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Legacy Carriers Airlines and Future Challenges - Research Paper Example

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This study “Legacy Carriers Airlines and Future Challenges” examines the main challenges faced by the full service carriers in the USA and Europe and also attempts to examine whether these carriers are able to survive these challenges…
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Legacy Carriers Airlines and Future Challenges

Download file to see previous pages... The operating expenses have been increasing significantly in the period of analysis for the legacy carriers while the revenue generating capacities have not been sufficient to cope up with them. .Most legacy carriers face significant losses in 2008 while the low cost carriers operate profitably except those in Asia. Passenger preferences also favour the low cost carriers. The study recommends the need for a relook on the business and marketing strategies of the free service airlines to compete with the low cost carriers. However the success of low cost carriers cannot be considered to be everlasting and cannot be considered as the success of a business model. The legacy carriers still form an integral part of the aviation industry.
With the wave of liberalization and deregulation in the 1980s, airline industry has also undergone deregulation. Since the 1970s, there was tight regulation and rising hyper competition. The two main features of the regulated era were tacit collusion and avoiding head on competition (D’Aveni, 1995; Jarach, 2004).With the wave of deregulation, low cost carriers emerged as the new category attracting huge customers creating big challenge to the traditional full service legacy carriers. Traditional carries have found out difficult to compete with these low cost carriers in the deregulated era.
It was argued that the tight regulatory practices in the airline industry might have led to many economic inefficiencies. This in turn had resulted in achieving low cost air transportation to public which was one of the core objectives of air transport policies. Hence deregulation wave started in the industry to improve efficiency and reduce airfares through rise in competition, air networks rationalization and airline governance enhancement (Gonenc and Nicoletti, 2001).
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