Strategic Management in the Airline Industry

In the last couple of decades, the advent of low-cost carriers has reinvented the airline industry. These efficient carriers offer no-frills service to travellers flying point-to-point short haul routes utilising efficient ticket distribution through direct internet offerings and utilise standardised short haul aircraft with quick gate turnaround times to maximise aircraft utilisation. South West Airlines is the pioneer in this segment in the US and EasyJet is the industry leader in this segment in Europe. Other significant players in this segment include Jet Blue in the US and Ryan Air in Europe.
The 9/11 tragedy, did cause a slump in the airline industry, but also gave valuable lessons. All the major airlines slowly woke up to the inefficiencies in their models and started drastic cost cutting measures translating into better operational efficiencies and improved margins in order to avoid slide into bankruptcy. The low cost airlines were the only ones that were able to manage the downturn due to their business models.
The major overhaul in the restructuring has gone a long way in changing the face of the aviation industry. Deregulation opened up the skies and brought in more players increasing the competition many fold. Consolidation is the name of the game and slowly the industry will consolidate into three or four major players and their improved synergies will end up contributing to a stronger airline. This focus on regional traffic will allow low-cost carriers to focus on their niche markets and improve their market share. The low-cost market is less mature in the Europe than the U.S.A, therefore there is more scope for newer routes to be opened up, and newer destinations charted out for a few years before the restructuring and consolidations occur.
From the legacy days of large airline companies monopolising the market place, the airline industry has fast become a price-sensitive industry. In the post September 11 era, the airline offerings are more commodity-like, with players who offer the lowest price and efficient services being the most profitable survivors. Most large full service airlines have been facing the brunt of the decline and are fighting for survival, trying to get out of multi-billion dollar losses and bankruptcies.
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In this changed landscape emerged the no frills airlines segment, which have achieved rapid growth in market share into the short haul European market. EasyJet, brainchild of Stelios Haji Ioannou, the son of a Greek shipping magnate who founded the company, based on the low cost, no-frills model of the US carrier Southwest, started in 1995. EasyJet is based on short haul air transport in a price in-elastic target segment and based on the concept that is that if prices are reduced, more people will fly. EasyJet flies to 33 locations in Europe with a fleet of over 120 aircraft and sells over 95% of its tickets through the Internet. It’s the leading player in the low cost market after the acquisition of "GO"(A no frills subsidiary of BA), closely followed on its heels by rival Ryanair which has now acquired "Buzz" (a subsidiary of KLM) and expanding as well. Virgin Express of Virgin airlines and British Midland’s BMI baby are all competitors in the "no-frills" sector. (Source: Case study EasyJet-The spectacular