European Airlines

Corporate Strategy---European Airlines 1993-1997 ⇨ Back ground and PEST analysis For many years, European Airlines are considered to be feed by the government. Before 1990s, the introduction of deregulation, this market was highly controlled by the government. Automatically, the result is high price as well as poor management and service. Consumers, of course, complained about the bad perform of them. Like most of the state-owned businesses, although some of the airlines intended to lower their price by cost cutting, redundancies and reorganization because of the increasing competition pressure, most of them failed because of the government interfere and strong labor reaction. Back in 1978, Airline deregulation first introduced to Americans. The new act allowed new airlines to come, permitted them to choose lines individually and release the pricing power. Till 1993, the price had decreased about 20%. A highly profitable service, transcontinental long haul flying, had exceeded 35% of the total. There in another one thing needs to mention: U.S. applied aggressive strategy, which is considered illegal in Europe. Refer to the fifteen years innovations in U.S, European politics finally made up their minds to repeal their restrictions in 1993. It is predicted that the European airlines environment might be completely open up in 1997 hopefully. In other words, there is five years for domestic airlines to adjust their strategies. Poter’s 5-force model ➢ The extent of competitive rivalry/industry competitors. Considering European market as a whole, the threat comes from airlines of other continents. This refers to those except cross-Europe and domestic routes. If we choose one airline specifically, for example Lufthansa airlines, its competitors most are inside the Europe. (E.g. British Airways, Deutsche BA, Air France, Alitalia etc. Further more, it was also threaten by some new entrants ➢ The threat of potential new entrants This involves