The Motivational Drivers of Horizontal Integration Strategies – The Airline Business Case

By B. Broekmeulen

Industry consolidation or horizontal integration in the value chain has been a trend in the airline industry since its deregulation. Indeed, most of the national orlegacy airlinesflying today are a product of one or more mergersin the last decades. The need for consolidation in the airline industry is mainly attributed to the desire to offer a global and seamless service; many customers today (especially business passengers) demand a seamless service ‘from anywhere to anywhere’. Two types ofstrategies are used to achieve this goal: cooperative and integrative strategies. Although these two strategies share the same objective many different forms are being used within
those strategies.

The objective of this study is to find the motivational drivers behind these choices. The study is of qualitative nature and consists of two parts. The first part provides the theoretical background of the topic in order to create a conceptual model. The second part explains the differencesin motivational driversthrough the use of two business cases. This latter part tests the model of the first part. It appears that both strategies are motivated by drivers at the same levels(environmental, firm and relational) but the importance of the levels and the driving factors within those levels differ. In the first business case the alliance strategy seems to be chosen from a more defensive standpoint and out of necessity (competitive pressures and financial uncertainty), and the M&A strategy in the second case seems to be chosen from a more offensive point of view in order to increase market power. However, both strategies are motivated by the attractiveness ofthe assets involved, especially the route network and airports. An important drawback of this study is the extensiveness of the conceptual model, which in turn limited generalizability because only one case for each strategy could be tested.

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