Deregulation in the Airline Industry: The Impact of Parallel Alliances on Social Surplus when Airlines face Different Cost Functions

By Livia Lablans

lablansOn behalf of my master thesis at VU University Amsterdam, I did research on the effects to social welfare when different cost functions are used and government intervention is incorporated within the airlines optimization problem. The analysis is carried out by means of a model in which two out of three competing airlines decide to cooperate. Both the incorporation of government intervention and the model set-up are inspired by the KLM-AF merger, which is subject to a restriction on the distribution of traffic between Schiphol and Charles De Gaulle airports until 2010. The results of the analysis show that the government restriction on the allocation of traffic via certain hub airports gives sub-optimal outcomes. Furthermore, I argue more research should be carried out on a more precise specification of the cost function within the airlines’ optimization problem since this appears to be crucial for the results of similar research.

Book Review: Flying Ahead of the Airplane

Book Review by Willem-Jan Zondag

flying_ahead_airplaneIt should be no surprise for readers of Aerlines Magazine that the global fi nancial crisis has hit the airline industry hard. Question
raises how airlines can survive and what they have to do to transform their company into a winning airline business.

With a good sense of timing, US airline industry guru Nawal Taneja published his book “Flying Ahead of the Airplane” late 2008. He claims that “Airlines willing to develop insight from foresight relating to the expected ‘step phase changes’ will eventually improve their margins. Read More

Book Review: Airline Choices for the Future – From Alliances to Mergers By Kostas Iatrou and Mauro Oretti

The formation of alliances and the combining of forces between airlines through mergers or acquisitions have become an unavoidable trend, due to limitations on obtaining traffic rights and resources. Airline alliance expert Angela Lu reviewed this book and concludes that the publication of this book is timely and the authors’ insightful observations are highly useful.

How Sustainable is Emirates’ Business Model?

By Prof. Dr. Andreas Knorr & Alexander Eisenkopf

This contribution takes a closer look behind one of the fastest growing airlines in the world: Emirates. Despite the success of Emirates so far, there is also a fair amount of skepticism with respect to the commercial viability and long-term sustainability of Emirates’ business model. In this article, the authors provide a SWOT analysis of Emirates’ business model that needs to be discussed in the broader context of Dubai’s overall growth and development strategy into which it is firmly embedded.

Airline Management at University of New South Wales

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