Discussion Surrounding Global Alliances Operating in the Airline Industry

1) Introduction to airline industry 2) Drivers of globalisation using yip’s model 2.1 Market globalisation 2.2 Cost globalisation 2.3 Globalisation of government policies 2.4 Globalisation of competition 3) Localisation- arguments against globalisation 4) Pestle Analysis 5) Porter’s 5 forces analysis and their application to Airline industry 5.1 Rivalry amongst Existing Firms 5.2 Threat of substitution 5.3 Threat of new entrants 5.4 Power of customers 5.5 Power of buyers 6) Opportunities and Threats of Airline industry 7) Internal analysis of Virgin Airlines: Strengths and Weakness 8) Financial Statics of Virgin Atlantic Airline 9) Strategic

The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).

This is an analysis of the Airline Industry in Europe. The paper will cover the current market situation, including financials and market volume. Following this will be a Five Forces analysis on the factors that affect industry competition. The paper will conclude with key insights into the profitability of the industry and a SWOT analysis of one of the industry’s best performers and what rivals and possible future entrants can learn from their success.

“Air Canada is one of 99 airlines based in Canada; it is the largest domestic and international airline. It is among the top 20 airlines and together with it’s partner’s Air Canada express regional and Air Canada rouge, Air Canada attends over 38 million passengers annually and flies to more than 190 destinations on five continents” (Air Canada). It serves 60 Canadian cities, 49 destinations in the United States of America and 73 cities in Europe, the Middle East, Asia, Australia, the Caribbean, Mexico and South America, it flies to most cities using codeshares with airlines such as: Etihad Airways, Lufthansa, Singapore Airlines, Ethiopian Airlines, etc. Air Canada is one of the founding members of “Star Alliance”, the world’s largest and

Synergy with other Sky Team members that stretch out to all corners of the globe while sharing best practices enhances the company’s performance (Canadean, 2015). The 20-team members include Aeroflot, Aerolineas Argentinas, AeroMexico, Air Europa, Air France, Alitalia, China Airlines, China Eastern, China Southern, Czech Airlines, Delta, Garuda Indonesia, Kenya Airways, KLM, Korean Air, Middle Eastern Airlines, Saudia, Tarom, Vietnam Airlines, and Xiamen Airlines (Sky-Team, 2015).

The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

Lastly, the Star Alliance has succeeded in making United Airlines a more globally-known carrier by teaming up with some of the world’s top airlines. This network is now the largest global airline alliance, and has offered connections for passengers and cargo customers to over 965 world destinations in around 162 countries. Some of United Airline’s well-known partners include: Air Canada Lufthansa, Scandinavian Airlines, Singapore Airlines, South African Airlines, and Air New Zealand, just to name a few. All of United’s Star Alliance partners are complete participants in the lucrative Mileage Plus Program, which offers customers a chance to earn miles as they fly which can later be retrieved and reused for other flights and is the runner-up to being the most successful loyalty programs worldwide with 54 million global members. (United Air Lines, 2009)

Air Asia leading airline was established with the dream of making flying possible for everyone. Since 2001, Air Asia has swiftly broken travel norms around the globe and has risen to become the world’s best. With a route network that spans through to over 20 countries, Air Asia continues to pave the way for low-cost aviation through our innovative solutions, efficient processes and a passionate approach to business. Together with our associate companies, Air Asia X, Thai Air Asia, Indonesia Air Asia, Philippines Air Asia and Japan Air Asia.

Oneworld was the second of the three major alliances to be born, launched two years after its rival Star Alliance. The founding members were all long-established, well-respected airlines such as British Airways, American Airlines and Qantas, who were soon joined by two more highly regarded European carriers, FinnAir and Iberia. LanChile then came on board to provide coverage of Latin America, followed by Royal Jordanian in 2005, the first Middle Eastern carrier to join any alliance (Hill, 2014). Other significant airlines that have joined the alliance ever since includes Japan Airlines and Malaysia Airlines, strengthening the alliance extensive coverage of Asia. Oneworld aims to forge relationships with "frequent international travelers," particularly from the corporate and business world, a goal reflected in its HQ location on Park Avenue, NY. It serves just under 1000 destination airports in over 150 countries – substantially fewer than either of its rivals, but carefully targeted to appeal to its business clientele (oneworld, 2015). Oneworld was the first global alliance to introduce interline ticketing between member airlines, which means you enjoy smooth transfers and greater flexibility across the entire network, and offers the widest range of alliance fares, making it

In less than twenty years, the global industry has gone through tremendous change. Several airlines had gone out of business that had been on top of the industry for years. One of the remarkable changes had been airline alliances. The case focuses on the airline industry and how airlines are forming alliances and joint ventures. It then introduces the partner firms Air France KLM , and Delta . Air France KLM had over 25 collaborative agreements with other carriers and was a founding member of Skyteam, one of the leading airline groups. Air France KLM and Delta Airlines formed revenue

Emirates has chosen not to join any alliance but it does offer code sharing with various airlines. By remaining an independent airline, it is able to “react without consensus from other alliance members” (Lone Emirates still flying high on luxury). With all these destinations, Emirates has been able to have 101098 available seat miles.

Liberalisation of the Airline Market now allows carriers to engage in alliances to form more powerful synergy’s and capture a larger share of the market. Since the introduction of The Airline Deregulation Act in 1978 in North America and similar acts worldwide the aviation industry has become one of the fastest growing industries. The main objective of this was to allow the market place to influence the development of airlines. The main development from this was that airlines find it more beneficial if they join alliances. In this report I will discuss why airlines engage in alliances, identify the strategic benefits of alliances and assess their effectiveness.

In the past few years, the commercial air carriers have formed strategic alliances with each other which were not possible before this due to the previous regulations.

System: Both New Zealand and Singapore Airlines Star Alliance, which includes 27 airlines from different part of the continents. In addition, Air New Zealand is the only member of the Australasian Union located.