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.

All For One – Factors for Alignment of Inter-Dependent Business Processes at KLM and Schiphol

By Rolf P. Perié

KLM_SchipholAs airline and hub competition becomes fiercer, airline-airport co-operation becomes a necessary option for both main carrier airlines and hub airports to face this competition together. The inter-dependency between airlines and airports in producing air-transport services is tight, i.e. their destinies are inter-twined. Their existence as viable economic entities depends upon market performance of each other. This leads to the assumption that the relation of airlines – airports serves as an example case for dyadic alignment.

Although research has been carried out regarding many forms of co-operation, little is known about specifically alignment at the business process level. By alignment of their interdependent dyadic business processes competitive advantage can be obtained; both KLM and AAS have acknowledged this.

The aim of this research is to determine Factors for Alignment for specific inter-dependent business processes at KLM and AAS. For research purposes the research question is formulated as follows:

Which are the factors for alignment of dyadic business processes at KLM and AAS?

Answers to this research question are to increase the understanding of the effect of different factors upon alignment. This research has a theoretical as well as a practical value. It develops a theoretical Delft Factors for Alignment (DFA) model. This enables subsequent development of analysis tools that quantitatively and qualitatively measure the performance of Factors for Alignment. For practical purposes, it identifies issues and maps differences and similarities present between KLM and AAS within their specific dyadic business processes. These dyadic processes are Environmental Capacity, Network Planning, Infrastructure Planning and Aircraft Stand Allocation.

This research is based upon the assumption that alignment of the dyadic business processes of KLM and AAS is achieved by addressing the issues affecting alignment regarding various subjects within each business process, as indicated by employees of these firms. By making use of interviews and questionnaires within both firms it is found that the issues present within four dyadic business processes of these firms, at three different levels of decision making, can be modeled by the developed DFA model. The model identifies the most potential of Factors for Alignment of their dyadic business processes. It is proven that the DFA model is a diagnostic tool in finding the Factors for Alignment of dyadic business processes of KLM and AAS by creating a structured ordering of the issues by interviews and questionnaires.

The research question, as formulated above, is answered by primary and secondary Factors for Alignment per business process. This also implies that the DFA model is effective for analysis of dyadic business processes.

The research methodology has proven to be viable. This would encourage application for research of other dyadic business processes at KLM and AAS, which could also strengthen their competitive advantage.

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