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Strategic Management: Airlines industry - Essay Example

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Strategic Management: Airlines industry

some of the recurring costs that an airlines industry requires to survive. The airlines industry is a complex one. Therefore, the industry is attractive as such but with the kind of investment required in carrying out the business, it is very difficult for new entrants to challenge the existing players, as is the norm is many other sectors like retail, IT services etc. Deregulation of market in EU did open up the field for new entrants, but the developments that followed have firmly established the high levels of competition prevailing in the industry.
The Scandinavian Airline Systems (SAS) group is an established player in the sector, with over 60 years of experience in the sector. SAS group is also one of the founder members of the Star Alliance. Formed in 1997, the Star Alliance of a number of leading players in the aviation sector is an effort towards consolidating the respective positions of the airlines in such a manner that competing companies do not end up working at cross purposes.
The airlines industry is a high risk industry as well. Particularly after the onslaught of SARS virus and 9/11 events, the airline companies are required to be doubly careful in handling the security matters, installing safety features, recruiting new people etc. The onset of low cost airlines has further made the field competitive while squeezing the profit margins. As a result of decreasing profit margins and the growing realisation of the need to consolidate their positions, a major trend within the global airlines industry has been for companies to seek strategic alliances with other airlines and benefit from synergies in operations. The Star alliance is a good example of such a realisation.

The growing competition has proved to be a boon for the travellers actually. With airline companies trying all out efforts to woo the customer, the number of alternatives for the customer have actually increased. This has led to increased emphasis on improving the quality of services being offered to the customer. Providing quality on board services, perfect baggage handling, adhering to the timeline i.e. punctuality, presenting pleasing faces during customer handling etc. are some of the benchmarks for the airline companies. The fact that SAS has been declared as Europe's most punctual scheduled airlines during the past six months points out the emphasis being placed by SAS in making the journey comfortable for its customers. Such measures are in fact are a prerequisite not only for maintaining a decent level of profitability but even for survival in the industry. The closure of airlines like Hong Kong's 'Oasis', after just about 18 months of its launch1 or that of another Low-cost US carrier Skybus Airlines within less than a year of its start off are an indication of the cut-throat competition prevailing within the industry. It is worthwhile here to mention that the recessionary trend started off with the US sub-prime mortgage crisis is also making the life difficult for the airline industry. ATA, Aloha, American, Southwest, Delta etc. are some of the names which have been facing the pinch. In order to survive in the industry some airlines are also resorting to mergers and acquisitions. Merger of Delta Airlines and Northwest airlines2,

2. Identify, analyse and discuss SAS's group unique resources and competences, their ...Show more

Summary

Airlines industry is the kind of industry which requires huge investments yet the level of competition is such that airlines often keep investing for years together and keep waiting for break even. The industry is investment intensive from the beginning, and requires continuous replenishment throughout the operational activities as well…
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Strategic Management: Airlines industry essay example
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