Abstract

This paper focuses on technological and organizational levers as strategic determinants of innovation and transformation of airlines, considering the high rate of technological and organizational change (Barrett S., 2000) occurred in airlines market since 2004. The European airlines evolution will be especially examined on the basis of the hyper-competition phenomenon.

European airlines industry appears as a paradox both from an organizational and a technological point of view. By an organizational perspective, classical competition theory (Porter 1979, 1980, 1985) opposes low cost and differentiation as two mutually exclusive “generic strategies”. Not choosing between these strategies dooms firms to “stuck in the middle”. However, this static model does not seem to explain the behaviour of firms in hyper-competitive (Volberda, 1999) and turbulence environments characterized by high and frequent changes. In airlines industry the coexistence of “low-cost” and “networks” airlines seems to be an illustration of Porter’s dualist model. If low cost and differentiation can coexist, does it mean that Porter’s duality is still valid in hyper-competition? We argue here that a close analysis shows that both types of companies practice cost reduction and differentiation. Moreover, there are some “hybrid airlines”, like Meridiana, that operate in the same time as low cost and network airlines. On technological standpoint, the main effect of the Internet channel is supposed to deliver more consumer surplus than cost reduction, according to the Long tail theory. An inclusive analysis of Internet performance into European airlines is usually perceived to be cost reduction and differentiation. Therefore, this paper suggests moving beyond the “airline paradox” in Europe.

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