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MERGER AND ALLIANCES
ALLIANCES :
When two or more airlines come
together and pull their resources
an airline alliance is formed
Advantages of airlines alliances for airlines
Increased market reach
Cost control
More efficient supply of capacity
Traffic feed
Economies of marketing
Technical advantages
Shared CRSs
Motivations for airline alliances
Access to benefit of another firm’s asset
Reduced risk by sharing it
Defence of current markets
Trend towards globalization
Survival
Code - sharing
Code-sharing occur when one airline
allows another to use its designator code,
enabling the same service to be offered
by more than one airline
Block seat arrangements
Blocked space agreements are an
extension of code-sharing concept
whereby an airline leases a block of seats
on the services of another airline on route
it does not operate itself.
Wet-leasing
Wet-leasing occurs when an aircraft is
leased yet the crew, fuel and maintenance
are all provided by the aircraft’s owner
MERGERS:
Mergers involve one airline in taking
an equity stake in another airline.
Example of Mergers:
In the UK, BA was formed through the merger, in
the early 1970s, of the following two state carriers:
British European Airways and British Overseas
Airways Corporation.
In the USA, important mergers included those of
Northwest with Republic and TWA with Ozark
Globalization
What globalization means in an industry in
which many of the major international airlines
already service numerous destinations in the
following way:
The ‘global airline’ seeks to supply its services
in any world market where it sees an opportunity
for profitable expansion.
The objective of globalization is to improve
competitive opportunities, to maximize new
business openings, to enhance growth and to
increase profitability.
Global Grouping
The emergence of global groupings and
the rise of the so-called mega-carrier are
topical aspects of industry
Meaning of the global groupings
Global groupings are about airline partnerships, they
use the illustration of European, Asian and American
companies’ attempt to consolidate their networks by
entering into commercial agreements.
The original alliances were mainly between two
airlines.
LOW-COST CARRIERS
Low cost carriers have had significant
impact by lessening the distinction
between scheduled and charter airline.
Indicative features of low cost carriers
LCC = Low Cost Carrier, FFP =Frequent Flyer Programme,
CRS= Computer Reservations System
Direct distribution
Ticketless travel
Interline agreements
Removal of the “
added value ”
Simplified pricing
structure
Reduced service and
entertainment level
One-class travel
Continued...
High-load factors
Fewer booking
restrictions
Aircraft safety and
comfort
Lease v. buy
departure points
Reduced labour