European-airlines--strategic-responses-to-the-COVI_2020_Journal-of-Air-Transportation

1. Europan Airlines' Strategic Responses To The
COVID-19 Pandemic

2. Airline strategy
Crisis response
Europe
COVID-19
Pandemic
State aid

3. COVID-19 Nedir
• Korona virüs 2019 yılında Çin’in Wuhan
şehrinde çıkan, yayılma kapasitesi çok yüksek
bir virüstür. Bu virüs insanlarda başta ateş,
öksürük, nefes darlığı gibi şikayetlerle
başlayıp kişinin sağlığına bağlı olarak bu
belirtileri göstermeden atlatabilirken kimi
insanlarda ise ölümle sonuçlanabiliyor.

4. • Since the COVID-19 pandemic first
started in China, its first home was China.
In the future, when this virus started to
spread around the world, Europe took
over the hosting of the Corona Virus. In
order for this virus to disappear from the
ground all over the world, measures had
to be taken while all countries started
vaccine research. These measures are;
• Social Distance
• Mask use,
• Reducing the capacity of common areas
• Giving importance to personal hygiene
Rules were created to slow the spread of
the virus by taking many precautions,
such as the use of disinfectants.

5. Covid-19’
Economical
Effects
• Airlines lost 1.7 billion passengers and 6.1 million flights in
total. European aviation announced a net loss of 56.2
billion Euros during this period. The economic hardship
caused 191 thousand direct job losses in Europe. 51
percent of aircraft that belong to European airline
companies were grounded by the end of 2020.

6. Aviation and Covid
Nobody knew what to do about this virus, as
the virus was not known by anyone at first.
However, as this virus became known later,
precautions were taken. This virus has started
to land almost 60% of planes and harm
companies. In order to turn this situation into
an advantage, companies made small moves
to reduce this negative effect, while some of
the passenger planes were lying on the
ground, while others were trying to turn them
into cargo planes by removing their seats.

7. Table 1 Terms
• Retrenchment summarizes measures that aim at
substantial cost/overhead and/or asset reductions.
• Persevering refers to measures aiming to preserve the
status quo of the organization and its activities.
• Innovating refers to strategic renewal of the
organization during the crisis.
• Exit refers to the discontinuation of an organization’s
activities. It can be either a forced outcome of an
unviable business setting or a strategic response to
crisis.

8. AIRLINE REACTIONS
IN EUROPE
• The airline announcements, or the measures taken
regarding the crisis caused by the spread of COVID-
19
1)Retrenchment
2)Persevering
3)Innovating
4)Exit oriented.

11. In this process, some airlines
landed their planes and went
into standby mode, but some
airlines removed the seats of
their planes and carried
cargo

12. I will describe the prominent roles of national governments at this time

13. PATHS
• As mentioned, (almost) all
airlines reacted immediately
with retrenchment to cut costs
drastically, and then embarked
in different directions. Upon
realizing that, due to the severe
lack of revenues, the airline
cannot be sustained on its own
even after substantial
retrenchment measures, many
started soliciting financial
support from governments
and/or investors

14. HYBRIDS
• For example, there are occurrences of grouping financial
persevering and crisis specific innovating (five airlines
solicited government support and transformed aircraft
from passenger into cargo transporters)

15. National
governments
• Our findings also highlight that governments are back – as grantees,
lenders, or investors of last resort they support airlines in their persevering
and innovating strategies

16. 3.Implications for the European airline industry
In the third part, we consider implications of the European airlines' strategic crisis responses for the post-
COVID-19 competitive landscape of aviation in Europe.
Some companies probably had to implement the decisions they made before covid 19 after this crisis.
As an example,
Air France-KLM has retired all of A-380s.
Lufthansa closed Germanwings.
Delta Airlines, Air France-KLM, Virgin Airlines announced codeshare agreement.
Also British Airways and Qatar Airways have teamed up.
We will examine governments acting as change agents, a resetting of business model convergence, and a
cementation of industry structures.

17. 3.1. National goverments as change agents ?
The future success expectations of market participants and competition parameters may
change with the observable interventions of the states. Although the necessary liquidity is
provided in the market thanks to the interventions of the state, the state has a control
mechanism over the operational or strategic management decisions taken by the
companies.
For example, the conditions or "requests" added by the state to the French and German
bailouts clearly illustrate the flow of political objectives.
For example, by referring to the goals of countries on environmental awareness and
"Greenness", the expected conditions and added conditions while giving state aid can be
interpreted as an accelerating power effect for the changes that the industry will already
face in the future.

18. 3.1. National
goverments as
change agents
?
However, such conditions can lead to unproductive
developments from the airline's point of view.
Moreover, when pricing and revenue calculations for
international itineraries are faced with the additional
parameter of external supply service providers who take a
share of the ticket price, the already complex task of
managing airline networks is further complicated and airline
revenues are dramatically reduced.
Additional side effects are likely: The major network carriers,
as the main beneficiaries of this state aid, are already openly
politicized organisations. National flag carrier companies
have recognized this burden over their regional low-cost
carrier (LCC) competitors. All major network carriers have
made great strides in increasing their efficiency with
innovative business models and organizational solutions.

19. 3.1. National
goverments as
change agents
?
Multinational airline groups such as Air France-KLM,
Lufthansa, and IAG that collect subsidies from multiple
governments and are crushed by each one's own terms risk
facing competing demands unlike their predecessors. The
COVID-19 situation is now strengthening legally and
politically.
National interests, combined with renewed legal leverage
and conflicting to put pressure on boards through
government-approved executives, make effective and
efficient decision making difficult for companies in a fast-
paced and competitive environment.

21. 3.2. Resetting
business
model
convergence
Following the liberalization of the industry in the late 1990s
and the rise of low-fare airlines in Europe in the first decade
of the 21st century, the continental European aviation market
has entered a period of consolidation.
The business models of LCCs and network carriers were
converging towards a common design of continental
passenger flight services. Government interventions caused
by COVID-19 unfortunately have the potential to reset these
developments: While network carriers receive government
aid packages, LCCs do not receive or even desire to receive
special packages.

22. 3.2. Resetting
business
model
convergence
Ryanair and easyJet, known as the largest LCCs, have
received funding from the UK government's general
commercial aid fund, while Wizz Air has not received any
additional support from national governments.
Large groups of network carriers will suffer from increased
politicization, which limits their decision-making
independence regarding routes and hub development,
aircraft orders, fleet size and technology (all), and possibly
corporate restructuring.
However, LCCs do not face such challenges and may even
thrive on the new priorities and imperatives of their network
carrier competitors.

23. 3.2. Resetting
business
model
convergence
Wizz Air plans to expand into new European markets, and
Ryanair has announced that it will increase price competition
when markets reopen, thereby committing to maintaining its
strategic position as the main developer and leader of price-
driven airline competition in Europe.
According to the first projections, announcements were
made that flying would become more expensive after COVID-
19. And it's not just because of social distancing measures on
airplanes, like empty middle seats.

24. 3.2. Resetting
business
model
convergence
In conjunction with the announced fleet/route reductions by
Lufthansa, British Airways and others, market shares across
the continent may shift towards growth-hungry LCCs. The
future position of easyJet, which has grown significantly as a
pre-COVID-19 LCC in Europe, is less clear. easyJet has
downsized its fleet for now, but at least it has not received a
bailout from governments and will therefore not be subject
to additional restrictions.

25. 3.3. Cementing the industry structure –
preventing industry consolidation
Already in the short term, the European airline industry structure can be predicted to
solidify, at least as long as further consolidation trends already underway are delayed.
For example, Alitalia, which the Italian government plans to deploy as a nationalized
instrument serving the recovery of the economy and tourism, seems to be secured.
For this reason, airlines like Alitalia, which have reached the end of their life and have been
subject to a series of takeover attempts and negotiations, would not have been able to hold
on to a market environment had it not been for the COVID-19 disruption. However, it is seen
that such airlines remain in the game due to COVID-19.

26. 3.3. Cementing the industry structure – preventing
industry consolidation
While crises often tend to create lots of takeover opportunities, we do not expect takeovers
to increase in the COVID-19 crisis.
Planned acquisitions have been canceled or postponed in the process so far. Such initiatives
are rarely implemented due to the extremely uncertain sector outlook regarding the
duration and intensity of the crisis, the development path towards the “new normal”
situation and its actual situation.
Government restrictions on the use of resources while backed by tax money will further
paralyze mergers and acquisitions between European airlines.

27. 3.3. Cementing
the industry
structure –
preventing
industry
consolidation
All major carriers have announced variants of fleet
downsizing (and accompanying layoffs) so that buying other
carriers (bringing fleet and personnel with them) is already
more challenging.
Even the more extreme COVID-19-driven scenario of a major
network carrier becoming the target of a takeover, thanks in
part to government bailouts, is highly unlikely. So beyond the
exit of a few small carriers due to bankruptcy, European
industry consolidation is unlikely to see a resurgence any
time soon.

28. Conclusion
Closing their loss Long-short Term
orientation
State Aid