Impact of IT on Airline Consolidation

Powerful economic, competitive and regulatory forces are reshaping the airline industry marketplace. The cost of fuel, labor and other operating and capital requirements continue to rise. Prices and services have undergone commoditization on a global basis, further tightening profit margins and forcing fundamental changes in business models – particularly in the airline sector. New low-cost competitors are capturing passengers, profits and market share. Post-9/11 security concerns have added new layers of cost and responsibility, while governmental actions have opened new competitive fronts from Europe, Asia/Pacific and elsewhere.

In response to these drivers, air carriers and others have worked diligently to eliminate waste and to squeeze incremental efficiencies from their operations. But after five years of efforts, carriers are beginning to reach a point of diminishing returns in their current round of cost-reduction efforts, causing some to consider consolidation as an opportunity to achieve new levels of cost and revenue performance.