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european airline

Free essay example:

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Marketing Environments:

The European Airline Industry

Gemma Massey

001133426

Word Count:  4,500

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CONTENTS PAGE

Executive Summary

  1. Intentions of the Report
  1. The Marketing Environment
  1. The Micro-Environment
  1. Suppliers
  2. Intermediaries
  3. Customers
  4. Publics
  5. Competitors
  1. Situation Review: The European Airline Industry
  1. Segmentation of the European Airline Industry
  1. The European Airline Industry vs. The US Airline Industry
  1. The No-Frills Sector of the European Airline Industry
  1. Effect of the No-Frills
  2. Reactions to the Low-Cost Threat
  1. The Macro-Environment
  1. SWOT Analysis
  2. Pestle Analysis
  3. Porter’s Five Forces Analysis
  1. Conclusions and Recommendations

Summary of Abbreviations

Research Portfolio

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Executive Summary

The European airline industry is a competitive and dynamic industry whose fortune is closely linked to the performance of the overall European economy.

The European airline sector has historically been dominated by national flag carriers who together account for over 70% of civilian passenger traffic. These airlines emerged along national boundaries after World War II and historically were important state-owned or state-sponsored instruments of economic development. Examples include British Airways, Lufthansa and Air France.

In 1997 the European Commission deregulated commercial aviation within the European Union (EU) with an ‘open skies’ agreement allowing any airline to fly any route in Europe.  Over the last 10 years European aviation has moved from a highly regulated market, based on bilateral agreements, to a highly competitive single market.  The liberalisation of Europe’s airline industry was hailed as a turning point.

The dominance of the flag carriers is now being eroded as the European airline market is exposed to free market forces.  A rising share of the market is migrating towards low-cost airlines who are establishing themselves as long-term competitors to traditional airlines thanks to deregulation.

Another major turning point to this industry came as a result of the terrorist attacks of September 2001.  Although this hurt the aviation industry the resulting turmoil provided an opportunity to reshape a troubled sector. While America's federal government propped up its ailing airline industry with cash and loan guarantees, the European Commission limited aid. Swissair and Sabena, the national carriers of Switzerland and Belgium respectively, filed for bankruptcy that October.

The big winners of the shake-out were low-cost airlineswho continue to grow in market share.  The established network carriers slimmed down and began fighting back.

History suggests that the low cost airline sector will experience market consolidation and increased market concentration over the coming years. The low-cost airline segment in the European market may eventually be dominated by just two carriers – EasyJet and Ryan Air. Numerous start-ups will come and go. Scale matters in the aviation industry.

Most of the big airlines have pursued marketing alliances. In October 2003 two European airlines, KLM and Air France, announced they were hooking up.  In a further step towards market consolidation, talks began in October 2003 between the EU and the United States over extending the liberalisation of transatlantic traffic.  This could be a final momentous agreement that will alter the industry so it may begin a phase or maturity.

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Over the medium term a new market beckons in the ten countries joining the EU in 2004. These countries have a combined population of 75 million.  There is every chance for existing airlines to exploit market opportunities.  The new members of the EU will become part of the EU Open-Sky Treaty allowing point-to-point services between EU countries.  

The demand for air travel in Europe increased three-fold between 1980 and 2000, and is set to double by 2020.  It is predicted, preliminary, that overall, air traffic in Europe will increase overall by 7.5% in 2004.While the full-service carriers are struggling to get back to the traffic levels they enjoyed in 2000, the budget airlines are growing by more than 10% a year and little is getting in their way.

Perhaps one of the main threats to this industry is terrorism.   The recent terror bombings in Madrid have spelled bad news for airlines.

1.0 Intentions of the report

This reportwill look sequentially at the marketing environments of the European airline industry and will analyse the main forces shaping its future.  It will concentrate on the impact of low-cost airlines on this industry.

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2.0 The Marketing Environment

An organisation’s marketing environment can be defined as: "... the actors and forces external to the marketing management function of the firm that impinge on the marketing management’s ability to develop and maintain successful transactions with its customers" (Kotler et al 1997)

There are three key perspectives in the marketing environment which all need to be considered in order to undertake a comprehensive analysis (see diagram below):

  • The 'macro-environment'
  • The 'micro-environment'
  • The 'internal environment'

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Figure 1 Source: http:// www.marketingteacher.com/Lessons/lesson_marketing_environment.htm

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3.0 The Micro-environment

The micro environment can be seen as the forces close to an organisation that have a direct impact on its ability to serve customers.  In developing marketing plans, marketers must take into account the different objectives within the firm including influences from management, finance, R&D, purchasing, manufacturing, HR and sales as well as from suppliers, intermediaries, customers, publics and competitors.  

Main players in the aviation industry

The diagram below breaks the airline industry into different sectors which each exert forces upon the organisation:

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Figure 2 Source:  IATA Legal Symposium 2004:

The diagram above highlights airlines as being the weakest link in the value chain.  The airline market has an over-capacity with fierce competition.

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3.1 Suppliers

The activities of suppliers’ impact marketing decisions in terms of availability, quality, type, cost and quantity of goods and services offered to the organisation.  In a quest to cut costs a rising number of operations are outsourced to suppliers. Examples of suppliers include:

Aircraft manufacturers:

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Fuels and Liquids:    

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Security Services:

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Catering Services:

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Maintenance Companies:        

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3.2 Intermediaries

Intermediaries aid in the distribution process and have direct contact with the customer.  Travel agents may be used to assist in ticket sales including:

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In an attempt to cut costs and avoid commission fees airlines, especially low-cost airlines, use more direct techniques to sell tickets; via telesales or the internet.  This technique drives down administration costs even further.  Also, ticket-less systems are increasingly being used.  Examples of these intermediaries include:

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The global distribution systems (GDS) Amadeus, Apollo/Galileo, Worldspan and Sabre are used in ticket distribution.  They sort airline flight schedule and fare information for travel agents.

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3.3 Customers

Customers can be split into two broad categories:  business passengers and leisure passengers.   Considering the fact that 4.5% of the UK population make 44% of all flights and that the people most likely to fly are those earning over £30,000 it seems that price is a major driving factor in this industry and for customer segmentation.

The chart below indicates Customer Segmentation in the Intra-European aviation market; it highlights the following points:

  • Entrance of low-cost airlines will push customer segmentation.
  • There is a Sharper focus on customer segments, especially for short routes (Dual Market: airlines for price-conscious customers and others for quality-conscious customers)
  • There will be stiffer competition for non-business passengers and price-conscious business passengers on short routes.

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Figure 3 Source: AEA, IATA, Mercer analysis

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3.4 Publics

This includes any group having an actual or potential interest in an organisation; impacting its ability to achieve its objectives including:

  • Shareholders
  • Media
  • Government
  • Lobby groups         
  • Local community

Recently there has been debate over airport expansion plans in the UK. Heathrow is calling for a third runway to be installed, allowing for the predicted growth in air passenger numbers. In reaction to this, locals are lobbying against the construction of a third runway with regards to increasing pollution levels and relocation concerns.

British Airways, Virgin Atlantic and BMI British Midland have led the aviation industry in lobbying for expansion at Heathrow, where take-off and landing slots are so scarce that they are changing hands for up to £10m each.

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3.5 Competitors

In the European airline industry competition comes in many forms, especially on short-haul routes:

  • No-frills vs. full-service airlines:

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  • No-frills vs. No-frills:

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  • Full-service vs. full-service airlines:

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  • No-frills vs. Other transport modes:

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The main competition arena exists around the no-frills and full-service carriers however, within this field segmentation of the airlines occurs: large international carriers, small nationals and their local competitors, regional companies and charter carriers all exist creating rivalry.  Market segmentation will be analysed further in this report.

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4.0 Situation Review:  The European Airline Industry

The European air transport industry comprises more than 130 airlines, a network of over 450 airports and some 60 air navigation services providers.  

The European Short-haul Airline sector is one of the world’s most competitive air travel markets.  With the amount of passengers flying within and out of the U.K. expected to increase from 180 million in 2000 to 500 million in 2030, there appears to be huge demand in this industry.  

Despite this, figure 4 below shows how sustainable profitability is volatile within this industry after events such as September 11th and the SARS virus.  The graph highlights the AEA (Association of European Airlines) scheduled traffic in RPK (Revenue Passenger-Kilometre’s) showing the negative impact of these unprecedented events on the European airline industry.

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Figure 4 Source: http://www.aea.be/aeawebsite/datafiles/PR_brief290104.PDF

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5.0 Segmentation of the European Airline Industry

The airline market in Europe has traditionally been divided among five types of carriers:  large international carriers (e.g. Lufthansa, Air France), small nationals (e.g. Iberia, Alitalia) and their local market competitors (e.g. Spanair, British Midland), regional companies, and charter carriers.  Research suggests that by 2010, this industry structure will undergo fundamental change, leaving only three primary segments as highlighted in the diagram below:

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Figure 5 Source: AEA, IATA, Mercer analysis

  • Network carriers/alliances—each of the major international carriers is likely to solidify its position as an alliance leader. Most regional and second tier airlines will likely enter into alliances with the network carriers as feeder/shuttle services to the air traffic hubs and to provide complementary services. According to Mercer one-third of flag and second tier carriers will exit the market.
  • Low-cost airlines will gain significant share of the intra-European air market for leisure travellers and cost-conscious business travellers.
  • Charter carriers will see only marginal growth, and are likely to face market share losses to low-cost carriers on intra-European routes. They will need to strengthen their integration with leisure groups to protect their niche package tour market.

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6.0 European Airline Industry vs. US Airline Industry

The diagram below views the European airline industry in relation to the US airline industry; it shows how the US carriers receive state funding unlike those in the European Union.  This may distort competition within the industry.

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Non-reimbursed costs:                             Hand-outs from US Government:

800 million Euros                                      USD 3 billion

Figure 6 Source:  IATA Legal Symposium 2004

Figure 6 highlights how security costs cause distortion of competition between European and US carriers.  A future transatlantic competitive landscape that is heavily weighted against European airlines will add further pressure to the problems already faced through intra-Europe competition.

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7.0 The no-frills sector of the European Airline Industry

The first successful low-cost carrier is generally acknowledged to be Southwest Airlines in the United States, which pioneered the concept when founded in 1971 and has been profitable every year since 1973. With the advent of aviation deregulation the model spread to Europe as well, the most notable successes being Ireland's Ryanair, which began low-fares operations in 1991, and easyJet, formed in 1995. As of 2004, low cost carriers are now edging into Asia, led by operators such as Malaysia's Air Asia.

Many carriers have opted to launch their own no-frills airlines, such as KLM's Buzz and British Airways' Go, but have found it difficult to avoid cannibalizing their core business.

The European airline industry is being shaken up by the presence of low-cost airlines.  It is estimated that existing low-cost airlines will expand their European market share from 5% in 2000 to 25% by 2010, as illustrated in figure 7, establishing themselves on a long-term basis which will have major effects on the European airline industry as a whole.  

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Figure 7 Source: AEA, IATA, Mercer analysis

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Figure 8 shows how no-frills airlines have been thriving in Europe since the mid-90s.

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Figure 8 Source:  OAG:  Airline websites; AEA_YB_03_11

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7.1 Effect of the no-frills:

The no-frills airline industry is having a huge impact on the European airline industry.  The table below highlights how the market is migrating to a new business model:

customer behaviour is changing

► Customers expect internet to provide lowest possible price offer

► Price becomes decisive factor:

–  Destination is not!

  • No-frills carrier’s develop routes according to costs

► No-Frills Carriers have generated growth of aviation in this segment

–  People fly who would not have otherwise flown

Market structure is changing

Erosion of traditional “national” markets:

► Segmentation of market into:

– No-Frills on local markets

– Regional niche markets

– International/alliance markets

Greater flexibility and simplicity of traditional model

► Established airlines are questioning their models.

► Some have moved into the no-frills segment.

Flexible adaptation of traditional pricing models

► Many full-service carriers offer simple and low prices.

Marketing focus on the actual product offered

► Some carriers are marketing frills aggressively.

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7.2 Reactions to the Low-Cost Threat

There are three possible scenarios that could be used by traditional airlines in responding to the low-cost threat:

(1) ‘Flag carriers’ may attempt to defend their position by introducing dramatic price cuts on routes where low-cost competitors appear. Even if this option were successful in the short term, however, it could ultimately lead to long-term value destruction. They may choose to reduce their losses by selectively withdrawing from national and intra-European direct flights. This strategy runs the risk of diminishing the value of the network and reducing customer loyalty.

(2) They may elect to introduce their own low-cost services, but this will only work if the respective brands are kept separate and distinct, in order to enable competitive cost structures and aggressive growth strategies in the low-cost segment.

(3)  Over time, the increased participation of low-cost airlines in the European market, while stimulating overall demand for air travel and providing greater customer choice, is also likely to lead to surplus capacity and declining average yields for all carriers.

8.0 The Macro-environment

The macro-environment may be defined as the collection of uncontrollable forces and conditions facing a company or industry.  The external marketing environment can be audited in more detail using approaches such as:

  • SWOT Analysis
  • Michael Porter's Five Forces Analysis
  • PESTLE Analysis

Each of these frameworks will be used as tools to analyse the macro-environment of the European airline industry.  The SWOT analysis will focus on the No-frills sector to evaluate the robustness of the low-cost business model.

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8.1 SWOT Analysis:  Low-Cost Airline Industry

The SWOT analysis is used to analyse the internal and external view of the low-cost airline industry with a view to analyse the growing threat of the no-frills model upon the traditional industry.

STRENGTHS

  • Simple fare structure
  • Relative low unit costs
  • Multi-base network offering point-to-point service
  • Strong corporate culture i.e. EasyJet
  • High commitment to safety and customer services
  • Efficient use of airports with rapid turnaround times
  • Highly profitable with rising demand

WEAKNESSES

  • Customer expectations of service are increasing
  • High aircraft utilisation means more vulnerable to delays
  • Prices are low, but they are not as low as they could be.
  • Weak brand loyalty between low-cost airlines and passengers
  • Growth in size means complexity
  • Seasonal variations and cyclical demand
  • Affected by economic downturns

OPPORTUNITIES

  • Eastern Europe on verge of business boom as 10 states prepares to enter EU in 2004
  • Europe is a land of opportunity for low-cost airlines
  • Significant growth of internet bookings expected - 17% annual compound growth rate of Internet user population
  • Increase in Britons buying second homes abroad
  • Outsourcing of IT functions such as call centres in India
  • Airport expansion

THREATS

  • Flag carriers imitate low-cost business model offering ‘cheaper flights to people booking well in advance’
  • BA, as well as other airlines has redesigned its website to make online booking easier
  • New EU legislation travel compensation laws
  • Air passenger duty to rise £5-£10 on economy tickets
  • Some customers prefer to book through a travel agent
  • The development of rail network within the EU
  • Video conferencing may take an increasing share of the business clientele
  • Threat of terrorism e.g. bombings in Madrid
  • Lack of take-off and landing slots

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8.2 PESTLE Analysis: The European Airline Industry  

The PESTLE model is used as a form of market screening for the European airline industry, including the low-cost airline industry.  It can be used to assess possible growth in this sector.

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Figure 9 Source: www.nvq5.com/businessreview/ images/pestlediag.gif

Political Analysis

  • Open-Skies Agreement: In 1997, the European aviation became a highly competitive single market. Discretionary powers of the national authorities have been curbed allowing airlines to enjoy greater freedom to set fares, open new routes and determine what capacities to offer.
  • Kerosene Tax:  the introduction of ‘Kerosene tax’ would face strong opposition from the international community: ICAO Chicago Convention as kerosene is essential for the growth of airlines and especially for low-cost airlines.
  • Expansion of the EU in 2004: Moves toward a federal government for the EU will likely result in attempts to create competition on a Europe-wide basis as trade barriers and anti-competition barriers are broken.  Eastern Europe is heralded as an emerging market in the process of being exploited by the airline industry.

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  • Post 9/11 security concerns remain: Legislation has been passed concerning passenger safety for increased airport security.  Airlines are caught in the middle on the introduction of sky marshals and passenger data techniques.
  • Industry Monitoring: The European Commission continues to monitor the industry and investigate to make sure competition is fair; an example includes the monitoring of Ryanair subsidies at Charleroi Airport.
  • Expansion restrictions:  European Legislation on air and noise pollution will restrict the possibilities of airport expansion projects e.g. Heathrow expansion scheme.
  • 1999 duty-free abolishment on intra-European travel.
  • Common Aviation Policy:  Continues to develop for Europe.
  • Airlines are liberalised, but the aviation industry as a whole is not!

Economic Analysis

  • World business:  Air transport is essential for creating jobs and opening up new market opportunities.  Over 40% of world trade of goods (by value) is carried by air.
  • Rising real income:  There is a strong relationship between rising real incomes and demand for air travel.  Providing accession countries enjoy economic growth and development once inside the single market, there is every chance for existing airlines to exploit market opportunities.  Economic growth is the main driving force of the airline industry.
  • Increases in GDP:  rises in GDP have a positive affect on the industry, and this is exuberated by the high income elasticity of demand.

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  • Cyclical nature of demand:  The airline industry is cyclical with demand following consumer spending.  This is also linked to factors including alternative transport modes, population size and relative income.
  • Tourism: Travel and tourism is one of Europe's largest industries, directly or indirectly contributing approximately 11 % of total GDP and providing more than 19 million jobs across the EU.
  • Recession: Of all the airlines the low-cost ones are the best positioned to with-stand recession.
  • Growth in travel demand:  Demand for air travel in Europe increased three-fold between 1980 and 2000 and is set to increase even more.  Figure 10 shows how the European travel market is set to grow, in RPK (Revenue Passenger-Kilometres) in relation to other world-wide travel markets; the graph shows a growth above the world average of 5 per cent between 2002 and 2022 for the European market.

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Figure 10 Source: http://www.airbus.com/pdf/media/gmf2003.pdf

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Social Analysis

  • Loss in passenger confidence:  As a result of the tragic events of September 11th and the floods in Central Europe in 2002 there has been a need to rebuild confidence in air travel.
  • Lifestyle changes:  The aging population and the rising number of people buying holiday homes abroad will have a positive affect on air travel growth.
  • Air Traffic Control: Problems due to congestion of the skies will affect future consumer safety concerns.
  • Strikes:  Short-term, Public Services union strikes including French air traffic control staff continue to disrupt the airline industry.

Technological Analysis

  • Internet for travel bookings:  Airline websites are a crucial part of the whole industry, they accounted for 58% of all air travel bookings in 2000, compared with 53% in the previous year.
  • Improved aircraft and jet technologies:  new aircraft technology is forcing hub-airlines to change, both posing extra challenges and offering potential solutions.  The fact that the latest versions of single-aisle jets, such as Boeing 737-800, have much longer ranges than those 10 years ago means that low-cost airlines, which usually opt for a fleet using one type of aircraft, can now contemplate some long-haul routes.

Legal Analysis

  • Air Passenger Duty:  The Department of Transport and the Treasury are proposing to raise air passenger duty from £5 to £10 on economy tickets within Britain and from the UK to Europe.  

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  • Compensation Laws:  Air travellers whose flights are delayed, overbooked or cancelled will be legally entitled to generous levels of compensation following a landmark European Union deal: a blow to low-cost airlines.
  • Safety:  Despitethe rapid and constant growth in air traffic, accident rates have been reduced byover 50% during the past 20 years.

Environmental Analysis

  • Air traffic:  With the number of passengers using UK airports forecast to increase the European Commission is putting huge emphasis on the airline industry to lower the noise and emission pollution and adopt a more environmentally friendly technology.  Pollution cost UK £1.4 billion in 2000, producing 30 million tonnes of CO2 (5% of total), expected to rise to 55million tones (10/12%) by 2020.
  • Tax exemption on Kerosene:  If the industry continues to grow at is predicted rate, its contribution to greenhouse gases will be 75% according to the Royal Commission on Environmental pollution (RCEP).  Tax exemption on kerosene provides no incentive for airlines to use efficient aircraft.  
  • Airport expansion: Expansion poses environmental issues requiring, for example, increased support infrastructure e.g. roads

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8.3 Porter’s Five Forces Analysis

Michael Porter’s five forces model provides a framework to asses the attractiveness of the European airline industry:

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Figure 11 Source: http://www.libraries.psu.edu/business/industries/steelanalysis.htm

Threat of new entrants: LOW

  • High capital investment negates threat of new entrants to some extent; the cost of leasing new fleets of aircraft is high.
  • Lack of take-off and landing slots makes it difficult for new carriers to find suitable airports therefore high barriers to entry at major hubs.
  • Over-crowded market and very strong competition, especially fierce price competition from no-frills carriers deters potential new entrants.
  • Passenger demand declining/static in most countries.
  • Deregulation has created a competitive single market in Europe however, it is necessary to apply for and secure an air operator’s licence from the EU.
  • New entrants must go into a new route on a large enough scale to achieve acceptable cost levels.
  • Overcoming existing customer loyalty achieved by companies who have exploited first-mover advantage on specific routes - perhaps reinforced by strategies such as frequent flier programmes may prove difficult.

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Bargaining Power of Customers: MEDIUM/HIGH

  • Customers are still fickle and extremely price sensitive; they vote with their feet in order to find value for money.
  • Customers have good access to information about airlines; more power.
  • In times of economic depression customers have a tendency to opt for cheaper ticket flights – this can go some way to explaining the success of no-frills carriers in the current economic climate.
  • Customers have the Civil Aviation Authority (CAA) on their side[1].

Bargaining Power of Suppliers: HIGH

  • The price of aviation fuel is directly related to the cost of oil, individual companies do not have the power to alter this.  Fuel prices are a major cost with no substitute; therefore the suppliers have a powerful hold on airlines.  However, agreements and relationships with suppliers may decrease their power.
  • The more airlines expand the more power they possess over suppliers.
  • The aircraft carrier supply business, for example, is mainly dominated by two companies; Boeing and Airbus, hence they have huge bargaining power.
  • The likelihood of a supplier integrating vertically isn't very likely. In other words, it is unlikely that suppliers will start to offer flight services on top of building airlines.
  • Strong labour unions within the industry.

The Threat of Substitute Products or Services: MEDIUM

  • Other modes of transport offer no tenable threats, distances too great except from London-Paris, which can be reached by Euro Star; cars may be used as an alternative for short distance travel.
  • Technology develops and financial commitments rise.
  • No substitutes for long-haul routes.

Industry Competitiveness: HIGH

  • Many companies in airline industry.
  • Little product differentiation.
  • Excess capacity.
  • High fixed/variable costs.
  • Seasonal fluctuations in demand.

Highly competitive industries generally earn low returns because the cost of competition is high. This can spell disaster when times get tough in the economy.Competitive rivalry within the market place is becoming increasingly high due to unitised markets and thus internationalisation of organisations.

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  1. Conclusions and Recommendations

Since the unprecedented events of September 11th the European air travel industry has been slowly recovering; analysts are forecasting that BA will finish the year until the end of March with profits of around £600m, close to the record level of 1996.   But the rising travel and revenue figures merely reflect a belated recovery from a trough.  Even if the travel numbers are rising, the airlines have to offer huge discounts to fill seats.  

However, BA appears to be the exception; Lufthansa has plunged into a 980 million Euro loss.  Network airlines everywhere are facing the same challenge due to the fact that they were designed for the time of state regulation and ownership.

As the flag carriers try to adapt to a single market with free competitive forces, competition has sharply moved in from the low-cost airlines with their economical business processes such as selling seats over the internet and flying their aircraft more hours each day.  

Since deregulation arrived in 1997, budget carriers such as EasyJet and Ryanair have grown to account for around a fifth of European air travel, thriving after the events of September 11th; their market share is expected to grow rapidly.  This year the budget airlines will carry more than 50 million passengers around Europe. In the past couple of months another six budget airlines entered the market in Britain, Ireland, Hungary, Germany and Poland.

Observers of the European airline industry have long believed that the flag-carrier system has created too many airlines and led to inefficient excess capacity. The suggested remedy is consolidation of the European industry via cross-border mergers, an avenue that is now open as a result of EU deregulation. The first major consolidation event is currently unfolding, with the proposed Air France-KLM merger recently approved by EU regulators.

It is likely too that the low-cost sector will experience consolidation leaving EasyJet and Ryanair as the two main players.  While the big airlines consolidate, trying to win more premium business traffic, the cheap fares airlines will fight ruthlessly for leisure traffic.  British Airways has already withdrawn from European routes where it makes a loss.

In the longer term, airlines are looking to join forces in the context of the prospects of the liberalisation of air traffic between the United States and Europe, which is expected to lead to fierce competition on both sides of the Atlantic.

However, industry-wide consolidation across the Atlantic is still a long way off given the large number of legal obstacles.  An agreement between the EU and US on transatlantic flights could pave the way for pan-European carriers.  This would improve the dire state and profitability among the leading airlines.  

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Two things matter to airlines - the amount of empty seats on their planes and the cost of getting those planes into the air. Reducing those two factors leads to profits, and in recent years, the European industry has been struggling.

The fear of terrorism and disruption in the world's aviation system has simply made things much worse.  And looking to the future of European aviation, it seems that the issues associated with the environment will be addressed severely, possibly leading to taxation on the one thing supporting airline growth; Kerosene.  Furthermore, the matter of over-capacity, which has lead to a lack of taking-off and landing slots, could hinder further growth and drive up prices for the low-cost airlines.  

While the full-service carriers are struggling to get back to the traffic levels they enjoyed in 2000, the budget airlines are growing by more than 10 per cent a year.  The expansion of the EU in 2004 will provide vast opportunities for the low-cost sector but for the budget airline industry to thrive; low-cost really does have to mean low-cost.

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Summary of abbreviations

ACI EUROPE – Airports Council International – European Region

(www.aci-europe.org)

AEA – Association of European Airlines (www.aea.be)

ATAG – Air Transport Action Group (www.atag.org)

ERA – European Regions Airline Association (www.eraa.org)

EUROCONTROL – European Organisation for the Safety of Air Navigation

(www.eurocontrol.be)

IATA – International Air Transport Association (www.iata.org)

Observers

Research Portfolio

Company Reports

EasyJet Interim report March 2003

Internet Sites:

  • http://www.aea.be

This is the website for the Association of European Airlines and provides information and statistics regarding the European airline industry.

  • http://www.airbus.com

The airbus website provided useful forecasts for the airline industry as a whole and as well as for the European sector.  I was able to look at predictions in travel demand.

  • http://www.businessweekly.co.uk/

This website provides up-to-date business news; I obtained an Interview with Stelios Haji-Iaonnou, John Rossand 28th January 2003, which gave me an insight into easyJet’s strategy from the perspective of its founder.

  • http://www.easyjet.com

This is EasyJet’s official website.  The web site shows flight and destination information.     The web site also provides a general overview including information about the company, its history and its strategy which can be used to gain insight into the low-cost airline operating model  

  • http://www.economist.co.uk

The economist website contains business articles relating to the European airline industry.  One of the main articles from the Economist was entitled,

‘Silver linings, darkening clouds’ 25th March 2004

This article focused on the future of the airline industry, including issues relating to market consolidation.

  • http://www.guardian.co.uk

This is the website of the guardian newspaper.  I found articles on the airline industry through the website’s search engine entitled,

‘Landing us in it’, 6th December 2003

This article reviewed the environmental issues surrounding the airline industry.

EasyJet plans £2.7bn expansion’, 8th Jan 2002

This article discussed the future of easyJet compared to other low-cost airlines including expansion plans.

  • http://www.IATA.com

This website provided lots of information and forecasts about the European Airline Industry, including safety report.

  • http://www.internettravelnews.com

This site contains up-to-date travel news and contains various articles about the airline industry which can be accessed through a search engine.  I used the article entitled,

‘Battle of the low cost airlines’. August 2003

      This article analyses easyJet and Ryan Air in terms of passenger numbers and  revenues

  • http://www.timesonline.co.uk

I used the article entitled,

Early birds get full service before prices take off’, 30th September 2003  

This article reviewed the position of low-cost airlines relative to competitors including British Airways.

  • http://www.world-tourism.org/

This is the official website of the World Tourism Organisation.  It enabled me to research Europe as a tourist destination. It provided information on the current political and economic situation.  I used the article entitled,

Global Tourism Trends and Prospects for Central and Eastern

European Countries’, Shlevkov, 13 December 2002

Research Papers:  

  • Mintel Report ‘Travel Agents – UK’, June 2002

This report looks at the use of travel agents in the holiday market sector.  It discusses amongst other issues, the increase in demand for Independent travel and how this may affect the holiday market through the eyes of a travel agent.

  • Mintel Report ‘Holidays – Coping with a Crisis – UK’, Jan 2002

This report discusses repercussions of events such as the 11th September Terrorist attacks on the US on the travel and holiday industry including the effects on low-cost airlines.

Textbooks

  • Electronic Commerce B2C Strategies and Models; Elliot, 2002, John Wiley &Sons Ltd

This textbook contains analysis of strategies undertaken by the low-cost airline easyJet, allowing me to understand its key business drivers.

  • International Marketing Strategy; Isobel Doole and Robin Lowe, 1st edition, 1999, International Thompson Business Press

This textbook contains the context, techniques and strategies involved in successful international marketing.  It provided me with a good background to better direct my research and understanding

  • Principles of Marketing, Brassington, F and Pettitt, S, 3rd edition 2003, Prentice Hall

This book provided me with an overview on the principles of marketing.  It contains case studies which aided my understanding into certain marketing principles.  The book is a good point of reference as it puts theory into a practical context.

  • Marketing Theory, a student text; Michael J Baker, 1st edition, 2000, International Thompson, Business Press

A collection of original contributions on the subject of marketing theory, from specialists

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[1] The Civil Aviation Authority (CAA):

  1. Provides protection against the consequence of travel organiser failure for people who buy package holidays, charter flights and discounted scheduled air tickets.
  2. Licences airlines and ensures compliance with requirements of European – UK legislation to financial resources, liability and insurance of airlines.  

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