STAR ALLIANCE

Star Alliance

Star Alliance

Introduction

With the formation of Star Alliance, Oneworid, and Sky Team in the mid to late 1990s, the international airline industry has experienced the emergence of globally operating strategic alliances that have steadily grown over time and have achieved great stability. Since then, while extending their market coverage throughout the world, the member airlines have realized their main objective: The enhancement of revenues. Although it was only of secondary priority, however, the promised cost reductions have fallen short of the carriers' expectations. In particular, cost advantages through scale economies have only been achieved to a minor degree, partially due to the relatively low integration during this period (Belobaba & Odoni, 2009, 140). One of the most recognized Airline of in United Kingdom is British Airways. BMI, Air Berlin, Air France, easy Jet, Virgin Atlantic, KLM Royal Dutch Airlines, and Ryan air are some of the competitors of British Airways.

MACRO Environmental Analysis of Airlines in UK

PEST Analysis

The analysis of the current external environment includes the investigation of the macro external environment by means of the PEST analysis and the illustration of the opportunities and threats for the major airlines in the first years of the 21st century.

Political Factors

In the last eight years, the political environment of the airline industry has primarily been determined by the developments of liberalization in the airline industry, terrorist attacks and political instability in the near and Middle East. International air transport has not experienced any significant progress towards liberalization since the creation of the CEAA in 1997. Although the “Open Skies” policy (introduced by the United States) has led to slightly more liberal international markets and has triggered an increase in competition, international air traffic is still mainly governed by the traditional ASAs which do not contain Fifth, Seventh, and Eight Freedom rights, and furthermore restrict foreign ownership. Nevertheless, the “Open Skies” agreement of 2007 between the EU and the United States is a first step to a liberalized international air transport system. As of March 30, 2008, it will allow European carriers to offer routes from every EU-member state to the U.S.

Deregulation and liberalization of the sector has led to the relaxation of ownership rules in US and EU and other part of the world. Deregulation leads to increase in market size of the airline and more opportunities for passengers as it leads to competition in prices offered to passengers (Cento, 2009, 99). Competition from independent carriers has the capacity to influence the airline fares. For example, the entry of low-cost airline in the US has exerted strong downward pressure on prices since deregulation. This has accounted for an estimated 40% annual savings from lower fare offered to passengers.

To survive the pressure created by deregulation and liberalization, airlines responded by forming alliances, acquisition and merger and cooperation in ways that were hitherto impossible. For instance, the STAR alliance which include SAS airlines, Lufthansa and twenty five other airlines cooperate in such a way that they are able to reduce cost of operation and ...