Airlines and their focus on cost control and productivity

Abstract

Increasing competition and other important drawbacks, such as the terrorist attacks of 11 September 2001, the severe acute respiratory syndrome (SARS) and the global economic downturn, have led airlines to face unprecedented and severe financial turbulence. It is usually argued that the bottom line of this crisis is larger than the impact of 9/11 since so many airline managers have been forced to undertake cost reduction programmes which allow airlines to survive in this global industry. The rest of the chapter is structured as follows. A review of the European air transport deregulation is presented in Section 2; Section 3 reviews the different business models of the airlines. In particular, we will focus our attention on the development of low-cost carriers’ (LCCs) competition. The different legacy carriers’ strategies with respect to the new threats introduced by the competition of low-cost carriers will be analysed in Section 4; in Section 5, we will study the role of other sectors such as airports, air traffic control and regulators, and how these sectors affect the competitive result of air transport markets. Section 6 concludes.