Flying the flags Essay Example | Topics and Well Written Essays - 2250 words

Flying the flags - Essay Example The airline industry is significant considering that it is one of the largest capital intensive industry segments and in addition to its contribution to the GDP it also provides employment options to a large number of individuals. The airline industry is prone to various external aspects like oil price, government regulations and market distortions. However the airline industry has shown signs of revival with all the major economies in Europe being put back on the path of economic growth. A report by Mott McDonald pegs the present value of the airline market in Europe would increase by approximately 2.3 percent by the year 2025 (Mott McDonald, 2011). Another significant aspect that has changed the shape of the aviation industry is the advent of Low Cost Carriers (LCC) following the de regulation of the aviation industry by the European and US governments. These players have grabbed a significant market share owning to their aspect of low cost which has provided them with a competitiv e advantage (European Commission & United States Department of Transportation, 2010, p.3). Mergers and acquisitions have become one of the most vital strategies that have been adopted by market players across the world including Europe to increase their market share as a means to improve the product mix (Siebert, 1989, p.10-11). Review of the EU Airline industry Europe constitutes one of the most important markets for the participants of the airline industry. The mammoth size of the European aviation market can be analysed from the fact that there are approximately 450airpots in the region which ferried approximately 751 million passengers in 2009 alone. The market has about 150 scheduled airline companies including full service and low cost carriers. In addition to this fact the aviation industry provided direct employment to about 500000 individuals and had an approximate turnover amounting 100 billion Euros as of the year 2009. The aviation industry apart from being a significant contributor towards the economy and growth of the region also serves as a means to bring together people from different regions and provides integration or all the member states of Europe as well as with the rest of the world (European Commission, 2011, p.5). Figure 1: 20 Year forecast for the Airline Industry (Source: Mott McDonald, 2011) The figure above shows the forecasted growth rates in both cargo as well as passenger segments of the European aviation market. It is clear from the figure that the airlines industry in Europe is expected to show growth rates of 5 percent and 6.1 percent in the passenger and cargo sections respectively by the year 2026 on a year on year basis. This is even more significant considering the fact that the European airline market was severely impacted by the terrorist attacks in US in 2001 as well as the financial meltdown in the recent years. The recovery of nations in the European Union has again created hopes for the resurgence of the European air line industry. Figure 2: Major Market Players in Europe and their levels of consolidations (Source: Buttner & Burger, 2008, p.8) The major market players in the European Union are shown in the figure above. The major airlines of the EU are trying to aggressively expand their business by undertaking consolidations by using strategies like mergers and