De-Regulation, Liberalization, and Concentration in the Airline Industry. (Editorial)

Management International Review, April 2002 | Go to article overview

De-Regulation, Liberalization, and Concentration in the Airline Industry. (Editorial)


The airline industry has historically been hindered from achieving a high degree of internationalization and globalization because of restrictive domestic and international regulations. Those restrictions began to work already in the early days of flying, when nations did identify the importance of planes, airlines and infrastructure facilities as an economic growth driver and as a potential military instrument. Although during the last two decades liberalization in the US, the EU and other regions has enhanced the potential for aviation competition in the respective domestic markets, specific regulations and bilateral international agreements continue to restrict significantly the competitive scope and thrust of airlines at the international level.

According to reports of the OECD and the US Department of Transportation up to now most national or regional (in the case of the ELl) airline regulations prohibit or at least limit foreign ownership of domestic airlines. Furthermore, despite the fact that bilateral international agreements, mainly so-called "open skies" agreements, are less restrictive with respect to the number and identity of airlines and the international routes or capacities that can be provided, they still do not permit market entry from airlines headquartered in third countries; this means that--for example--a US-UK open skies agreement would not allow Alitalia to fly the route London-Rome-Chicago. Also the agreements do not allow for cabotage; even the British airline BA is not allowed to carry passengers from Chicago to Los Angeles when flying the route London-Chicago-Los Angeles. Another obstacle to a higher degree of competition is caused by the natura bottleneck "infrastructure". At many international airports, the demand for take-off and touch-down slots and for gate respectively terminal facilities exceeds the available supply level. This is especially true for rush hours. Furthermore, incumbent carriers may hold a dominant position in slots, limiting the chance for new market entry. Last but not least in some countries discriminatory arrangements benefit the incumbent flag-carrier airline when it conies to the question who gains access to airport facilities. As a result of the described changes within international airline business a strange management situation occurred at least with the beginning of the nineties. Although no full liberalization took place there was a slightly increased chance for entering new international markets. On the other side full access was--up to now--not permitted. Airline managers had to decide whether to hold on to traditional and thereby proven routines, i.e. to stay at the level of mainly pure national carriers, or to develop and employ concepts which allow for international growth and higher ROIs. Some managers turned out to be real entrepreneurs. They saw the chance to establish strategic alliances. What are the firm-specific benefits of alliances? First they are effective means to lower cost and to enhance efficiency by rationalizing the system. As a second benefit they allow to expand seamless services or--in fact--services that seem to be seamless. Code-sharing alliances offer the same advantages as true seamless connections do: no additional check-ins, greater security in the case of delays or in the case of lost luggage. In combination with frequent flyer programs alliances are therefore able to enhance demand for the allied airlines. As a third benefit alliances will reduce the degree of competition in those markets, which were previously served by the distinct alliance partners. The described benefits will even grow when airlines would begin to standardize their planes and other material. Although the game with mighty alliances began only in the mid of the nineties--the oldest, still existing, and most developed alliance is the Star Alliance, founded by Lufthansa and United Airlines in 1997--the world market has changed dramatically. According to the OECD already in 1998 the major alliances One-world (core partners: American Airlines/British Airways), Sky Team (core partners: Delta/Air France) Star Alliance (core partners: Deutsche Lufthansa/United Airlines), and "Wings" (core partners: Northwest/KLM) accounted for 57% of world traffic market share.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

De-Regulation, Liberalization, and Concentration in the Airline Industry. (Editorial)
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.