
4. Supply Cost Factors
5. Example of Thai Airways and Star Alliance
6. Benefits and costs of Alliances
7. References Globalization Drivers Globalization Factors Emergence of international markets Deregulation and "Open Skies" 1978 (US): airline deregulation comes into force

international deregulation fosters formation of alliances
and global route networks

greater competition no more government shelter
expansion of domestic airlines
fewer, larger airlines
rise of airlines from Far East Competition = airline's firm specific assets sophisticated computer reservation system
existing route authority on desirable routes
physical constraints Supply Cost Factors Industry: thin profit margin Labor costs
Fuel costs
Aircraft ownership access to international routes can bring down costs through economies of scale

global sourcing of personnel & services to lower costs

costs of providing capacity are slightly higher for domestic operations, but domestic yields are significantly higher. Benefits and Costs of Alliances leading global airline network
etablished in 1997
http://www.ukessays.com/essays/management/contributing-factors-of-airline-industry-globalistion-management-essay.php References Member airlines of Star Alliance Facts 27 member airlines
4570 aircrafts
448.926 employees
670,58 Mio. passengers per year
194 Countries
181,83 billion revenues (US$) "Smoother Travel Experience" national carrier of the Kindom of Thailand
founded in 1960
headquarter: Bangkok
53,77 % owned by Thai Government
Revenue: 6,18 billion US$ (2012) Sorajak Kasemsuvan (CEO) Background Globalization --> Economies became more global

1) Change in Aviation Industry

2) Higher demand of flights

3) Change in customer demand/needs

4) Fiercer competition between airlines Conclusion >>In the age of globalization, it became a common internationalization strategy for airlines to join or form alliances in order to stay competitive and provide their customer with a smoother travel experience. << Industry has faced steady growth and falling prices

- customer needs & preferences have changed
= decline in customer loyalty, more rivalry
- less government regulation
- more rivalry amongst airlines Market is traditionally led by North America and Western Europe

Globalization of airlines is intertwined with overall globalization

= growing competition for occidental airlines Benefits - reduce amount of capital risk in route expansion
- allow smaller airlines to keep up with majors
- obtain access to new routes, test market their effectiveness
- obtain scarce assets, such as gates and slots at busy airports ...to airlines ...to customer - routes available to customer that might otherwise be dropped by customer's preferred airline Costs - anti-competitive results as dominant alliance partners can scarce off new entrants
- reduce of market share potential for others when alliance partners use code sharing to get higher priority listing in CRS ...to airlines ...to customer - fewer airline choices at higher fares
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