Airlines are adjusting their 5-STAR Business Networks to the new economic reality

As the economic centre of the world moves more and more towards its more populous nations in Asia, a number of businesses are realising that they must adjust their business models, as well as their 5-STAR Business Networks to this new reality. Take the example of airlines industry. A recent recent article in Bloomberg  explains

Seven of the world’s 10 busiest routes by passenger volume are in Asia, according to the report, with the globe’s busiest link being between the South Korean island of Jeju and Seoul, followed by flights between Sapporo, Japan, and Tokyo.

There is do doubt then that the airlines in rest of the world will have to move to get a piece of action in this growing market. Not only is the market penetration much lower in Asia than it is Europe and the US, but also lack of surface infrastructure makes it doubly attractive to fly over all those bad roads and railway tracks. The two major alliances of the airlines – Oneworld and Star alliance – are a result of an old business model which is now struggling to adjust. Qantas found a way around by making a an alliance with Emirates that could hugely benefit both the companies on trans-continental flights to and from Australia, via Asia to Europe. Lufthansa is talking about starting a low cost carrier focused on Asia. Bloomberg reported:

Air France, Lufthansa and Iberia of Spain are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of Ryanair and its peers. Cologne-based Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic.

As I noted in my book The 5-STAR Business Network, the changing economic reality always creates an imperative for newer business models – to survive and thrive. There is no doubt airlines will need to create much more robust and engaging business models in coming years.
What is your view on the emerging business models in the airlines industry? How can the airlines ensure their survival amid the current turmoil? Please comment below.

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Vivek Sood

I write about "The Supply Chain CEOs", "The 5-STAR Business Networks", and, how to "Unchain Your Corporation". In my work, I help create extraordinary corporate results using several 'unique' supply chain methodologies. Contact me for interesting, high impact projects, or, to get access to my IP for creating transformations using these methodologies.

  • CEO Supply Chain says:

    My Opinion-
    Nothing stays the same. Things change. Things evolve. Then again, sometimes things simply explode into new dimensions and new challenges to survival. Identifying emerging disruptive trends well in advance – boldly and regardless of accepted wisdom – is what separates long-term successful companies from history-book has-beens.

  • James Catoya says:

    The airline business is a strange business and in desperate need for business model innovation. All present challenges and opportunities for the airline industry are not few. As with any business, the main thing to consider when looking at airline business and airline management are the most commonly used airline business models. The business model, in general, determines the way one intends to make money with the airline. There are various possibilities and the ones outlined below only show a generic and most common set of business models available.

  • Rebecca Davis says:

    There are really few main airline business models which are being used by the majority of airlines around the world. Of course, those airlines tend to add their own tweaks to each model in hope to get ahead of competition, but still – the framework remains within one of those few models. The addition of this airline business model, which you called a 5-Star Business model, as some airlines lean towards combining two or more of the available models to their benefit.

  • McCoy says:

    Excellent blog Vivek. The dynamics of the airline industry are becoming increasingly pronounced as deregulation and competition increase. Technology or government involvement is no longer guarantees of success. However, the business model is becoming the leading factor of survival in this industry. This blog of yours will hopefully give some insight into airline operations, the industry, and business models in general.

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