Reinventing the airline business: no-frills ailines.

Essay by fedecUniversity, Ph.D.A+, February 2004

download word file, 32 pages 4.5

1. The marketplace is changing radically as a result of major societal forces such as technological advances, globalization and deregulation. Customers increasingly expect higher quality and service and some customization.? How can this statement be justified based on the facts presented in the case study?

2. Does the new model of reinventing the airline business give a sustainable competitive advantage?

1.Executive Summary

In 1978, only 275 million people took to the skies - a number that more than doubled to 600 million in 1997. Over those years, the number of competing airlines soared from 39 to 95 and adjusting for inflation, airline tickets are 37% cheaper today than they were before deregulation

The demand for international air transportation is a joint function of:

*the business environment

*the flow of tourists

*the demand for airfreight

While The main drivers for the acceleration of traffic are:

*the rise of world GDP


*increasing world trade and investment

*higher percent of retired persons


International tourism receipts and arrivals have been growing every year.

During the decade 1990-2000 the number of tourists increased from about 450 million to 700 million. The increase in leisure travel is also caused by a rise in the percent of old age persons.

The introduction of an open competitive aviation market in Europe has broadly been a success. The arrival of low fare carriers such as EasyJet, Debonair and Go illustrates a market in which competition is taking hold, and benefiting the passengers.

The reduction in labour costs, combined with other methods of cost reduction such as Outsourcing and Franchising have shown to have decreased airline costs. The more radical strategy of 'No-frills' operations has been the most significant post-deregulation development and are now seen as benchmarks for firms to compete with.

The single aviation market...