![]() ![]() ![]() Network Management for Swissair and Sabena knew that the both carriers were in a highly vulnerable position, given the industry–wide profit declines, the increasing vulnerability of all mid–sized flag–carriers, and the obvious failure of the SAir Group’s fleet and outside business investments. ![]() Swissair- Sabena management remained completely separate from the management of the SAir Group holding company, and had no responsibility for any of the other newly acquired carriers. The Network, Marketing and Financial management of Swissair and Sabena was combined in 1999 although there was no plan to merge brands or operations. The new SAir Group conglomerate strategy (code–named "Hunter") withdrew assets from Swissair and invested them in service businesses (catering, IT) and smaller European airlines where SAir Group could exercise full control. In 1997, the Swissair Board abandoned its previous airline–based strategy that utilised alliances with major intercontinental carriers (Delta, Singapore) and other middle–tier European flag–carriers (Austrian, Sabena, SAS) to augment the scope of Swissair’s brand and Zurich–based network. Although no national airline in Western Europe had ever failed before, both carriers were destroyed and liquidated within eighteen months. Both airlines were financially healthy, in the sense of having strong positive cash flow, easily meeting all current obligations, and having much of their networks earning fully allocated profits. These declines mirrored downward profit trends among airlines across Europe. In 1999, Swissair had a minus 4% profit margin while Sabena had a minus 6% margin, after having earned small profits in the previous two years. The challenge facing Swissair and Sabena in 2000 What new business models would give flag–carriers the greatest chance of surviving the coming industry shakeout?.Is the economic logic underlying new entrant business models powerful enough to threaten the survival of the flag–carriers?.Are the industry’s problems largely cyclical, or is the economic logic underlying the traditional flag carrier business model obsolete?.What caused the industry–wide profit collapse of the late 90s?.Why have some European hubs been more profitable than others?.What drives competition between the major European carriers?.This article addresses a set of questions faced by every European carrier struggling to establish a basis for sustainable future profits, including: The data and analysis presented here were originally developed in 2000, by the management of two mid–sized flag–carriers whose existing strategy was clearly unworkable and whose survival was highly uncertain. As in the US, the future viability of the industry’s dominant business model and its major airlines has been openly questioned.ĭiscussions of airline business models, demand segmentation and traffic flows can sometimes seem a bit dry and academic. Serious flaws have developed in the traditional European flag–carrier business model, and the competitive landscape of 2005 will likely look quite different than that of 1995. What is the future of the European flag-carrier? September 2002Įuropean aviation is beginning a process of major restructuring. ![]()
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