Strategic Alliance Vs. Acquisition M & A And Organic Growth

The last part of industry analysis is about rivalry. In aviation industry, the rivalry is very drastic. This industry develops slowly or even stagnant and it is mature in recent period. There is no new company established in developed areas and also there is no major firm going broken. Most of survivals are big companies. All of them have abundant capital and ample operating experience and hold a relatively fixed percentage of market. In long run, the number of airline companies does not change. In another word, the cake is divided up. However, people define business with a ward, for profit. If airline companies want to share more percentage of market, they must seize other companies’ part.

Because of the deregulation of the government policy, there are a number of new airlines that entered the industry at first. However the most significant barrier to entry that new entrants face is significant post-entry competition from existing major airlines. The existing market is already saturate. In order to open market the new entrances have to lower the price of their limited routes. But they are facing the stronger competitor who can provide lower price on the same routes while create profit on the other non-competing routes.

Every potential partner has its strengths or core competencies which should not be compromised, hence a successful alliance is one which outcome are a

The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being

International Competition. Internationally, the Company competes not only with U.S. airlines, but also with foreign carriers. International competition has increased and may increase in the future as a result of airline mergers and acquisitions, joint ventures, alliances, restructurings, liberalization of aviation bilateral agreements and new or increased service by competitors, including government subsidized competitors from certain Middle East countries. Competition on international routes is subject to varying degrees of governmental regulation. The Company’s ability to compete successfully with non-U.S. carriers on international routes depends in part on its ability to generate traffic to and from the entire United States via its integrated

Airline deregulation was the process of removing the government imposed regulations on the entry of new airlines as well the airline fare limiting the competition and growth of the airline industry. In the United States, airline deregulation mainly refers to the Airline Deregulation Act of 1978 signed by President Carter. President Carter signed the Act, but the act was proposed initially during Nixon’s administration, and carried through Ford administration. The airlines industry was growing dramatically during 1960s and mid-1970s. Due to the steady increase in air travel, and strict regulations imposed by the Civil Aeronautics Board, the industry faced three major difficulties- lack of free and stable market, high ticket prices leading to poor productivity, and rising labor and fuel costs. Airlines have adopted many new strategies ever since the industry has been deregulated. The path since the deregulation has been challenging, as the airlines have faced various hurdles such as terrorism, war, recession, high fuel prices over the years impacting the economic structure of the United States. These challenges have raised the question concerning whether the deregulation should be considered or even reversed.

The Airline Deregulation Act of 1978 within the United States promulgated an era of unencumbered competition within the market, opening the floodgates for newer carriers – with a variety of lower pricing structures – to compete with formidable incumbents. Numerous carriers consequently filed for bankruptcy, and many of the industry leads consolidated their airlines to increase their power. Within the last twelve years alone, a series of bankruptcies and mergers have resulted in ten major U.S. airlines consolidating into four market-dominating mega-carriers: American, Delta, Southwest, and United. Why is

The civil aviation industry of world has expanded its wings by letting in private organisations. Privatisation in the domestic and the international circuit can help in foreseeing the future of the aviation industry at a mark up rise, and

After the Deregulation Act of 1978 in the United States, the airline industry was forced to adapt to the rapidly changing environment (Goetz & Vowles, 2009). At the time, the nominally regulated air transporting environment permitted the airlines to begin services on any desired route, giving them a great deal of liberty in the market. Although things were going well for those involved in the aviation industry, several factors began to have a negative impact on the industry. For instance, as the competition started to escalate, airlines began to take a competitive stance against one another, fighting for their share of the market. Moreover, the World Trade Center tragedy in 2001 had an adverse impact on the entire airline industry (Coy, 2005). Adding to the predicament, the recent financial crisis of 2008 and the current inflation in fuel prices have caused the US airline industry to regroup the fleet formation, making it the most competitive airline industry in the world (Ryerson & Kim, 2014). The whole airline industry now found itself struggling to survive.

America reigned as the “defacto monopolistic” leader in commercial aviation industry. (Sharma, n.d., para. 2). Boeing and McDonnell Douglas maintain a comfortable margin, controlling two thirds of the world’s market shares through the mid 1990’s. McDonnell Douglas, a company merger from the late 1960’s, struggled with industry competition in the latter half of the century. Boeing acquired McDonnell Douglas in 1997; an effort Boeing thought would secure its position within the commercial airline industry.

1. Deregulation of the US airline industry in 1978 ushered in competition in the hitherto protected industry. Several low-cost, low-fare operators entered the competitive market after the deregulation.

Deregulation provided a freely competitive market that would provide air service efficiently changes due to deregulation eliminate of restrictions on which routes airlines could fly that airlines can add new routes and remove old routes by themselves, not controlled by Civil Aeronautics Board (CAB). Thus, deregulation make rapid expansion of the airline operations, also emerged of new airlines such as low cost carriers (LCC), smaller airlines which would not squeezed out from the airline industry base on the deregulation, also they can survive in airline industry with large airlines now.

The companies within the alliance are going to agree that the company that best produces a specific product, with lower costs, is the one who is going to be in charge of this product, so this will lead to a low cost strategy. Moreover, the offer of the alliance will consist on a wide range of different products.

* Alliances, code-sharing etc are some of the strategies airlines are forming to achieve economies of scale and limit supplier power in terms of fuel & aircrafts. Such collaboration between airline operators, gives them a higher bargaining power.

A strategic alliance is a good way for the company because it allows sharing the risks and the resources with the alliance that mean does not have to bear all the risk of the exporting. In addition, the alliance can help it to develop the new competencies - maybe the new product or