Airline companies strategy and Open Skies Agreement

Résumé du document

From Icarus to Airbus 380, the dream of the "flying man" seems to be universal. During the 20th century this dream was becoming real through the development of the plane and airline companies which manage it. The rising need to travel has obliged the authorities to regulate this market by rules and agreements. The last trend is the "open skies" agreements which deregulate between two countries some of commercial, logistic, strategic and economic points of airline company organization. In 2005, a major "open skies" agreement about Trans-Atlantic aviation has been signed with difficulty by EU and US. By focusing on business issues, my study deals with the change this agreement will bring for airline companies, according to the key question of the case study: "What strategies might airlines adopt in this new regulatory environment?" As an answer, I have decided to divide the study in three parts.

Extraits

[...] The months following the signature of this agreement, will be critical for the countries. The best word to introduce this is anticipation. On the other hand, this new agreement will decrease the national's sky control and therefore increase the European's sky control. The sky being an essential part of countries' borders and identity, this agreement is also the first step to a European Identity. Regarding passengers travelling, new routes and air security. We will now focus on the new agreement on the companies/customers side. [...]

[...] At present just two of American airlines such as United and American have access to it. (Jeffery N. Shane.2006).This agreement will definitely change this situation. Undoubtedly EU countries will gain a lot, as USA let foreigner's investors up to hold 49% of US carries shares. Moreover in the Board use to could be maximum of 3 foreign shareholders at preset there is no clause which deal with numbers of members. According to agreement all carriers will: operate without limits on routes or capacity fix fares freely in respond to the market demand reach cooperative agreements with different airlines- in such areas like code sharing and leasing In this point we should also mention that agreement gives a huge chance to develop free trade between the EU and USA. [...]

[...] In the second part, we will study the up and out of this agreement. Open skies agreement The liberalization of the sky is going to reach a new step with the coming agreement between the United States and the European Union (Area which represent 60% of the whole market). This aviation agreement will define new rules for countries, airlines companies and new benefits for the customers. We will first see the impact of this agreement on the countries and how it is becoming the first step of a “European Identity”. [...]

[...] Firm and international companies have more financial resources to fly with up-market airlines'. Air transport industry will benefit from sufficient growth opportunities for both the hub's strategy and the low costs. In the future, business models of scheduled carriers, low-cost carriers and charter airlines will converge and overlap even more. In intercontinental traffic, traditional scheduled carriers and strategic alliances will be less vulnerable to competition. As a conclusion, it seems that low costs and “regular airlines'” will not operate on the same market and will not aim the same target. [...]

[...] This strategy will help airlines' to face their environment's threats. However the situation could be better since these companies have a sustainable competitive advantage namely hubs. As a result, in the future, planes will be bigger. As a matter of fact, passengers' frequentation is going to increase; hubs will have to reorganize themselves. The airport landscape will gradually change, the leadings scheduled carriers and strategic alliances will focus on major hubs whereas secondary hubs will have function for small partners of a strategic alliance or for certain regions. [...]