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Separation or integration? Can network carriers create distinct business streams on one integrated production platform?

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  • Lindstädt, Hagen
  • Fauser, Bernd

Abstract

The worldwide airline industry is currently facing one of the most severe crises in its history. Particularly affected are the network carriers, which need to develop more distinct products to adapt to the changed market environment. Since structure needs to fit strategy, the question of how the network carriers need to design their organization arises. So far carriers have either used one flight operation (production platform) as a basis for all products offered, or have built separate organizational entities for each business segment. From a corporate strategy point of view this paper compares the efficiency and effectiveness of an integrator versus a separator approach. The analysis indicates that the integrator approach is both less efficient and effective and it is argued that the network carriers should preferably operate with separate entities.

Suggested Citation

  • Lindstädt, Hagen & Fauser, Bernd, 2004. "Separation or integration? Can network carriers create distinct business streams on one integrated production platform?," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 23-31.
    • Handle: RePEc:eee:jaitra:v:10:y:2004:i:1:p:23-31
    DOI: 10.1016/j.jairtraman.2003.10.005
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    References listed on IDEAS

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    1. Oliver E. Williamson & Scott E Masten (ed.), . "The Economics of Transaction Costs," Books, Edward Elgar Publishing, number 1652.
    2. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
    3. Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-123, May.
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    Cited by:

    1. Renan P. de Oliveira & Alessandro V. M. Oliveira & Gui Lohmann, 2021. "A Network-Design Analysis of Airline Business Model Adaptation in the Face of Competition and Consolidation," Transportation Science, INFORMS, vol. 55(2), pages 532-548, March.
    2. Redpath, N. & O'Connell, J.F. & Warnock-Smith, D., 2017. "The strategic impact of airline group diversification: The cases of Emirates and Lufthansa," Journal of Air Transport Management, Elsevier, vol. 64(PB), pages 121-138.
    3. Magdalina, Ana & Bouzaima, Martin, 2021. "An empirical investigation of European airline business models: Classification and hybridisation," Journal of Air Transport Management, Elsevier, vol. 93(C).
    4. Budd, Lucy & Graham, Brian, 2009. "Unintended trajectories: liberalization and the geographies of private business flight," Journal of Transport Geography, Elsevier, vol. 17(4), pages 285-292.
    5. Dennis, Nigel, 2007. "End of the free lunch? The responses of traditional European airlines to the low-cost carrier threat," Journal of Air Transport Management, Elsevier, vol. 13(5), pages 311-321.
    6. Teichert, Thorsten & Shehu, Edlira & von Wartburg, Iwan, 2008. "Customer segmentation revisited: The case of the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 227-242, January.
    7. Whyte, Randall & Lohmann, Gui, 2015. "The carrier-within-a-carrier strategy: An analysis of Jetstar," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 141-148.

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