U.s. Airlines ' Open Skies ' Program And Continuation Of Globalization

r market by entering into strategic code-sharing agreements with international carriers, such as Cathay Pacific , and American Airlines

This section will examine each of the five competitive forces that are active in the European Airline Industry. In this instance the buyers in the industry will be taken as passengers. Fuel companies, aircraft manufacturers and employees are the suppliers. Substitutes stem from modes of transport that fall under land and sea transit. Potential entrants are any airlines based outside of Europe or newly founded airlines based in Europe.

Globalization in the airline industry may seem to be a natural flow of the business model. However, some companies have a better fit, or culture that lends itself to a smooth and prosperous integration into the global market. In comparing this integration into the global market one might take a historical look at American and Northwest. Both carriers were formed just after World War I, as mail carriers (3,4). Eventually both evolved into passenger carriers. Americans roots are traced to Charles Lindberg and the cities of Chicago and St Louis (4). Northwest also has its roots in Chicago, but their first routes went north to Minneapolis / St Paul (3). Northwest eventually evolved into Northwest-Orient Airlines and expanded its routes into Japan, being the first airline to make a profit in the Asian market without subsides (3). Northwest continued to globalize with their alliance with KLM Airlines and eventual expansion into the Netherlands (3). American, on the other hand, concentrated their growth in the Americas. With an extensive route system into Central and South America (4), American Airlines seems to have centered its expansion in the United States. A possible result of American’s expansion, or lack of expansion outside the U.S., might have reduced the artifacts that could have otherwise further enhanced their global culture mix and thus created a better

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.

1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).

1. Political: “In some cases, foreign governments limit U.S. air carriers’ rights to carry passengers beyond designated gateway cities in foreign countries.”

American Airlines, Inc. (AA), commonly referred to as American, is a major American airline headquartered in Fort Worth, Texas. American Airlines was developed from a conglomeration of 82 small airlines through acquisitions in 1930 and on June 25,1936 it became the first airline to fly the DC-3 in commercial service

Another emerging trend in the past five years has involved the progress made on open skies agreements between the United States and other countries. Open skies agreements serve to liberalize Orlando International Airport transport markets between the two signing countries or parties in the agreement. These agreements remove government restrictions, such as limits to the number of flights any one airline is allowed to operate per week between countries. The removal of these limitations has opened some routes up to increased competition, by allowing Orlando International Airport to fly more frequently and making these routes more accessible. Orlando International Airport could not previously justify the capital expense of operating on routes with limited flights are now able to profit on routes with high demand.

American Airlines had been the largest airline in the United States for a long time. In 1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped drastically, for this reason, fare wars started and all the airlines incurred massive losses.

Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998).

The international aviation industry is arguably one of the most competitive and cut-throat businesses in the world today. Characterised by high revenue but notoriously thin profit margins, modern international airlines are constantly searching for methods to gain advantages over their competitors and attract new customers. One of these methods which has become popular since the late 1990s is that of the global airline alliance. Today there are three major alliances in operation, each containing different member airlines. These alliances offer airline customers various advantages over travel with a traditional carrier. Nevertheless, these advantages have been criticised by some as being anti-competitive, there are several examples of

• to liberalize the rules for international aviation markets and minimizes government intervention — the provisions apply to passenger, all-cargo and combination air transportation and encompass both scheduled and charter services; or

International mergers have been frustrated for years in the airline business where there are in excess of 200 national carriers conveying passengers across the world. Bans on foreign ownership and lingering government control over routes, flights and slots at major airports prevent international mergers and limit the ability of airlines to enter new markets. The incentive for mergers is to grow revenue and reduce costs to become even more competitive by reducing fares. This frustration has to a certain extent been overcome by super-alliances between national carriers operating out of international 'hubs' like Amsterdam, Buenos Aires, Chicago, Copenhagen, Hong Kong, London, Paris, Rome and Tokyo. Major airlines have grouped together with names like One World, Star, Delta and KLM/NW to sell tickets to a wider range of destinations without flying to more. They also draw on the 'spokes' of each member airline's associated companies operating out of other airports in the member's country to the hub. Partners in an alliance sell each other's flights, and even book blocks of seats on each other's aircraft.

There has been a positive growth in world airline traffic up to the global economic crisis of 2008 and THY moreover has maintained to outpaced growth in

One of the outstanding innovations entails lower cost carriers (LCC). The innovation is a cross-border venture that was meant to overcome restrictions of bilateral agreements (David, 2010). The innovation gave rise to successful subsidiary airline companies; which were low-cost and, allowed the use of multiple brands. For example, Qantas has been success among the subsidiary airline companies (Yuri, 2013). The subsidiary companies have been working in close ties and incorporated innovative low-cost operations — that has resulted to sustainability in the current Asian economy. The Association of South East Asian Nations (ASEAN) and Single Aviation Markets (SAM) that liberalize multilateral company operations also link LCCs closely with crucial measures that are taken. The formation of ASEAN and SAM has been influential in creating agreements between bilateral states, implying further collaborations in the airlines. Furthermore, ASEAN and SAM have led to projections of further economic growth; expected to be