IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v64y2017ipbp121-138.html
   My bibliography  Save this article

The strategic impact of airline group diversification: The cases of Emirates and Lufthansa

Author

Listed:
  • Redpath, N.
  • O'Connell, J.F.
  • Warnock-Smith, D.

Abstract

The airline industry is a diverse sector, requiring the support of a varied range of ancillary businesses such as maintenance, catering and travel agencies to carry out its activities. Many of these supporting businesses demonstrate the potential to drive wider profit margins despite generating lower revenues than the airlines themselves, making them attractive investment opportunities in a sector prone to volatile and often lacklustre trading. This study investigates two of the largest diversified airline groups, Germany's Lufthansa Group and Dubai's Emirates Group, each adopting a distinct approach towards diversification that may serve as a model for airline groups worldwide. The areas investigated were Cargo, Maintenance, Catering and Travel Services. The research found that whilst diversification may not always present the most attractive option financially, strategic factors can often outweigh such concerns. Business units studied were found to have variable prospects; particularly in the case of Catering, a sector on the rise – versus in-house Maintenance, which for airlines, is likely to see decline. The pursuit of third party revenue streams to offset weak internal trading and growth in competencies were found to be the key drivers of success. Interplay between segments was also apparent, showing that a well-organised diversification strategy can achieve robust cross-functional benefits and deliver significant value to the parent organisation.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jaitra:v:64:y:2017:i:pb:p:121-138
    DOI: 10.1016/j.jairtraman.2016.08.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699716303350
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2016.08.009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 117-148, August.
    2. Heracleous, Loizos & Wirtz, Jochen, 2009. "Strategy and organization at Singapore Airlines: Achieving sustainable advantage through dual strategy," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 274-279.
    3. David J. TEECE, 2008. "TRANSACTIONS COST ECONOMICS AND THE MULTINATIONAL ENTERPRISE: An Assessment," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 20, pages 427-451, World Scientific Publishing Co. Pte. Ltd..
    4. Kilpi, Jani & Vepsäläinen, Ari P.J., 2004. "Pooling of spare components between airlines," Journal of Air Transport Management, Elsevier, vol. 10(2), pages 137-146.
    5. Chavas, Jean-Paul & Kim, Kwansoo, 2010. "Economies of diversification: A generalization and decomposition of economies of scope," International Journal of Production Economics, Elsevier, vol. 126(2), pages 229-235, August.
    6. Kock, Carl J & Guillen, Mauro F, 2001. "Strategy and Structure in Developing Countries: Business Groups as an Evolutionary Response to Opportunities for Unrelated Diversification," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 10(1), pages 77-113, March.
    7. Grosskopf, Shawna & Hayes, Kathy & Yaisawarng, Suthathip, 1992. "Measuring Economies of Diversification: A Frontier Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 453-459, October.
    8. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    9. J. Michael Geringer & Stephen Tallman & David M. Olsen, 2000. "Product and international diversification among Japanese multinational firms," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 51-80, January.
    10. 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.
    11. Suen, Wilma W, 2002. "Alliance strategy and the fall of Swissair," Journal of Air Transport Management, Elsevier, vol. 8(5), pages 355-363.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brown, Richard S. & Kline, William A., 2020. "Exogenous shocks and managerial preparedness: A study of U.S. airlines’ environmental scanning before the onset of the COVID-19 pandemic," Journal of Air Transport Management, Elsevier, vol. 89(C).
    2. Castiglioni, Marco & Gallego, à ngeles & Galán, José Luis, 2018. "The virtualization of the airline industry: A strategic process," Journal of Air Transport Management, Elsevier, vol. 67(C), pages 134-145.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hitt, Michael A. & Li, Dan & Xu, Kai, 2016. "International strategy: From local to global and beyond," Journal of World Business, Elsevier, vol. 51(1), pages 58-73.
    2. Bürgel, Oliver & Fier, Andreas & Licht, Georg & Murray, Gordon & Nerlinger, Eric A., 1998. "The internationalisation of British and German start-up companies in high-technology industries," ZEW Discussion Papers 98-34, ZEW - Leibniz Centre for European Economic Research.
    3. Lin, Hsing-Er & Hsu, I-Chieh & Hsu, Audrey Wenhsin & Chung, Hsi-Mei, 2020. "Creating competitive advantages: Interactions between ambidextrous diversification strategy and contextual factors from a dynamic capability perspective," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    4. Sharad Asthana, 2013. "Diversification By The Audit Office And Its Impact On Audit Quality," Working Papers 0152acc, College of Business, University of Texas at San Antonio.
    5. Rakesh B. Sambharya & Jooh Lee, 2014. "Renewing Dynamic Capabilities Globally: An Empirical Study of the World’s Largest MNCs," Management International Review, Springer, vol. 54(2), pages 137-169, April.
    6. Darcy W E Allen, 2020. "When Entrepreneurs Meet:The Collective Governance of New Ideas," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number q0269.
    7. Yannis Caloghirou & Ioannis Giotopoulos & Alexandra Kontolaimou & Aggelos Tsakanikas, 2022. "Inside the black box of high-growth firms in a crisis-hit economy: corporate strategy, employee human capital and R&D capabilities," International Entrepreneurship and Management Journal, Springer, vol. 18(3), pages 1319-1345, September.
    8. Pitelis, Christos & Teece, David, 2009. "The (new) nature and essence of the firm," MPRA Paper 24317, University Library of Munich, Germany.
    9. Freixanet, Joan & Renart, Gemma, 2020. "A capabilities perspective on the joint effects of internationalization time, speed, geographic scope and managers’ competencies on SME survival," Journal of World Business, Elsevier, vol. 55(6).
    10. Jacobs, Sofie & Cambré, Bart & Huysentruyt, Marieke & Schramme, Annick, 2016. "Multiple pathways to success in small creative businesses: The case of Belgian furniture designers," Journal of Business Research, Elsevier, vol. 69(11), pages 5461-5466.
    11. Quyen T. K. Nguyen, 2017. "Multinationality and Performance Literature: A Critical Review and Future Research Agenda," Management International Review, Springer, vol. 57(3), pages 311-347, June.
    12. Aguilera, Ruth V. & Crespí-Cladera, Rafel & Infantes, Paula M. & Pascual-Fuster, Bartolomé, 2020. "Business groups and internationalization: Effective identification and future agenda," Journal of World Business, Elsevier, vol. 55(4).
    13. Kirca, Ahmet H. & Fernandez, Whitney Douglas & Kundu, Sumit K., 2016. "An empirical analysis and extension of internalization theory in emerging markets: The role of firm-specific assets and asset dispersion in the multinationality-performance relationship," Journal of World Business, Elsevier, vol. 51(4), pages 628-640.
    14. Roderick Bugador, 2015. "The Stages Of International Growth Of The Business Groups From Emerging Economies," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 6(2).
    15. Roger Strange & Igor Filatotchev & Trevor Buck & Mike Wright, 2009. "Corporate Governance and International Business," Management International Review, Springer, vol. 49(4), pages 395-407, September.
    16. Christos N. Pitelis & David J. Teece, 2010. "Cross-border market co-creation, dynamic capabilities and the entrepreneurial theory of the multinational enterprise," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(4), pages 1247-1270, August.
    17. Francesco Parola & Giovanni Satta & Riccardo Spinelli, 2013. "L?impatto delle strategie corporate sulle performance delle imprese di logistica via mare," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2013(2), pages 201-225.
    18. Brandon Pope & Andrew Johnson, 2013. "Returns to scope: a metric for production synergies demonstrated for hospital production," Journal of Productivity Analysis, Springer, vol. 40(2), pages 239-250, October.
    19. Trevino, Len J. & Grosse, Robert, 2002. "An analysis of firm-specific resources and foreign direct investment in the United States," International Business Review, Elsevier, vol. 11(4), pages 431-452, August.
    20. Juergensen, Jill Josefina & Narula, Rajneesh & Surdu, Irina, 2022. "A systematic review of the relationship between international diversification and innovation: A firm-level perspective," International Business Review, Elsevier, vol. 31(2).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:64:y:2017:i:pb:p:121-138. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.