HARDIK GAMI

0931759

AIM:
Impact of the globalization on the Aviation Industries over the world.

BACKGROUND:
Globalization is the process of interconnection of national states, societies,
organizations, corporations and individuals. Globalization is a new production
concept and income distribution. The airline industry is an interesting and
unique industry. This research paper looks at the development of the world
airline industry over globalization, from a strategy view. The key developments
and issues covered include the deregulation of the industry, the nature and
extent of competition, and airline alliance developments, strategies and the
longer-term implications. These strategic developments have directed airline
industry and will continue to do so in the years ahead. As in the globalization
also the use of the airways are going to rise, so the aviation industry have the
big impact. Some airlines or aviation companies are going up and some are
going down.

OBJECTIVES:
The aviation industry is a huge industry. And now because of globalization,
aviation industry has a big impact of it. Some domestic airline companies are
not going to become global, they have less chances for getting success in this
age of globalization. Globalization is an umbrella term referring to increasing
interdependence in the economic, social, technological, cultural, ecological and
political spheres (Brinkman and Brinkman, 2002). I explained first the business
of aviation or airline industry over the world. Then I explained about some
marketing strategy of the airlines, its advantages and disadvantages with
appropriate examples. Next I explained significant strategy and alliances
strategy and its impact on aviation field. Then I mentioned deregulation of USA
on aviation field. Then I discussed some advantages and some strategies of
USA aviation industry. Then I described methods. And at last I conclude the
proposal.

LITERATURE REVIEW:
The world is going to become smaller and smaller day by day because of the
globalization. Now a days globalization is over the world wide. The main effect
of the globalization is on the aviation or airline industries. Because of the
globalization, aviation or airline industries are well developed now. The industry
is worth over US$1,000billion, employs 22 million people, and transports and
services over 1.25 billion passengers a year. The aviation industry is also at the
heart of world’s largest industry as travel and tourism, employing one in nine
workers (Corporate Location Journal, 1994).
Recently, global mergers and acquisition in many major world industries, such
as financial markets, financial services, telecommunications, information
technology, car manufacturing, shipping, etc are going to rise. But some airline
services still remain a certain conservative role in national character. Aviation
industry has played an important strategic role in the affairs of the nations. Like
flag carrying airlines played the ‘ambassadorial roles’ for the nations they
represent abroad. For example, Singapore Airlines was first introduced
Singapore to the world through carrying flag (Business Times, 1997, p.18). This
role is not important in this age of globalization, but many airlines carrying flags
as a symbol of national prestige and pride. But some airlines disadvantaged
because of country size, such as SIA. The development and control of a flag
carrier by a foreign-owned airline remains a politically sensitive matter
(O'Connor, 1995). In the case of Pan American, in its time the US flag carrier, it
has been argued that its collapse was allowed by the US Government only
because there were other nationally owned airlines ready to step into that role
(Williams, 1994).

From an industry-wide strategic perspective, the British Airlines and Asian

Airlines alliance has some potentially significant strategic implications, like that
the coordination of their schedules to offer flights onwards to a final destination
beyond the situated on the other side of the Atlantic (Rothman, 1992, p.44).
Asian Airlines will be able to offer tickets on British Airway’s network across
Europe and onwards from London to destinations in Asia, such as Hong Kong,
Singapore, etc. In total, it is estimated that the two airlines could offer around
36,000 different routes.

In recent years, in the developing towards globalisation of the airline industry,

the formation of airline alliances as a strategy to deal effectively with
competition has gathered momentum. Alliance strategy is a part of every good
strategist's performance and, when properly managed, it is best means to bring
strategy to carry in global markets (Ohmae, 1991, p.99). Without the protected
position of national airlines brought about by deregulation, building alliances as
a strategy became necessary for many airlines to stay competitive and gain
access to a global market (Johnstone, 1996). Every major airline is involved in
some kind of alliances or another. Some are in as many as 30 partnerships, and
none has shown any doubtable feelings about linking up with two directly
competing rivals at the same time (Johnstone, 1996). The alliance strategy has
not turned out to be smooth running for many. Alliances in the airline industry
are collaborative partnerships which make easy to access and reach to a
globalising industry. Alliances are viewed by airlines as necessary and have
become the fast-growing area of competitive advantage since 1993 (Asian
Business, 1997, p. 22).

The discussion of a global deregulated airline industry must begin with the USA.
It was in the USA that the deregulation idea for the airline industry was first
subjected to debate (Williams, 1994). In the USA, the airline industry is a
strategic industry. The US government has played a critical role in developing
the industry. Beginning in the 1920s, the airline industry was used by the US
government as a vehicle to promote economic growth, provide jobs, and draw
the nation closer together (Prestowitz et al., 1993). In 1988, following a most
profitable year, the US airline industry, however, became a troubled industry.
The airlines lost a total of US$10 billion more than the industry had made in its
entire history (Prestowitz et al., 1993).

The US Airlines have a clear comparative advantage on the costs of the

aviation field. Their labour costs, which were slightly more than 30 percent of
overall fixed costs, were only about the half those of their Asian competitors
(Fortune, 1994, p. 26). As for the European airlines, in 1993 estimated those US
airlines have a 28 percent labour productivity advantage (The Economist, 1993,
p. 18). Generally Asian Airlines had higher wages level and employed the more
staff compares to US Airline. It was noted by United Airlines that “Unlike the
Asians, we have gone through the hard-knocks school of deregulation''
(Fortune, 1994, p. 26). Airlines worldwide responded to the threat problem or
question by the deregulation battle hardened low cost from the US, by offering
better or differentiated service, undertaking several cost-cutting measures, and
reducing prices to stay competitive. In 1994, prices cut down for the some
instance by about 20 percent or more on some of the more popular routes
(Asian Business Review, 1996, p. 34).

METHODS:
Prior to deregulation, service quality in the USA was a matter of conforming to
the standards set by the US Civil Aviation Board (CAB). The CAB set minimum
service standards and carriers prohibited from competing on price competed to
offer the best service (Glab, 1998). As deregulation and liberalization spread
throughout the international airline industry, the issue of service quality has
taken on a new focus as has the concept of measuring quality (Kahn, 1990,).

Service quality data were found in the Department of Transportation publication

Air Travel Consumer Report since 1987 to 2008. These data were first
published in 1987 and have undergone a number of changes over the years,
including a more extensive breakdown of on time performance by airport, the
including of cancellations of the flights, and some modifications. Data collected
for this study included customer complaints on flight problems, ticketing,
refunds, fares, customer service, advertising, and other problems, overall carrier
on-time performance, involuntary denied boarding, and lost baggage
(Parasuraman et al., 1985, p.44). The total quality rate represents the sum of
the percentage of late flights, total number of consumer complaints, total
number of involuntary denied boarding, and total number of lost baggage
reports divided by total yearly departures for a particular airline (Masters, 2007).
In a real sense, this rate is a measure of disquality and can be interpreted as
the number of quality problems per departure (Brady, 2000). The results of the
research shows that the quality rates of the airlines in 2008 are good compare
to 1987. And also the service quality rates of most of the airlines are much
higher in 2008 rather than 1987.

In 1992, United Airlines' Chairman, Stephen Wolf, argued that competition

would continue to remain a feature of the scheduled airline industry despite
increasing levels of market concentration. This is happened in international
level. An important question that follows concerns the nature and extent of the
competition that will unfold on the international airline scene (Business Times,
1998, p. 2).

CONCLUSION:
I conclude from this research that some countries have conservative ideas
about their nation or some politically disturbance, they cannot get success in
this age of globalisation. With the help of the Air Travel Consumer Report of, I
got some results that in globalization, many airline industries improved their
quality rate and services. All the companies are trying to merge with another
organization of foreign nations. Most of companies are trying to become a
global, as well as also wants put their nation in a global market. USA did some
mistakes with deregulation but now USA is also trying to improve it. Finally, I
just want to say that globalization change the face of the world and aviation
industries played an important role for globalization and give the chance to the
world to come closer.

PROJECT PLAN:
 DATE TIME DURATION PROCESS
14/02/2011 - 21/02/2011 1 Week Search a topic
21/02/2011 - 28/02/2011 1 Week Research on project
28/02/2011 - 07/03/2011 1 Week Define a project
07/03/2011 - 14/03/2011 1 Week Collect materials
14/03/2011 - 21/03/2011 1 Week Research procedure

21/03/2011 - 28/03/2011 1 Week Survey or meetings

28/04/2011 - 04/04/2011 1 Week Survey or meetings
04/04/2011 - 11/04/2011 1 Week Get results from survey
11/04/2011 - 18/04/2011 1 Week Adding results in project
18/04/2011 - 25/04/2011 1 Week Make a project dreft
25/04/2011 - 02/05/2011 1 Week Review final project info
02/05/2011 - 09/05/2011 1 Week Submit the project

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