Airline business strategy

Abstract

Airlines are notorious for providing lower returns on investment when compared with other corporations. As a result, airline executives implement business strategies aiming to obtain higher than normal financial returns. With the liberalisation process that airlines have enjoyed around the world (see Chapters 6 and 7), some carriers have been quite creative in fostering new approaches in terms of their business models, product differentiation and cost reduction (see Chapter 8). In addition, because of the international multiple-business-related nature of airline operations (which includes aircraft manufacturers and maintenance, distribution channels and airport logistics), these characteristics make airline strategic management a very complex exercise. A number of approaches have been used to explain strategic issues related to airlines. One of them is Shaw’s (2011) application of Porter’s classic Five Forces model to the airline industry, a framework for analysing competitive forces, for instance rivalry, substitution, new entry, power of customers and power of suppliers. Scholars have also focused their attention on analysing airline strategic decisions relating to several managerial issues, with a particular emphasis on mergers and alliances (Gudmundsson and Lechner, 2011; Iatrou and Oretti, 2016).