Strategic Management

Airlines Industry Case Study

Recap of Lecture
The environment as a layer around an industry
and firms
Importance of interface and interactions between
firms and institutional environment
Government, regulatory policy and the capital
markets key institutions
Use of PESTEL Framework to identify key drivers
of change and plan scenarios
Strategic Behaviour by firms that seek to
countenance institutional constraints
PESTEL Framework
Source: Johnson, Whittington and Scholes, 2011
Airline Industry
Political Factors

National flagship
Security controls
Restrictions on migration
Granting access to airspace
Employee strikes (air traffic control; baggage
handling)

Airline Industry
Economic Factors

National, regional, global growth rates
Fuel prices
Foreign exchange rates
The price of landing slots/availability of land
Business travel versus leisure travel

Airline Industry
Socio-cultural Factors

Rise in travel by elderly; student travel

Incidence of second holidays

Emerging economies (cultural distance)

Airline Industry
Technological Factors

Fuel efficiency and new materials
Scale of aircraft
Security checks
Business teleconferencing, Skype and on-
line services

Airline Industry
Environmental Factors

Pollution and emissions

New runways and availability of landing slots

New materials (Dreamliner)

Airline Industry
Legal Factors

Traffic control; availability of landing slots

Anti-trust and other regulations (impact both
of the above)

Safety

What do we conclude?
Many of the factors are linked
- technological changes driven by (international)
emission targets
- rise in elderly travel related to economic growth
and improving healthcare
Identify key drivers that have high impact
now and in the future (cyclical or structural)
The combined effect of some of the factors
is likely to be most important

What do we conclude?
Dynamic analysis: consider future outcomes
by simulating various scenarios
- what happens when oil price is at $150, $60?
- what happens to travel after a terrorist attack?
- what happens when /$ rate is 2.00 vs 1.00?
Impact affects all firms in the industry and
there is a link to other industries (hotels)
Some firms more sensitive than others
(ANA; Skytrain)