Background: Since the airline deregulation was completed in 1997, a new business model has emerged in the European civil aviation industry. It has caused a shift in the way people travel within Europe. The airlines operating under this new business model known as point-to-point, have created a new outlet for commercial passenger travel and raised concerns for established flag carriers. Problem: This study is of great importance due to the fact that people are traveling more frequently and wish to do so quicker and more efficiently. With so many options to choose from and cost being an important decision maker for both companies and consumers, a study of this industry in terms of competition, price and service quality is of great impor-tance. Purpose: The purpose of this thesis is to investigate and describe whether or not changes in the competitive landscape of the European civil aviation industry are related to the movement of economy class prices. The thesis also looks at whether or not changes in the competitive landscape are related to changes in service quality in the same industry. Both flag-carriers and low-cost carriers in terms of their business models will be investigated. Method: The method chosen for this study was of an integrated approach based solely on secondary data due to the sheer size and scope of this industry. This study investigated the two major business models of this industry through routes to the major cities and capitals of Western Europe from Stockholm Arlanda airport and Stockholm Skavsta airport. A literature study coupled with a comparative analysis has also been done. Conclusions: Dramatic change is occurring in the industry. Competition is increasing not only between companies but between two competing business models. Increased competition is leading to better on-time performance but lower in-flight and ground service quality. Aggregate price level has risen for flag carries with the opposite happening for low-cost carriers. The increased competition is threatening the ill-performing flag carriers and will most likely transform the industry.

<p>Background: Since the airline deregulation was completed in 1997, a new business model has emerged in the European civil aviation industry. It has caused a shift in the way people travel within Europe. The airlines operating under this new business model known as point-to-point, have created a new outlet for commercial passenger travel and raised concerns for established flag carriers.</p><p>Problem: This study is of great importance due to the fact that people are traveling more frequently and wish to do so quicker and more efficiently. With so many options to choose from and cost being an important decision maker for both companies and consumers, a study of this industry in terms of competition, price and service quality is of great impor-tance.</p><p>Purpose: The purpose of this thesis is to investigate and describe whether or not changes in the competitive landscape of the European civil aviation industry are related to the movement of economy class prices. The thesis also looks at whether or not changes in the competitive landscape are related to changes in service quality in the same industry. Both flag-carriers and low-cost carriers in terms of their business models will be investigated.</p><p>Method: The method chosen for this study was of an integrated approach based solely on secondary data due to the sheer size and scope of this industry. This study investigated the two major business models of this industry through routes to the major cities and capitals of Western Europe from Stockholm Arlanda airport and Stockholm Skavsta airport. A literature study coupled with a comparative analysis has also been done.</p><p>Conclusions: Dramatic change is occurring in the industry. Competition is increasing not only between companies but between two competing business models. Increased competition is leading to better on-time performance but lower in-flight and ground service quality. Aggregate price level has risen for flag carries with the opposite happening for low-cost carriers. The increased competition is threatening the ill-performing flag carriers and will most likely transform the industry.</p>

<p>The study looked particularly at the operations of national carriers and governments&lsquo / efforts to sustain the airlines&lsquo / operations. Evidence has shown that many countries struggle to maintain operations of their flag carriers, but few countries are willing to completely leave the airlines in the hands of the private sector because of national pride. On the other hand, many of those airlines that get into private hands fail and end up being closed down or go back into state hands. These airlines are also perceived to be development tools, in particular for tourism development which is a predominant economic activity in many developing countries. For this reason, many states do not favour privatisation, even though the perception is that the airline industry is better handled by private businesses. The main conclusion of the study for Botswana is therefore that neither full state ownership nor full privatisation is the solution to addressing the problem of ailing flag carriers. There is no single solution, but a combination of several. A broader global view of national airline operations clearly shows that approaches adopted by many successful national airlines, in both developed and developing countries, is some form of partial privatisation.</p>

<p>The study looked particularly at the operations of national carriers and governments&lsquo / efforts to sustain the airlines&lsquo / operations. Evidence has shown that many countries struggle to maintain operations of their flag carriers, but few countries are willing to completely leave the airlines in the hands of the private sector because of national pride. On the other hand, many of those airlines that get into private hands fail and end up being closed down or go back into state hands. These airlines are also perceived to be development tools, in particular for tourism development which is a predominant economic activity in many developing countries. For this reason, many states do not favour privatisation, even though the perception is that the airline industry is better handled by private businesses. The main conclusion of the study for Botswana is therefore that neither full state ownership nor full privatisation is the solution to addressing the problem of ailing flag carriers. There is no single solution, but a combination of several. A broader global view of national airline operations clearly shows that approaches adopted by many successful national airlines, in both developed and developing countries, is some form of partial privatisation.</p>

Magister Economicae - MEcon / The study looked particularly at the operations of national carriers and governments' efforts to sustain the airlines' operations. Evidence has shown that many countries struggle to maintain operations of their flag carriers, but few countries are willing to completely leave the airlines in the hands of the private sector because of national pride. On the other hand, many of those airlines that get into private hands fail and end up being closed down or go back into state hands. These airlines are also perceived to be development tools, in particular for tourism development which is a predominant economic activity in many developing countries. For this reason, many states do not favour privatisation, even though the perception is that the airline industry is better handled by private businesses. The main conclusion of the study for Botswana is therefore that neither full state ownership nor full privatisation is the solution to addressing the problem of ailing flag carriers. There is no single solution, but a combination of several. A broader global view of national airline operations clearly shows that approaches adopted by many successful national airlines, in both developed and developing countries, is some form of partial privatisation. / South Africa