Studies shows that departure and arrival times of a flight are other certain important factors that affect passengers’ preference regarding airlines. Departure time is a leading factor that affects the airline preference of passengers that fly particularly short-distance and for business purposes.
Network structure: In today’s deregulated markets, the network structures of airlines have become one of the most important factors that affect their competitiveness as transportation is offered as a service over a network. Network structures are shaped according to their strategies and airports selected as operational hubs have an impact on the costs and yield of airlines.
During the regulatory period, since there was no flexibility concerning market entry, airline were not able to shape their network structures as they desired and so most of the time they had to operate in a line network or grid network structure from one point to another. However, deregulation created a new environment which made airlines re-think their marketing strategies and re-form their network structures accordingly. Within this context, transition to H&S network structure is one of the most significant changes created by deregulation. Basically, the H&S network structure suggests a system whereby passengers are brought from spoke airports to a central hub airport, collected there and distributed again from this hub airport to spoke airports. The H&S network structure creates a much greater network and thus increases demand and decreases unit costs.
Prior to deregulation, established airlines used to have flights from one point to another but, thanks to the H&S network structure system, they have started protecting their own routes against low cost airlines that entered the market following deregulation. This structure was first developed by Delta Airlines and has since been taken as an example by many other traditional airlines. Bank-customer interactions
Another feature of H&S network system is that it may be used as a barrier against market entry. An airline that operates using this network structure generally gains strength in the market at the hub airport thanks to the advantages brought by the system. It is rather difficult for another airline to enter into the hub airport and from this airport to the other spoke airports in the system.
Other airlines try to compete by flying from one point to another with their line network strategy. A line network structure is not deployed around a hub airport but rather connects cities on a linear route. This structure is a network strategy that supports a cost leadership strategy. A low cost carrier that has no stopovers but only direct flights does not have to wait for passengers arriving from connecting flights and thus will reduce the turnaround time; in the end, with the impact of short-distance flights, it will increase the frequency of its aircraft utilization.
Some regional airlines that take advantage of deregulated markets and follow a focus strategy establishing their networks around one or two hub airports because they have a role of feeding the hub airports of major carriers. If a regional airline co-operates as such with a major airline that follows a differentiation strategy it will gain a remarkable competitive advantage over its rivals. Mergers, Acquisitions and Alliances: One strategic response airlines give to the impact of deregulation is moving into new structuring in the form of mergers, acquisitions or alliances. A fast consolidation has been encountered in many airline markets after deregulation.
Three different synergies can be identified created with airlines’ merger and acquisition strategies. Thanks to the operational synergy created, cost effectiveness is achieved in various areas, such as supply, sales, maintenance, scale benefits at airport activities, sharing of overheads and information technologies. With network synergy, undesired routes are excluded, costs are reduced, destinations that create a value are included in the network so that demand is increased and resource utilization is more efficient. Thirdly, growth ensures an eligible basis for higher bargaining power and effective capital management, so that airlines reinforce their competitive positions.