Growth and internationalisation strategies in the airline industry

Growth and internationalisation strategies in the airline industry.

Authors:

Ana B. Ramón-Rodríguez (Corresponding Author)
anar@ua.es
Instituto de Economía Internacional
University of Alicante

Luis Moreno-Izquierdo
luis.moreno1985@gmail.com
Instituto de Economía Internacional (PhD.)
University of Alicante

José F. Perles-Ribes
fjperles@ajcalp.es
Department of Applied EconomicAnalysis
University of Alicante

Instituto de Economía Internacional (Universidad de Alicante)
Edificio de Institutos Universitarios
Campus de San Vicente del Raspeig
Ap. Correos 99 E-03080 ALICANTE (SPAIN)
Tel +34 965 903 582 +34 965 903 782 Fax +34 965 903 816
iei@ua.es

Department of Applied Economic Analysis (Universidad de Alicante)
Facultad de Ciencias Económicas y Empresariales.Campus San Vicente del Raspeig
Ap. Correos 99 E-03080 ALICANTE (SPAIN)
Tel +34 965 903 609 Fax +34 965 909 322
deaea@ua.es
Growth and internationalisation strategies in the airline industry.

1. Abstract
This paper analyses the different forms of international expansion in the airline industry. Its major contribution is to adapt, for the first time, internationalisation theories to thissector, while making the necessary adjustments required due to the specific characteristics of the industry.
Although in principle we could define aviation as an international sector, we have observed that barriers to entry and geographical concentration, among other factors, inhibit the internationalisation process. Another important finding is concerned with the different types ofinternational expansion developed by low cost carriers and traditional airlines. In summary, low cost companies use what we call a direct form of expansion while traditional ones use code-sharing alliances as the main alternative to direct expansion. To obtain this result, a chi-squared test was used for the statistical analysis of airline information from a worldwide database.

Keywords:Internationalisation, airline industry, traditional airlines, low cost carriers.

1. The internationalisation of services.
Traditionally, theories relating to the internationalisation of business have based their hypotheses on the behaviour of manufacturing industries. However, during the last few decades there has been a defined shift towards the tertiarisation of the economy on a global scale supported by thenew technological paradigm[1], giving rise to some convergence of internationalisation theories within the service sector, although insufficient and of little depth for now (Axinn and Mattyssens, 2002). The adaptability of traditional internationalisation theories to sectors such as banking, telecommunications or hotels has been subject to in-depth debate, mainly due to the basic structure ofservices which differentiates them from manufacturing industries[2] (Buckley et al., 1983;Vandermerwe and Chadwick, 1989; Li and Guisinger, 1992; Samiee, 1999; Ramón-Rodríguez, 2002; Andersson, 2004).
In recent years, the changes that the revolution of the Information and Communication Technologies (ICTs) have produced in the way business expansion is approached have been the main focus ofstudy with respect to internationalisation theory, with the contribution of authors such as Dunning (1998), Petersen and Welch (2003), or Brennan and Garvey (2009) among others. The effects of the contribution made by new technologies can be summarised as: a) an acceleration of the internationalisation process, stimulated by the direct contact between clients and companies and a greater marketknowledge; b) larger scale processes, generated by the security resulting from contact and market knowledge; and c) a greater number of global companies, - both large and small-, thanks to the possibility of operating throughout the world at a minimum cost using the ICTs.

In this paper, the airline industry is studied as part of the analysis of the industrialisation of services. In order to...