The Airline Industry Challenges in the 21st Century
The debate on the future of the aviation sector and the evolution of its traditional business practices is the core of this book. The new millennium began with terrorist attacks, epidemics, globalization, and the rise in oil prices which all combined to p
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Alessandro Cento
The Airline Industry Challenges in the 21st Century
Physica-Verlag A Springer Company
Alessandro Cento KLM Royal Dutch Airlines Via Modigliani 45 20090 Segrate (MI) Italy [email protected]
ISBN: 978-3-7908-2087-4
e-ISBN: 978-3-7908-2088-1
DOI: 10.1007/978-3-7908-2088-1 Contributions to Economics ISSN 1431-1933 Library of Congress Control Number: 2008932181 © 2009 Physica-Verlag Heidelberg This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: WMXDesign Printed on acid-free paper 9 8 7 6 5 4 3 2 1 springer.com
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Preface
The debate on the future of the aviation sector and the viability of its traditional business practices is the core of this book. The liberalization of the EU market in the 1990s has radically modified the competitive environment and the nature of airline competition. Furthermore, the new millennium began with terrorist attacks, epidemics, trade globalization, and the rise of oil prices, all of which combined to push the industry into a “perfect storm”. Airline industry profitability has been an elusive goal for several decades and the recent events has only accentuated existing weaknesses. The main concern of industry observers is whether the airline business model, successful during the 1980s and 1990s, is now sustainable in a market crowded by low-cost carriers. The airlines that will respond rapidly and determinedly to increase pressure to restructure, consolidate and segment the industry will achieve competitive advantages. In this context, the present study aims to model the new conduct of the ‘legacy’ carriers in a new liberalized European market in terms of network and pricing competition with lowcost carriers and competitive reaction to the global economic crises. The current evolution of the aviation sector in Europe can be described in terms of the combination of two main factors: (1) the liberalization process which began in the EU during the 1990s and the succeeding boom of the low-cost carriers. This has changed the nature of competition, as new entrants or potential entrants have different business models, especially concerning the network organization; and (2) the set of specific exogenous f
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