Consolidation of Airlines
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1. How does consolidation improve airlines' revenues? How might it improve their costs?
2. Are there any disadvantages to the airlines consolidating?
3. Why do you think Southwest Airlines is (on average) one of the most profitable of the U.S. airlines? Should it attempt to integrate with other airlines? Why or why not?
4. How do the corporate strategies of U.S. domestic airline carriers (like JetBlue, Southwest, Frontier) contrast with the international carriers (like United Airlines, Delta, American Airlines)?
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Solution Summary
This solution discusses various aspects of US airline, including consolidation, profit, and revenues.
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1. How does consolidation improve airlines' revenues? How might it improve their costs?
Consolidation played an integral role in helping airlines such as Delta and Northwest in 2008, United and Continental in 2010, Southwest and Air Tran in 2011; and American and US Airways in 2013 (Trefis Team, 2014). Consolidation made it easier for airlines to preserve capacity discipline. This enabled airlines to operate with fuller planes as well as dictate their airfares with ease. With fuller planes, and airlines being able to increase their airfares it helped to improve the airlines financial health. During economic downturn, airlines search for ways to survive, and a viable option is consolidation. While consolidation is not a new concept, it has certainly benefited airlines as they focus on service and revenues. The most common reasons for airlines to consolidate are to improve cost, expansion of their network; and presence in key markets and entrants into emerging ones (Hits, 2014). The advantages of consolidation are cost reduction through economies of scale the handling of services, joint purchasing, and shared facilities (Hits, 2014). Consolidation also gives airlines the ability to grow their network and market share. Consumers also benefit from consolidation through things such as joint check-ins, more choices in destination, and shared loyalty programs.
2. Are there any ...
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