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Extensively revised and updated edition of the bestselling textbook, provides an overview of recent global airline industry evolution and future challenges. Labor Relations and Human Resource Management in the Airline Industry ( Pages: ). Dr. Jody Hoffer Gittell Ph.D. Andrew von. Editorial Reviews. From the Back Cover. The Global Airline Industry, Second Edition provides a comprehensive introduction to the global airline industry.
According to Luo , cooperation between Under the auspices of the International Air Transport As- competitive rival firms is in response to increasing haz- sociation, a tradition of cooperation between airlines was ards from institutional environments i.
The rise of constella- as a springboard for governments to ease restrictions on tions in the industry is due to not only the group-based cross-border cooperation among airlines paving the way advantages of groups stemming from the resources and for alliances to emerge. However, this has not fully mate- capabilities controlled by the constellation, but also to rialized. The European Union followed the U.
Airlines need global by establishing the Single European Aviation Market partners to help them overcome some of the constraints, SEAM in , and since then, the forces of globaliza- such as bilateral barriers and ownership restrictions. Ownership and control restrictions do not allow mergers within the European Union. This meant that for cross-country mergers or takeovers in many less lib- airlines could develop larger networks through mergers eralized environments Oum et al.
These have a and acquisitions to help them compete in the global envi- Thunderbird International Business Review Vol. However, governments around the globe often in , some Asia-Pacific airlines joined the alliances, think and act locally rather than globally.
The cooperation in developing countries to achieve competitive advantage between Air France and the African airlines was a new on their own, but many have been dissuaded from join- phenomenon, but over the years this type of cooperation ing the GAAPs through various means. Some GAAPs such has evolved from bilateral to multilateral partners. This was probably route networks to attract more passengers to give them because no suitable or viable candidate emerged.
The in and became the first African airline within any of alliances have evolved from having been very rare in the the GAAPs see Table 1. Recently, Egyptair has followed s to being an essential and common feature of air- the SAA example by joining Star Alliance. As Bowen duction, and branding as firms attempt to achieve com- observes, the near absence of African airlines in these petitive advantage Vaara et al.
There are various alliances means that African cities are served by alliances strategic alliances in the airline industry. In addition, there in the global airline industry.
The developments call for are also the GAAPs, which encompass various airlines an examination of factors that mediate successful entry under one umbrella. Initially, the alliance included Star into these alliance constellations. DOI: Code-sharing ar- airports in countries and carries annually over rangements are a pivotal part of strategic airline alliances million passengers, as shown in Table 2.
It also employs Oum et al. It occurs when an airline puts its , staff members at various airports and offices on its identification codes to market flights operated by another behalf. This range of facilities allows partners to combine carrier as its own flights Bailey, ; Evans, Through this level of cooperative Strategic alliances have assumed increasing impor- relationships, the global rivals work together to collectively tance in the industry since the costs and risks associated improve performance by sharing resources and commit- with serving markets around the globe have grown to a ting to common goals—that is, pursuit of global-reach point where it is beyond the capacity of most interna- expansion and profit Luo, For airlines in developing countries, particularly As shown in Table 2, the extensive global networks of in Africa, this represents a major challenge.
Successfully destinations served by each group are unmatched by any in- negotiating themselves into these constellations will be an dividual airline, and this has become their key selling point.
This is done through electronic ticketing and infor- mation and communication technology. This allows them real-time access to information that ances. In this context, the motives and benefits are broadly helps members to sell tickets to a wider range of destinations categorized into two categories.
Speed and able airlines within a strategic alliance to reduce redundant capacity in reaching market is a key motivator common to capacity Eliasson, Consequently, the members are all airlines seeking to become global players. These alliance networks can pro- them to share certain facilities at airports around the vide member firms with important connections facilitating world.
The alliances provide member firms with access to internationalization of operations. The network provides information, knowledge, resources, markets, and technolo- member firms with not only the opportunity to access gies. For instance, since its formation in , Star Alliance knowledge, resources, and markets, but, more important, has become one of the most integrated airline networks, the necessary strategic foundations for airlines to improve with members cooperating on a range of activities.
Star connectivity of its flight operations. They exploit a number of avenues such as joint downloading of fuel, aircraft, and engineering services or parts to gain TABLE 2 Global Airline Alliances Groupings economies of scale. This means that they are able to Countries reduce maintenance costs and limit the cost of staff train- Destinations ing to achieve economies of scale.
With strong bargaining Passengers Millions GAAPs are a and collaboration in the industry. The of scale in aircraft and fuel downloading, maintenance, and cases presented are fundamental to our understanding ticketing and reservation systems. But these benefits have of these issues because not only did they exemplify the eluded airlines in Africa.
It is to this issue that we now turn nature of reforms, but also fundamentally shaped the our attention as we explore the reasons why many African nature of cooperation and collaboration among African airlines are largely operating in the margins of the GAAPs.
WAAC was a joint venture participation in alliance constellations.
In organizational factors include managerial and technical the late s and early s, many West African states capacity, firm size, and route network. The external fac- gained independence from their colonial masters, and this tors are broadly institutional in nature and include state precipitated the disintegration of the WAAC. When Ghana ownership of airlines and market reforms. This was sential to enhance our understanding of the historical partly because the WAAC was associated with colonial rule context within which these factors are placed.
It must be and its negative impact on Africa. The airline and other members have gone through various stages of survived as a statutory corporation when the three coun- development. Having undergone years of turbulence, the tries achieved independence and created the East African operation of Sierra Leone Airways was suspended in Common Service Organisation in , which then be- The operation of the carrier was resumed in under its came the East African Community in The ideological current name, Sierra National Airlines.
In ; Goldstein, The breakup of EAA led to the the case of Gambia Air Shuttle, following years of underper- creation of Ugandan Airlines, Air Tanzania, and Kenya formance it ceased operations in and was replaced by Airways as three autonomous carriers.
Today, privatized Gambia Airways in , which also went into liquidation Kenya Airways is one of the most profitable airlines in Af- in the same year Lyall, In , the Gambian gov- rica. Similarly, the disintegration of CAA, which was a joint ernment, with the support of Gambia Telecom, started the airline of Southern Rhodesia now Zimbabwe , Northern operation of Gambia International Airlines, but it appears Rhodesia now Zambia , and Nyasaland now Malawi , led that the carrier has ceased operations.
Over the years, a to the creation of three autonomous carriers—Air Malawi, number of factors, such as servicing of too many routes, state Air Rhodesia, and Zambia Airways. Air Afrique Air France, with the support of the French government, helped with the formation of African airlines such as Air Over the years, a number of Afrique. The agreement paved the way for the countries to pool traffic rights and marketing resources, ference, and undercapital- and share the investment required to establish an inter- state route system as well as long-haul routes to Europe ization, eventually led to the and additional destinations Sparaco, This alliance was successful in serving the interest of the governments for and , respectively.
The carrier went into bankruptcy in , en- tangled with problems such as state interference and over- employment. In addition, there is also a rising number of small African airlines today. African airlines tend to be relatively small in size compared with rivals in developed countries, and handi- Control of Scarce Resources capped by limited organizational resources and capabili- According to Gomes-Casseres , for a firm to gain ties to compete against established global players such as entry into these types of alliance groupings, it must control Air France—KLM and British Airways.
Their networks and scarce but valuable resources that enhance the resource services tend to focus on a few regional and domestic base of the constellation. This was particularly the case destinations. Some are motivated to enter international when South African Airways became the first African air- markets, but they face several constraints, such as lack of line to join Star Alliance.
It became a member mainly due access to finance and lack of technical and managerial to new routes and destinations it was able to add to Star expertise. For instance, SAA had a wide-ranging such as poor financial position of an airline affect its pros- network across Africa, which provided customers with ac- pects of becoming a member of the constellations. How- cess to 21 destinations on the African continent as well ever, the small and regional African carriers provide ser- as flights across both the North and South Atlantic Star vices on routes that are often considered unprofitable by Alliance, This helped to enhance flight options major carriers such as British Airways and Air France.
In other words, potential candidates are required main cities Accra, Kumasi, and Tamale. It also provides to possess an extensive network with efficient cost structure regional services to Ouagadougou in Burkina Faso. The key point here is that to gain membership into these alliances, a firm must Geographical Coverage possess distinctive resources and capabilities that contrib- ute to the joint enterprise.
In an environment like the Alliance groupings have to decide how to organize their airline industry where collective competition exists, firms operations geographically if they are to achieve competi- need to compete and gain competitive advantage over ri- tive advantage. The core of activities of most global air- lines or members of GAAPs is centered on the tripod of vals not only through the resources and capabilities within Europe, North America, and Asia.
Therefore, the alliances would only require a few potential The existing members of the groupings are endowed with members from Africa.
As observed by Bowen , lack specific resources but require additional resources to be of market attraction has led to the exclusion of the poorest competitive in emerging markets. As Hitt et al. However, as the sector serve, developed-market firms tend to seek local firms with in Africa continues to grow, these groupings will be forced local market knowledge and complementary capabilities to seek potential candidates in the region.
Currently, there are more accepted that states could operate airlines, and few ques- DOI: In such an environment, Paik observed, any seemingly normal courses of action for a firm entering into privatization of SOAs has a strategic alliance might be met with hostility from the host government.
In addition, such government ownership recently taken off and many of firms has often constrained their managerial capacity because of the presence of government influence Paik, airlines are at least partially As a result, there is a lack of corporate independence to even negotiate alliances due to state involvement in the owned by governments, firms management and control of such firms.
Amankwah-Amoah and Debrah further ob- are heavily limited in the ac- served that SOAs in Africa are closely associated with national security and often viewed as a source of national tions they can take in order pride.
Some governments also view privatizing state-owned airlines as tantamount to committing political suicide due to gain higher efficiency and to its close association with national identity. Therefore, by retaining some control, governments ensure that they profits to attract potential have some input into how these firms develop, and whom they enter into alliances with.
Not having the freedom to partners. The partial state ownerships also provide an avenue for governments to deter any potential alliance if it feels that potential partners could cause any undue harm to the state. Privatization creates an avenue for resource- tioned the desirability of a state airline monopoly. Since the constrained state-owned firms to raise funds in the open late s, when deregulation took off in the United States, market and find suitable partners.
State involvement has there has been a shift toward privatization of state-owned constrained some managers from making their own deci- airlines SOAs in the global airline industry. In the s sions and acquiring expertise, which played a key role in and early s, privatization constituted a major policy tool the demise of carriers such as Ghana Airways, Nigeria Air- for improving the performance of state-owned enterprises ways, and Uganda Airlines. Reducing state involvement and SOEs in Africa and, hence, reducing the burden imposed control of airlines would provide them with the freedom to on states through nonrecoverable loans and subsidies Ariyo make their own decisions with regard to alliance partners.
One of the classic cases is Kenya Airways, which and security.
This provided the governments, firms are heavily limited in the actions they platform for the airline to engage in joint ventures with air- can take in order to gain higher efficiency and profits to at- lines such as KLM Cargo and Martinair to gain experience tract potential partners.
As Amankwah-Amoah and Debrah in the cargo business. This study represented to local knowledge in operating in Africa. This is a good one of the first attempts to integrate a resource-based view of example of how strategic alliances can help to facilitate the strategic alliances with the concept of alliance constellations transfer of knowledge, capital, and management expertise.
In this endeavor, we respond to strength to become an associate member of the SkyTeam to the call from some authors that studies of the alliances alliance following a recommendation by KLM Flottau, phenomenon should not be constrained by any single and The yan example is a model for other African governments.
In spite Since the late s, various attempts have been made by of the limited degree of success in removing some of the African governments to ease restrictions in intra-African restrictions in intra-African aviation and some airlines such aviation to pave the way for airlines to extend their route as South African Airways and Egyptair joining the constella- networks to other regions of the continent.
There are resources e. In an increasingly and larger airlines elsewhere in a fully liberalized envi- competitive landscape, managers in these firms must ronment. The regu- bilities, but also those outside their boundaries. A sole nership, interlining, and code sharing with other airlines. In possess themselves for international operations.
For Afri- the twenty-first century, it is essential for African airlines to can airlines, cooperation and collaboration are essential reach out to other firms who hold resources complemen- and offer them the opportunity to pull their limited tary to their own. By combining their resources, these firms resources together to strengthen their competitive posi- stand to benefit from the extensive network to eliminate tions.
As previously noted, collaborating with potentially duplicated costs and exploit synergies. Our analysis also has policy implications at the regional level.
In helping to improve the competitiveness of carri- Future Research Directions ers, African governments have a role to play in removing Although we have made a fairly good attempt to integrate constraints such as complex bilateral agreements that re- the resource-based view of strategic alliance with the strict the ability of carriers to fully utilize their resources, concept of constellations, there are two significant issues such as planes to access new markets.
Hence, attempts that researchers need to address in the future. First, the should be made to speed up the implementation of the two theoretical underpinnings need to be integrated in a YD to improve market access for carriers.
In addition, more comprehensive manner than has been attempted governments should encourage weak and strong carriers here. Future research should attempt to apply the con- to engage in more cooperation and collaboration as a cepts in a different industry. However, combining two or more involvement in a constellation needs to be explored in weak African airlines will not necessarily make them ef- advancement of knowledge in this field.
It also has the potential of lessening competition on certain routes they are currently serving. Ac k n o w l e d g me n ts Implications for the Alliances The preliminary version of this article was presented at For the alliance groupings, the main challenge is whether the 35th Annual Conference of the Academy of Inter- to expand the group in an effort to increase aggregate ca- national Business U.
Choos- We are extremely grateful to the three anonymous ing the latter could result in granting membership to TIBR reviewers and Editor Mary Teagarden for their weak firms from developing countries, which could erode helpful suggestions in the preparation of this manu- the competitiveness of the constellations. A way needs to script.
We also thank Christos Antoniou for his useful be found to encourage small and less resource-endowed suggestions. His research interests include liberalization, organizational failure, organizational learning, international business strat- egy, and the airline industry in emerging economies.
His research papers have appeared or are forthcoming in journals such as the Group and Organization Management and International Journal of Human Resource Management. Yaw A. In addition, he has worked in Africa, Canada, and the United States. Thunderbird International Business Review Vol.
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Reynolds 9. Airline Operations Control Centers Objectives and Process