The struggle for competitive advantage in the airline industry

317 Pages·2017·20.81 MB·English

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The struggle for competitive
advantage in the airline
industry
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• A Doctoral Thesis. Submitted in partial fulfillment of the requirements
for the award of Doctor of Philosophy of Loughborough University.
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Publisher: (cid:13)c Gianfranco Cuccaro
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TIRE STRUGGLE FOR COMPETMVE ADVANTAGE
IN THE AERLWE INDUSTRY
By
Gianfranco Cuccaro
A Doctoral Thesis
Submitted in fidfilment the
partial of
for
the
requirements award of
The Degree Doctor Philosophy
of of of
Loughborough University
April 2002
Gianfi-anco Cuccaro, 2002
ACKNONMEDGAUNTS
May I take this to thank first foremost Professor Peter Lawrence for his
opportunity and
help, belief in friendship during
the
guidance, supervision, my capability and course of
this
research.
I like Professor John Wilson, for his
to thank
would also counsel given and availability
help in finding funding in fieldwork in Europe.
to to
me available order undertake my
Loughborough University Business School, deserve for
thanks their
also my sincere
financial
this
support of research.
My in investigation
thanks to those to the
many also go all who agreed participate and
high interviewed. A
to the
particularly some of profile senior managers of airlines very
interviewed for frankness
special-thanks to three of the vice presidents their amazing
in to Also I like to thank the
and cooperation responding my queries. would manager
directors important in Europe.
two them the
of airports one of most
A final big thank to brother Giovanni Cuccaro, Carmela
you goes my parents and
Cuccaro Lorenzo Cuccaro for their financial I
and patience, moral support and support.
would like to thank also all my friends, but particularly Charlie Bryson for his support
Maiko Komori for being Dr Janet Bunker for her
and around and supportive and advice
and support. Finally, a special thank to Jeff Chamock Front of House Manager at the
Corn Exchange for his flexibility he has
to
understanding, great support and given me
help in
me concentrate and succeed my research.
ii
ABSTRACT
The this thesis is to the in their
aim of examine way which civil airlines exploit
in to This is done the
resources order gain and sustain competitive advantage. within
framework based
the than the thought
of resource-based view, rather using market view,
to test that
without of cause presuming paradigm.
The first fairly detailed the industry. This is felt to be
chapter offers a account of airline
be industry The
to the thesis to
necessary render accessible readers who may not experts.
literature based
the the
second chapter examines on and overall merits of resource and
based
the the
market view, reformulates research objectives and outlines methodology,
data in by industry
the
primarily use of published specialist sources, supported personal
knowledge.
The develop the thesis to
subsequent chapters with regard cross airlines ownership
leverage by bigger
the
stakes and occasional merger and acquisition, exercised airlines
issue
the
at airports, and of strategic alliances.
The findings from in
that this that
emerge exercise are a sense checked via a series of
interviews key informants, based
to the
with and some qualifications resource view are
before
offered to the
proceeding a summary statement of conclusion.
iii
DISCLAMER
A IFf
the time
note on
While this thesis in 2002, PhD began in
was submitted spring of my studies actually
1999, I first in 1999,
summer of and started writing part of the thesis the autumn and
/07*ý
it Oh before final
many parts of re completed sometime submission.
But this is industry I have been
thesis,
a volatile and muchechanged while writing my
including in
changes ownership and ownership stakes, alliances membership,
bankruptcy, the beginning in 2001 impacting the
world economic slowdown and on
airlines, and of course the terrorist attacks in New York and Washington on the 11
September 200 1.
I have tried to take the these by facts,
count of some of changes, correcting changing
tenses, On
verb and rewriting portions of the thesis. the advice of my supervisor,
however, I have done facts,
this to the
not comprehensively preferring show which
shaped events and the motivation of initiators at the time they happened. My thesis is
not meant to be an up-to-date snapshot of the industry on the day the thesis was
but in industry
submitted, the the
an examination of competitive processes at work
based
for
the the the
most part on analysis of recent past.
iv
CONTENTS
H
ACKNOVMEDGMIENTS
..........................................................................
m
ABSTRACT
..............................................................................................
DISCLAIMER IV
..........................................................................................
v
CONTENTS
................................................................................................
GLOSSARY OF TERMS AND DEFINITIONS IX
...................................
xw
AIR FREEDOM RIGHTS
....................................................................
X-V
LIST OF FIGURES
.................................................................................
xv
LIST OF TABLES
...................................................................................
CEW? TER I
.................................................................................................
1.0 BACKGROUND OF TIRE AIRLINE INDUSTRY 1
...........................
1.1 CHARACTERISTICS OF THE AIRLINE INDUSTRY 7
..................
1.1.1 LABOR INTENSIVE NATURE 9
.......................................................
1.1.2 PRICING POLICY AND PASSENGER DEMAND 10
....................
1.1.3 HORIZONTAL AND VERTICAL INTEGRATION 13
...................
1.2
AIRLINE
GROVV'M
........... 00000.0 0 00 0*000 00000 *. * e. ooooooo*15
1.3 WORLD AIR-LINES AND EUROPEAN AIRLINES 23
.....................
1.4 EUROPEAN AIRLINE INDUSTRY AIAWKET 30
.............................
1.4.1 STRUCTURE OF TBE EUROPEAN AIRLINE INDUSTRY
AIARKET 31
...................................................................................................
1.5 AIRLINE DEREGULATION AND OPEN SK[ES 36
.........................
1.5.1 OBJECTIVES BEHIND EUROPEAN AIR TRANSPORT
LIBERALISATION 39
..................................................................................
V
1.6 CONGESTION AND OVER CAPACITY 43
.......................................
1.7 AIRLINE, OPERATING COSTS 45
......................................................
1.7.1 BREAK DOWN OF AIRLM COST 48
...........................................
1.8 DEVELOPAIENT OF TIRE WORLD AIRLINE INDUSTRY 53
.......
1.8.1 ALLIANCES, CODE SHARING, MERGERS 54
.............................
1.8.2 ALLLANCES 55
.....................................................................................
1.8.3 CODE SHARING 58
.............................................................................
1.8.4 M[ERGERS
.......................................... 000 00000 6.. 6060000 0000000000 058
1.8.5 AIRLINE ALLIANCE SHAPE 59
......................................................
CEUPTER 65
II
..............................................................................................
2.0 RESOURCE BASED-VIEW AND COMPETITIVE ADVANTAGE
0 ........ 0 ..... 00000 .... ...... 0 ... ..... 0000000000 ...... 00. ... 0.65
2.1 OVIERVIEW 65
............... 000 ..... 000 ..... 0 .............................
2.2 SUSTAINING COMPETITIVE ADVANTAGE AND CORE
COMPETENCE
70
.........................................................................................
2.3
OVERVIEW
OF TBE AIARKET-BASED VIEW AND
RESOURCE-BASED
VIEW CONCEPT 76
...............................................
2.3.1
INDUSTRIAL ORGANISATION (MARIKET BASED-VIEW). 76
2.3.2 RESOURCE BASED-VIEW 80
...........................................................
2.3.4 COMPETITIVE MATRIX 93
.............................................................
2.3.5 INTENTION AND METHODS 101
....................................................
vi
CHAPTER M 103
..........................................................................................
3.0 AIRPORTS AND AIRLINES RELATIONSIEEP 103
..........................
3.1 TYPES OF AIRPORT 107
......................................................................
3.2 AERONAUTICAL AND NON-AERONAUTICAL SOURCES OF
INCOME 109
..................................................................................................
3.3 COSTS INCURRED BY AIRLINES AT AIRPORTS AROUND
THE WORLD 112
..........................................................................................
3.3.1 AIRPORT TARIFFS AND CHARGES 115
.......................................
3.3.2 COMPARISON OF AERONAUTICAL AND NON-
AERONAUTICAL CHARGES AT SOME AIRPORTS 118
....................
3.4 BARGAINING POWER OF AIRLINES TOWARD AIRPORTS
120
* ... *000 ... 0.000-009 .... * ... 00.00 ..... 0 ......................................... o .................................
3.4.1 AIRPORT SLOTS 121
..........................................................................
3.4.2 ADVANTAGE AIRLINES CAN DERIVE FROM AIRPORTS
127
. -. 0.00-0 ... ...... 00 ... ...... oooo. oo ... ooo.
CHAPTERIV 136
...................... .............................................
4.0 MERGERS AND ACQUISITIONS 136
................................................
4.1 INDUSTRY CONSOLIDATION THROUGH MERGERS AND
ACQUISITION 140
........................................................................................
4.2 EFFECT OF MERGER AND ACQUISITION IN TIRE WORLD
AIRLINE MARKET 147
...............................................................................
4.2.1 CONSEQUENCES OF POSSIEBLE MERGERS AND
ACQUISITIONS IN THE WORLD AIRLINE INDUSTRY 149
..............
vii
CEUPTER V 163
............................................................................................
5.0 DYNAMIC OF STRATEGIC ALLIANCES INTIHE AIRLINE
01DUSTRY 163
..............................................................................................
5.1 AIRLINE ALLIANCE RESEARCH 167
..............................................
5.2 AIRLINE ALLIANCES 176
....................................................................
5.3 PROPERTY/ COMPLEXITY/ OF AIRLINE ALLIANCE 179
.........
5.5 CHOICES AND SYNERGIES AMONGST POTENTIAL
PARTNERS IN AIRLINE GROUPING 198
...............................................
5.6 AIRLINE GROUPING ANALYSIS AND MAR]KET STRENGTH
-ooo-00.00.0 ... ... 0 ........................ ooo*. *. * ........... 0199
CHAPTER VI 227
..........................................................................................
6.0 INTERVIEW ANALYSIS 227
................................................................
6.1 STRUCTURE AND EXECUTION OF INTERVIEWS 227
................
6.2 LE%lTrATIONS 228
.................................................................................
6.3 THREATS 237
..........................................................................................
6.4 CONFIRNUTION 240
............................................................................
CEUPTER VIII 261
.........................................................................................
7.0 CONCLUSION 261
..................................................................................
7.1 CONTRIEBUTION AND ORIGINALITY 271
.......................................
8. REFERENCES 273
....................................................................................
viii