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The European Airlines Industry - Essay Example

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The paper “The European Airlines Industry” seeks to evaluate the macro-environment of the European airline market in terms of competition, pricing, and services. Changes in legislation and opening up of the skies led to the creation of a new segment of flyers…
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The European Airlines Industry
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The European Airlines Industry

Download file to see previous pages... Thus deregulation led to increased number of passengers. Airlines with long-haul routes continued to earn profits but smaller airlines were unable to reap the benefits. Major airlines were allowed to charge higher prices between the individual EU countries and they also signed up different agreements with the USA for long-haul flights. The European Commission, on behalf of the EU, challenged these agreements as it was against the competition rules of the EU’s Treaty of Rome. A new agreement opened up all major European airports to all carriers. This further enhanced competition as the low-cost airlines started competing in the long-haul flights. In addition, terrorism, health scares and war reshaped the European airline industry (SD, 2004). Landing fees are high at the major airports.
 More passengers are opting for low-cost airlines, thereby affecting the legacy airlines. Other factors that have affected the number of people traveling is advanced technology in teleconferencing, the downturn in the global economy, increased fuel cost and the events of 9/11. Price became controlled on long-haul routes but the legacy airlines found other means to generate profits. The legacy carriers adopted the hub and spoke strategy where they derive economies of scale through full load over long distances. This is less attractive to the smaller carriers. The smaller carriers offer no-frills, point-to-point simple fare structure but without compromising on safety although passengers are not very happy with the service of the low-cost airlines. Consolidation is also taking place in the industry. No airline has a significant competitive advantage over rivals. The airlines face a competitive threat and keep trying different strategies like entering the budget segment or focusing on the business segment.
 Global warming is an important factor that airlines consider in their strategy development. ...Download file to see next pagesRead More
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