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May 2003
Developed in association with Dr.
Kenneth Button, George Mason University, Fairfax, Virginia
Note that this report was developed
using data and information from the Spring of 2003.
Industry events since that period are not reflected
in this report.
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Europe's aviation industry is in a state of flux. The move
toward a single European market, and corresponding liberalization
and privatization initiatives, mean that traditional models
based on a national "flag carrier" likely are not sustainable.
Furthermore, low-cost carriers such as Ryanair have shown
that new ways of doing business can be successful and can
lead to important changes in industry conduct and performance.
However, the number of carriers operating in Europe and the
many types of services offered mean that this industry is
highly fragmented, and poised for consolidation. As KLM's Leo
van Wijk indicated when KLM's merger with Air France was
announced, "All airlines know that the structure of our industry
cannot be maintained."
Only a number of studies have
been conducted on the structure, conduct, and performance
of Europe's aviation industry. This study presents a comprehensive
assessment of the industry's structure, investigating alternative
analysis methods. It concludes that the heterogeneous nature
of this complex industry is best captured by an industry
classification scheme that accounts for the differences
in business models that airlines tend to operate under. It
demonstrates how the business models deal with competition,
and presents the basis for more targeted industry and policy
analyses.
Table of Contents
1. |
Introduction |
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2. |
Analysis of Industry
Structure |
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2.1 |
Carrier Classification
Schemes Using Measures of Size and Route Class |
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2.2 |
Accounting for Competition
in the Industry Structure Analysis |
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2.3 |
The Importance of
a Business Models Approach |
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2.4 |
Industry Classification
Based on Business Models |
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2.5 |
Summary |
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3. |
Interface
With Non-Airline Modes |
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3.1 |
High-Speed Rail Services |
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3.2 |
Air Trucking |
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4. |
Moving
Forward |
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Appendix
A: Synopsis of Recent Literature on Changes in Industry
Structure |
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A.1 |
Low cost Carrier Emergence |
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A.2 |
Towards New Business
Models |
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A.3 |
Liberalizing the Skies |
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A.4 |
Summary |
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Appendix B: Data Issues |
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Appendix C: Bibliography
(Not Exhaustive) |
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1. Introduction
The purpose of this study is to develop
a more comprehensive understanding of the structure of
Europe’s aviation industry and of the level of competition
that characterizes the industry. Specifically, this report:
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Documents the results of multiple
approaches for classifying the carriers that operate
in this heterogeneous marketplace;
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Presents a classification scheme
based on business models supplemented and enhanced
by the results of other approaches to industry classification;
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Defines, describes, and characterizes
the industry classes that comprise the scheme; and
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Sets the context for further analysis
of modal competition issues, especially from high-speed
railways.
This report is structured into four
sections, including this Introduction, and three appendices.
Section 2 presents the analysis on industry structure,
especially the approaches for classifying airlines as
well as the classification scheme. Section 3 presents
an investigation of modal competition issues, in particular
competition issues between the airlines and high-speed
railways. Section 4 provides a brief summary. Appendix
A provides a review of some of the most pertinent literature.
Appendix B discusses data issues and provides examples
of the data that are available for this study. Appendix
D provides a bibliography.
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