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Prof. Paul Stephen Dempsey
AIRLINE ALLIANCES by Paul Stephen Dempsey Director, Institute of Air & Space Law McGill University Copyright © 2008 by Paul Stephen Dempsey Before Alliances, there was Pan American World Airways . and Trans World Airlines. Before the mega- Alliances, there was interlining, facilitated by IATA Like dogs marking territory, airlines around the world are sniffing each other's tail fins looking for partners." Daniel Riordan “The hardest thing in working on an alliance is to coordinate the activities of people who have different instincts and a different language, and maybe worship slightly different travel gods, to get them to work together in a culture that allows them to respect each other’s habits and convictions, and yet work productively together in an environment in which you can’t specify everything in advance.” Michael E. Levine “Beware a pact with the devil.” Martin Shugrue Airline Motivations For Alliances • the desire to achieve greater economies of scale, scope, and density; • the desire to reduce costs by consolidating redundant operations; • the need to improve revenue by reducing the level of competition wherever possible as markets are liberalized; and • the desire to skirt around the nationality rules which prohibit multinational ownership and cabotage. Intercarrier Agreements · Ticketing-and-Baggage Agreements · Joint-Fare Agreements · Reciprocal Airport Agreements · Blocked Space Relationships · Computer Reservations Systems Joint Ventures · Joint Sales Offices and Telephone Centers · E-Commerce Joint Ventures · Frequent Flyer Program Alliances · Pooling Traffic & Revenue · Code-Sharing Code Sharing The term "code" refers to the identifier used in flight schedule, generally the 2-character IATA carrier designator code and flight number. Thus, XX123, flight 123 operated by the airline XX, might also be sold by airline YY as YY456 and by ZZ as ZZ9876. -
Tendencje Rozwojowe Aliansów Strategicznych W Transporcie Lotniczym
Transport lotniczy Tendencje rozwojowe aliansów strategicznych w transporcie lotniczym Iwona Anna Czarnecka Alianse lotnicze są formą współpracy linii lotniczych (często konkurujących ze sobą). Uczestnictwo w aliansie to określone korzyści, ale także liczne zagrożenia. A jednak wynikający z procesów liberalizacji proces łączenia się przewoźników w alianse wykazuje tendencję rozwojową. Na przestrzeni lat zmieniają się cele i zakres aliansów. Integracja staje się głębsza i przyjmuje formę fuzji i przejęć. Obserwujemy budowę struktury kapitałowej. Widoczne jest ograniczenie konkurencji na rynku lotniczym wynikające z konsolidacji przewoźników wokół największych i najmocniejszych linii lotniczych. Wprowadzenie połączeń. Taką strategię przyjęły m.in. linie: mi innych aliansów. Teoria gier zastosowana BA, Lufthansa, KLM. Strategia przystępowa- do analizy współpracy linii lotniczych przez Kryzys finansowy, który ogarnął świat nia do aliansów, skupionych wokół najwięk- T. Busacker’a i J. P. Clark’a pokazała okolicz- w 2008 roku wpłynął także na branżę lot- szych linii lotniczych, była wybierana przez ności sprzyjające dobrej współpracy w ra- niczą. Przewoźnicy ponieśli ogromne straty. coraz większą liczbę przewoźników, zwłasz- mach aliansu: Nowe warunki funkcjonowania wymuszo- cza tych średnich i małych, dla których sta- • umowa zawarta pomiędzy członkami ne przez kryzys pokazują, że należy dokonać nowiła szansę utrzymania się na rynku. powinna mieć długotrwały charakter, co rewizji naszego podejścia do aliansów lotni- Do podejmowania współpracy -
Airline Alliances
AIRLINE ALLIANCES by Paul Stephen Dempsey Director, Institute of Air & Space Law McGill University Copyright © 2011 by Paul Stephen Dempsey Open Skies • 1992 - the United States concluded the first second generation “open skies” agreement with the Netherlands. It allowed KLM and any other Dutch carrier to fly to any point in the United States, and allowed U.S. carriers to fly to any point in the Netherlands, a country about the size of West Virginia. The U.S. was ideologically wedded to open markets, so the imbalance in traffic rights was of no concern. Moreover, opening up the Netherlands would allow KLM to drain traffic from surrounding airline networks, which would eventually encourage the surrounding airlines to ask their governments to sign “open skies” bilateral with the United States. • 1993 - the U.S. conferred antitrust immunity on the Wings Alliance between Northwest Airlines and KLM. The encirclement policy began to corrode resistance to liberalization as the sixth freedom traffic drain began to grow; soon Lufthansa, then Air France, were asking their governments to sign liberal bilaterals. • 1996 - Germany fell, followed by the Czech Republic, Italy, Portugal, the Slovak Republic, Malta, Poland. • 2001- the United States had concluded bilateral open skies agreements with 52 nations and concluded its first multilateral open skies agreement with Brunei, Chile, New Zealand and Singapore. • 2002 – France fell. • 2007 - The U.S. and E.U. concluded a multilateral “open skies” traffic agreement that liberalized everything but foreign ownership and cabotage. • 2011 – cumulatively, the U.S. had signed “open skies” bilaterals with more than100 States. Multilateral and Bilateral Air Transport Agreements • Section 5 of the Transit Agreement, and Section 6 of the Transport Agreement, provide: “Each contracting State reserves the right to withhold or revoke a certificate or permit to an air transport enterprise of another State in any case where it is not satisfied that substantial ownership and effective control are vested in nationals of a contracting State . -
Strategic Airline Alliances: Advantages for Major Airlines Being Aligned
STRATEGIC AIRLINE ALLIANCES: ADVANTAGES FOR MAJOR AIRLINES BEING ALIGNED Jorge J. Villar Department of Aerospace Engineering, Universidad Politécnica de Madrid, Spain Javier Tafur Department of Industrial Engineering, Business Administration and Statistics, Universidad Politécnica de Madrid, Spain Guozhu Jia School of Economics and Management, Beijing University of Aeronautics and Astronautics (Beihang University), China Fernando Zobel 3, 3º C 16002 Cuenca Spain Telephone: (0086)13691243311, (0034)659928918 E-mail: [email protected] Abstract Some factors including the deregulation in the U.S and the liberalization in Europe of the airline industry are essential to understanding why the number of partnership agreements between airlines has increased during the last 25 years. These events, coupled with the continuous economic downturn and the 9/11 catastrophe seem to be the perfect framework for the tendency to develop airline strategic alliances. However, it has been observed that this trend was not followed during the period 2005- 2008. The purpose of this paper is to analyze if a benefit was experienced by the major airlines who became a member of the current 3 big alliances compared to the major airlines that decided not to become a member or were not admitted into the alliances during 2005-2008. The methodology of this report includes an analysis of several airlines’ performance figures. These performance figures include the revenue passenger kilometers (RPKs), the passenger load factor (PLF) and also the market share (MS). The figures will be compared between the aligned airlines and others which have similar business models. The value of this paper is to reveal whether being aligned provides advantages to major airlines under a bearish airline market in a globalized environment. -
Historia De La Aviación Comercial Desde 1909 Hasta Nuestros Días
FACULTAT DE FILOSOFIA I LETRES, DEPARTAMENT DE CIÈNCIES HISTÒRIQUES I TEORIA DE LES ARTS HISTORIA DE LA AVIACIÓN COMERCIAL DESDE 1909 HASTA NUESTROS DÍAS TESIS DOCTORAL PRESENTADA POR EL DR. MARTÍN BINTANED ARA DIRIGIDA POR EL DR. SEBASTIÁ SERRA BUSQUETS CATEDRÀTIC D'HISTÒRIA CONTEMPORÀNIA PARA OPTAR AL TÍTULO DE DOCTOR EN HISTORIA CURSO ACADÉMICO 2013/2014 Martín Bintaned Ara 2 Historia de la aviación comercial Resumen Esta tesis doctoral investiga acerca de la aportación de la aviación comercial a la historia contemporánea, en particular por su impacto en las relaciones exteriores de los países, su papel facilitador en la actividad económica internacional y por su contribución al desarrollo del turismo de masas. La base de trabajo ha sido el análisis de la prensa especializada, a partir de la cual se han identificado los casos innovadores. Gracias al análisis de su origen (tecnológico, geo- político, aero-político, corporativo, de producto y en la infraestructura) y a su contextualización, hemos podido trazar la historia de la aviación comercial desde su origen en 1919 hasta nuestros días. Palabras clave: Historia contemporánea, Aviación comercial, Política aérea, Relaciones internacionales, Turismo, Innovación, Aerolíneas, Aeropuertos Abstract This doctoral thesis analyses the contribution of commercial aviation to the contemporary history, particularly in the field of external relations, international economy and mass tourism. We have identified all innovations with a structural impact on the industry through specialised press, considering the changes on technology, geopolitics, aeropolitics, business models, product and services, and infrastructure. This methodology has allowed us to write the history of the commercial aviation since its origin in 1919. -
DENNIS E DUSTRY CONSOLIDATION . ND FL. L Ite
i::i DENNIS E_DUSTRY CONSOLIDATION ._ND FL._L_ItE AJRLLNE _TWORK STRUCTURES IN EUROPE m NigelDc_n_ Senior Research Fellow Transport Studies Group University of Westminster 35 Marylebone Road LONDON NW1 5LS Tel: .444 20 79!1 5000 ext 334A. Fax: +44 20 7911 5057 e-mall: [email protected] A__hs!ra__ct In the current downaa'n in demand for air travel, major airlines are revising and rationalising their networks in an attempt to improve financial performance and strengthen their defences against both new entrants and traditional rivals. Expansion of commercial agreements or alliances with other airlines has become a key reaction to the increasingly competitive marketplace. In the absence, for regulatory reasons, of cross-border mergers these are the principal means by which the industry can consolidate internationally. The failure of airlines such as Sabena and Swlssair has also enforced restructuring at some of Europe's busier airports. This paper analyses the developments which have been taking place and attempts to itentify the implications for airline network _s and the function of different hub airports. Airlines have rationalised their networks by withdrawing services that feed the hubs of rival alliances. New ;links have however _ created hthatare made feasible by the alliance support. The range of services available to passengers in long-haul markets to/from Europe is evaluated before and after recent industry reorganisation. Hubs are crucial to interlink the route networks of parmers in an alliance. However, duplication between nearby hub airports that find themselves within the same airline alliance can lead to loss of service at the weaker locations. -
Analysis of Global Airline Alliances As a Strategy for International Network Development by Antonio Tugores-García
Analysis of Global Airline Alliances as a Strategy for International Network Development by Antonio Tugores-García M.S., Civil Engineering, Enginyer de Camins, Canals i Ports Universitat Politècnica de Catalunya, 2008 Submitted to the MIT Engineering Systems Division and the Department of Aeronautics and Astronautics in Partial Fulfillment of the Requirements for the Degrees of Master of Science in Technology and Policy and Master of Science in Aeronautics and Astronautics at the Massachusetts Institute of Technology June 2012 © 2012 Massachusetts Institute of Technology. All rights reserved Signature of Author__________________________________________________________________________________ Antonio Tugores-García Department of Engineering Systems Division Department of Aeronautics and Astronautics May 14, 2012 Certified by___________________________________________________________________________________________ Peter P. Belobaba Principal Research Scientist, Department of Aeronautics and Astronautics Thesis Supervisor Accepted by__________________________________________________________________________________________ Joel P. Clark Professor of Material Systems and Engineering Systems Acting Director, Technology and Policy Program Accepted by___________________________________________________________________________________________ Eytan H. Modiano Professor of Aeronautics and Astronautics Chair, Graduate Program Committee 1 2 Analysis of Global Airline Alliances as a Strategy for International Network Development by Antonio Tugores-García -
Swissair's Collapse
IWIM - Institut für Weltwirtschaft und Internationales Management IWIM - Institute for World Economics and International Management Swissair’s Collapse – An Economic Analysis Andreas Knorr and Andreas Arndt Materialien des Wissenschaftsschwerpunktes „Globalisierung der Weltwirtschaft“ Band 28 Hrsg. von Andreas Knorr, Alfons Lemper, Axel Sell, Karl Wohlmuth Universität Bremen Swissair’s Collapse – An Economic Analysis Andreas Knorr and Andreas Arndt Andreas Knorr, Alfons Lemper, Axel Sell, Karl Wohlmuth (Hrsg.): Materialien des Wissenschaftsschwerpunktes „Globalisierung der Weltwirtschaft“, Bd. 28, September 2003, ISSN 0948-3837 (ehemals: Materialien des Universitätsschwerpunktes „Internationale Wirtschaftsbeziehungen und Internationales Management“) Bezug: IWIM - Institut für Weltwirtschaft und Internationales Management Universität Bremen Fachbereich Wirtschaftswissenschaft Postfach 33 04 40 D- 28334 Bremen Telefon: 04 21 / 2 18 - 34 29 Telefax: 04 21 / 2 18 - 45 50 E-mail: [email protected] Homepage: http://www.iwim.uni-bremen.de Abstract Swissair’s rapid decline from one of the industries’ most renowned carriers into bank- ruptcy was the inevitable consequence of an ill-conceived alliance strategy – which also diluted Swissair’s reputation as a high-quality carrier – and the company’s inability to coordinate effectively its own operations with those of Crossair, its regional subsidiary. However, we hold that while yearlong mismanagement was indeed the driving force behind Swissair’s demise, exogenous factors both helped and compounded -
02/08/07 Overview of Trends and Developments In
02/08/07 English only OVERVIEW OF TRENDS AND DEVELOPMENTS IN INTERNATIONAL AIR TRANSPORT (ICAO Secretariat) 1. INTRODUCTION 1.1 This paper provides a global overview of regulatory and industry trends and developments of international air transport that have taken place over the past decade, focussing on significant developments since the last Assembly. It is prepared by the Secretariat for information purpose, which supplements Assembly working paper A36-WP/16, a Council report on Development and Economic Regulation of International Air Transport. 1.2 The overview has two parts. The first part looks at major regulatory movements towards the liberalization of international air transport, including bilateral and regional liberalization, air service negotiations involving a group of States, multilateral initiatives, national liberalization policies, competition and consumer protection policies. The second part reports on the airline industry’s responses to an ever changing and more competitive marketplace, including airline alliances, mergers and acquisitions, privatization, airline business models and product distribution. 2. REGULATORY DEVELOPMENTS 2.1 Liberalization of international air transport regulation is the cornerstone upon which to build the future growth of the air transport industry. The process has been evolving at various levels since the mid-1990s. In terms of the impact or extent, it is estimated that, in 2006, about 31 per cent of the country-pairs with non-stop passenger air services and about 49 per cent of the seat capacity offered occurred between States which have embraced liberalization either by bilateral “open skies” air services agreements or by regional/plurilateral liberalized agreements and arrangements (compared with less than 4 per cent and about 20 per cent respectively in 1995, and about 16 per cent and about 42 per cent respectively in 2000). -
Emerging Tendencies in the European Airline Industry
Thesis from International Master Program – Strategy and Culture Emerging Tendencies in the European Airline Industry - an investigation of SAS and Ryanair - Mandy Jacob Zuzana Jakešová Supervisor: SuMi ParkDahlgaard The photograph (on reverse side) was taken by Oliver Semrau October 30, 2002 in London, a commercial poster of Lufthansa. It nicely illustrates the motivation of the thesis. Avdelning, Institution Datum Division, Department Date 2003-01-20 Ekonomiska Institutionen 581 83 LINKÖPING Språk Rapporttyp ISBN Language Report category Svenska/Swedish Licentiatavhandling X Engelska/English Examensarbete ISRN Internationella ekonomprogrammet 2003/2 C-uppsats X D-uppsats Serietitel och serienummer ISSN Title of series, numbering Övrig rapport ____ URL för elektronisk version http://www.ep.liu.se/exjobb/eki/2003/iep/002/ Titel Emerging Tendencies in the European Airline Industry - an investigation of SAS and Title Ryanair - Författare Mandy Jacob, Zuzana Jakešová Author Sammanfattning Abstract Background: The airline industry is unique and fascinating. It was protected through government controls until the early 1980s. However, due to deregulation policy the industry opened to free competition. As a result, collaborations and alliances were formed and low budget airlines were able to enter the market. Purpose: The purpose of this thesis is to present the current stage of the European airline industry by investigating the strategies of Ryanair and SAS with the help of strategic management tools. Procedure: Two companies were chosen, Ryanair as a low budget airline and SAS as a mature airline. The investigation was based on secondary data found in financial -, annual -, business - and company reports as well as in independent analyst reports and on the Internet. -
Airline Alliances—Who Benefits?
Journal of Air Transport Management 8 (2002) 401–407 Airline alliances—who benefits? S.C. Morrish, R.T. Hamilton* Department of Management, University of Canterbury, Private Bag 4800, Christchurch 1, New Zealand Abstract The advent of global airline alliances in the 1980s gave rise to concerns that increased monopoly power of major carriers would lead to large and sustained producer surpluses. These global alliances now enjoy dominant market shares in the industry. This review examines some 15 years of alliance experience and finds no conclusive evidence that alliance membership has yielded monopoly profits to the airlines. Improvements in terms of load factors and general productivity levels have, for the most part, been accompanied by fare reductions of similar magnitude, resulting in only modest gains to the carriers. r 2002 Elsevier Science Ltd. All rights reserved. Keywords: Airline alliances; Monopolies; Fare levels 1. Introduction than between the carriers. The failure to join a global alliance would leave individual carriers isolated and at a This paper reviews the effect of alliance membership competitive disadvantage (Button et al., 1998). on the performance of international airlines. An airline A majority of airline alliances is route based. Park ‘alliance’ is any collaborative arrangement between two (1997) distinguished two major types of alliances as or more carriers involving joint operations with the being either complementary or parallel. The main declared intention of improving competitiveness and distinguishing features are that complementary alliances thereby enhancing overall performance. Despite a have non-overlapping routes, whereas parallel alliance history of instability and failure, alliances are now routes overlapped. Apart from routes, the most com- prevalent among international airlines. -
Overview of Trends and Developments in International Air Transport1
24/03/09 English only OVERVIEW OF TRENDS AND DEVELOPMENTS IN INTERNATIONAL AIR TRANSPORT1 (ICAO Secretariat) 1. INTRODUCTION 1.1 This paper provides a global overview of regulatory and industry trends and developments of international air transport that have taken place since the mid-1990s, focussing on significant developments for the past five years. 1.2 The overview has two parts. The first part looks at major regulatory movements towards the liberalization of international air transport, including bilateral and regional liberalization, air service negotiations involving a group of States, multilateral initiatives, national liberalization policies, competition, and consumer protection policies. The second part reports on the airline industry’s responses to an ever changing and more competitive marketplace, including airline alliances, mergers and acquisitions, privatization, airline business models, and product distribution. 2. REGULATORY DEVELOPMENTS 2.1 The liberalization of international air transport regulation continued to evolve at various levels since the 1980s. It is estimated that, in 2008, this involved about 31 per cent of country-pairs with non-stop scheduled passenger air services and about 58 per cent of the frequencies offered, through either bilateral “open skies” air services agreements or regional/plurilateral liberalized agreements and arrangements (compared with about 7 per cent and 35 per cent, respectively, a decade ago, see Figure 1). 2.2 Bilateral liberalization. Bilateral air services agreements remain the