British Airways and Lufthansa have both adopted the differentiation strategy where they seek to provide services unique from those of their competitors that are greatly valued by their passengers, such as complimentary drinks and a meal on board. Easyjet, Go and Ryanair have all adopted the low cost no-frills strategy, this is one that combines a low price, low perceived added value and a focus on price-sensitive market segment. This market segment is one that has not only proved high in demand but one that still has much room for further expansion. (Johnson and Scholes, 2002)
Future Trends of the Airline Industry The difficulties facing the airline industry in the coming years cannot be overstated. If a stable and prosperous industry is to emerge from the fallout of September 11, then there are serious issues that must be addressed first. The most imminent matters to be addressed are the issues of over-capacity, security, competition and reductions in cost structures. One likely strategy employed to overcome the over-capacity issue will be the further reliance on code-sharing alliances between airlines, as well as additional partnerships between airlines (Chan, 2000).
The concern of over-capacity is also being addressed by both Airbus and Boeing. However, the two companies seem to be at odds over what will be the best means to resolve the issue (Key Notes Ltd. , 2002). Airbus believes that the hub and spoke method of logistics prevalent in Europe and Asia will prevail, and thus plans on introducing large jumbo jets to satisfy larger customer demand. Boeing also forecasts increased demands; however, Boeing believes that the demand will more likely be satisfied by smaller sonic jets that will provide point-to-point services.
Regardless of the outcome, both manufacturers will continue to play key roles in the future development of aircraft that meet the demand needs off the industry. The issue of security and terrorism concerns the entire airline industry. The attacks on September 11 brought about the obvious need to eliminate the threat of another catastrophe. New security-based technologies, such as iris-scanning technology, are required to diminish the threat of a similar attack in the future. Once fully operational, the technologies may also serve to reduce the number of airline security personnel responsible for screening passengers.
These technologies, of course, are not cheap. The cost of these new technologies, as well as the exorbitant rates of insurance following the attacks on September 11, will add to the looming budget crisis faced by many airlines. Finally, the issues of competition and the need to reduce cost structures are inevitably related. The continued liberalization of the industry will stimulate further competition (Doganis, 2002) And as competition increases, the pressures to cut costs will continue to mount.
To compete effectively against the low-cost carriers, the mega-carriers must continue to lower their cost structures (Mullin, 2003). Finding alternative means to reduce overall costs structures will lead to a greater need to utilize modular and diffused airline production chains (Boyd Group/ASRC, 2003). Airlines will depend more heavily on third parties to provide services such as ticket sales, reservations, baggage handling, catering and even flying. Airlines will also utilize new technologies, such as e-ticketing, to speed efficiency and reduce reliance on manual labour.
These measures imply that an effective human resource strategy is to cut costs by reducing the number of jobs. That, of course, means that fewer employees will be needed to carry out tasks that used to be accomplished in-house. These measures will most certainly lead to contentious labour issues between management and the labour unions. In conclusion, the airline industry is not in an enviable position. In this day and age, the requirement to provide a safe means of transportation is a difficult enough challenge to achieve.
This challenge is followed by the obligation of management to maintain a competitive cost structure in the face of unrelenting pressure to lower cost (Mullin, 2003). And last but not least, there is the necessity to accomplish these tasks while satisfying the labour unions. Can these seemingly contradictory goals coexist? The future of air travel depends on it.
Books 1. Armstrong, M. (2001) ‘A Handbook of Human Resource Management Practice’ Eight Edition. British Library Cataloguing in Publication Data
2. Boxall, Peter, Purcell, John (2003) Strategy and Human Resource Management. Basingstoke, New York: Palgrave Macmillan. 3. Doganis, Rigas (2002) Flying off Course; The economics of international airlines. London, New York: Routledge. 4. Eaton, Jack (2001) Globalization and Human Resource Management in the Airline Industry. Aldershot: Ashgate Publishing Ltd. 5. Harding, Gareth (2003) ‘Feature: Europe’s cheap flight revolution’. United Press International, 12 November 2003.