Industry Presentations 2001 Strategy & International Business The European Airline Industry 9th November 2001

Strategy and International Business Group E Industry Presentation AEA Members

9th November 2001Strategy and International Business Group E Industry Presentation Industry Trends Consolidation Declining profit margins Failed Mergers International Alliances - e.g. Star Alliance General Industry trends before September 11th terror attacks

9th November 2001Strategy and International Business Group E Industry Presentation Factors Affecting Competition New Entrants - No Frills Airlines e.g. Easy Jet Advertising Market Segmentation Competitors Focus Increasing Consumer Power

9th November 2001Strategy and International Business Group E Industry Presentation P.E.S.T. Analysis (Political, Economic, Social, Technological.) Assessing the current market conditions

9th November 2001Strategy and International Business Group E Industry Presentation Political Factors Ownership rules and bilateral agreements Monopoly legislation Liberalisation Financial aid European Air Safety Authority Allocation of landing slots

9th November 2001Strategy and International Business Group E Industry Presentation Economic Factors Rising Oil prices Cyclical nature of Industry Global economic downturn Industry characterised by falling profits and increased competition. Distinct market segments becoming more evident

9th November 2001Strategy and International Business Group E Industry Presentation Social Factors Psychological factors - fear of flying after 11th September Attacks Global recession has negatively impacted Tourism

9th November 2001Strategy and International Business Group E Industry Presentation Technological Factors Increased security measures - Criminal database cross-checks - Cockpit security tightened - Sky Marshalls introduced Iris scans to speed up turn around time for passengers in terminals. Aircraft now capable of faster flight with greater numbers of passengers

9th November 2001Strategy and International Business Group E Industry Presentation Strategic Positioning Bowman’s Strategy Clock

9th November 2001Strategy and International Business Group E Industry Presentation The Competitive Environment Threat of new entrants Bargaining power of the firm’s suppliers Bargaining power of the firm’s customers Threat of substitute products Intensity of rivalry among competing firms Porter’s Five Forces Model

9th November 2001Strategy and International Business Group E Industry Presentation Effects of Terrorism Immediate Revenue loss - Cancellation of flights to and from the US Higher fuel costs Fear to fly Share price impact - Gulf War Comparison ‘The September 11th attacks have accelerated the recession that was looming on the European airline sector’ AEA report

9th November 2001Strategy and International Business Group E Industry Presentation Share Price Impact Immediate Impact on Industry Share Prices - Falls could accelerate trends of consolidation that characterise the industry.

9th November 2001Strategy and International Business Group E Industry Presentation Impact on Sector Performance Historic movements in Industry prices - New York attacks could have a similar, if not more pronounced effect on passenger figures than the Gulf War.

9th November 2001Strategy and International Business Group E Industry Presentation Prospects for the Future Accelerated cost cutting Consolidation - Merging of European flag carriers to reflect US market structure Greater degree of market segmentation. - Expansion of ‘no frills’ niche Recession within the Industry seems inevitable. As competition increases, airlines will be forced to further reduce margins in order to compete, or choose a strategy that will allow them higher margins ( focussed differentiation.)

9th November 2001Strategy and International Business Group E Industry Presentation GROUP E Peter Redston Susanne Wegl Alice Brader Gemma Mann Kirsty Duncan Sarah Morgan George Brown