An analytical model for the assessment of airline expansion strategies

Abstract

Purpose: The purpose of this article is to develop an analytical model to assess airline expansion strategies by combining generic business strategy models with airline business models.Design/methodology: A number of airline business models are examined, as are Porter's (1983) industry five forces that drive competition, complemented by Nalebuff and Brandenburger's (1996) sixth force, and the basic elements of the general environment in which the expansion process takes place. A system of points and weights is developed to create a score among the 904,736 possible combinations considered. The model's outputs are generic expansion strategies with quantitative assessments for each specific combination of elements inputted. Originality/value:The analytical model developed is original because it combines for the first time and explicitly elements of the general environment, industry environment, airline business models and the generic expansion strategy types. Besides it creates a system of scores that may be used to drive the decision process toward the choice of a specific strategic expansion path. Research implications:The analytical model may be adapted to other industries apart from the airline industry by substituting the element "airline business model" by other industries corresponding elements related to the different specific business models.

An assessment of the expansion strategy followed by Avianca Airlines: Period 2008-2012

“…The assessment of the industry environment (or the operating environment) will be made separately in accordance to the four main markets that correspond to the hubs mentioned above. Besides, the analysis will be conducted following the Airline Expansion Strategies Model developed by Moreira (2014) and the emphasis will be given to the following aspects: market penetration ratio of the air transport industry, historical evolution of the demand, the industry concentration, and the role played by the Government and the alliances.…”

“…According to the "Analytical Model for the Assessment of Airline Expansion Strategies" developed by Moreira (2014) other elements must be considered in the airline industry environment assessment.…”

“…According to Moreira (2014) the general environment is formed by eight groups of elements, namely, Economy, Demography, Politics, Legal, Social, Culture, Technology and Natural. However, in the present case the elements Legal, Culture, Technology and Natural seem not introduce relevant restrictions to the operation in Avianca's main markets.…”

“…Purpose: This article aims to apply to the case of Avianca Airlines the Analytical Model for the Assessment of Airline Expansion Strategies developed by Moreira (2014) in order to explain the rationale of the expansion strategy followed by this airline and indicate other possible expansion strategies.…”

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AbstractPurpose: This article aims to apply to the case of Avianca Airlines the Analytical Model for the Assessment of Airline Expansion Strategies developed by Moreira (2014) in order to explain the rationale of the expansion strategy followed by this airline and indicate other possible expansion strategies.Design/methodology/approach: This article is a case study in the sense that it aims to arrive to broad generalizations based on the collected evidences, focusing on one of the most traditional airlines in the world. This article is a positivist case study, based in the positivist understanding; because it is supported by objective facts of the situation which are informed by the researcher's interpretive understanding according to it is recommended for this type of study.

Findings:

The application of the Analytical Model for the Assessment of Airline Expansion Strategies above referred was successful, considering that the model was able to explain a wide range of complex aspects of the Avianca's development.

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