The international expansion of Airlines: challenges, strategies and the benefits of going global
February 28/23 | Blog
In recent decades, the aviation industry has undergone significant transformations. Many airlines are expanding their reach beyond their home countries to serve a more global customer base with the aim of gaining new market shares and expanding their operations worldwide.
This international expansion has been driven by several factors; these include an increased demand for air travel, the liberalization of air transport policies, the globalization of the world economy and many more.
In this article, we will explore how airlines face their international expansion. Not only that, but we will also consider the challenges they face as they do so, the strategies they adopt to enter these new markets, the benefits that come with going global and how Value Group can be a strategic partner in this new expansion they decide to pursue.
An international strategy can be the answer to a sinking demand in homebase.
Why international expansion may be the right choice
The main driver of international expansion in the aviation industry is the increasing demand for air travel. A bigger potential market becomes very attractive, especially for airline carriers looking to adopt a bigger customer base, when the finite number of passengers in their home bases becomes a challenge for their growth.
Our lifestyles also have changed. People have become more affluent, and consequently have become more mobile. At the same time, air travel has become more affordable, leading to a rise in the number of people being able to travel whenever and wherever they want.
Another significant factor behind the need to go international has been the liberalization of air transport policies. Governments around the world have loosened their restrictions on foreign ownership of airlines, allowing carriers to invest in and acquire other airlines, just like Lufthansa has done several times in the past decade.
But there are some challenges
Expanding into new markets is not without its challenges, and it’s no news that the aviation industry is famous for having a very high barrier to entry.
One of the main challenges airlines meet when looking to expand overseas is regulatory compliance. Each country has its own set of rules and regulations governing the aviation industry, its airport use and so on. Airlines must comply with local laws and regulations to operate in a new market, which can be a time-consuming and costly process.
Internationalization comes with its challenges, but overcoming them can be rewarding.
That’s why having a strategy is important
To overcome great challenges, you need great strategies. And one of the biggest challenges faced by airlines when starting their expansion is the new-found local and global competition.
When entering a new market, airlines must compete with established carriers that have already built up a loyal customer base. Carriers that are trusted and familiar to the locals.
In this case, different strategies must be adopted for different countries; one option can be to offer competitive prices, just like in Ryanair’s case whose competitive price-point made it the first airline in Europe.
Another one can be to offer high-quality service, and a strong brand reputation to win over new customers and gain a market share big enough to justify the investment.
In Emirates’ case, taking advantage of the attractiveness of its Dubai hub gave it a competitive advantage that helped it grow its global-scale coverage and increase its market share to achieve economies of scale. Emirates’ strategic decision to reposition itself as a global carrier enables air travelers to bypass traditional airline hubs in Europe and North America for the more glamorous and coveted Dubai.
Another example can be WizzAir’s expansion strategy. In 2021 only, post-pandemic, they expanded their network with 34 new bases. Taking advantage of their low fares and diverse network, supported by their efficient and sustainable operations and high-quality customer service, their expansion continues in 2023 with another 50 routes in January only.
How Value Group can be a strategic partner for airlines deciding to go global
Crisis management related to any type of flight disruption is always hard to manage, but even more so when starting operations in a new country.
The process of having to develop new roots in a country is a long and tedious process for any business, since it entails finding, building, and maintaining a new network of suppliers happy.
Fortunately, when it comes to IROPs management in general, Value Group’s clients are guaranteed full global coverage – as we have an international network of suppliers distributed all over the world.
While presently covering over 120 airports in more than 30 countries with our very own partners, making us the first all-in-one disruption management services provider in Europe, we are tirelessly and constantly invested in growing our network of suppliers’ base, so that our clients don’t have to.
Value Group becomes an airline’s all-in-one IROPs management global supplier, taking care of any crises that may arise so that airlines can focus all their energy on growing and expanding their brand names all over the world.
If you want to learn more on how Value Group can become your strategic partner in your internationalization strategy, you can visit our solutions for passengers page and our solutions for crew page.
The benefits of going global
Despite the challenges, the benefits of going global are significant for any company, and airlines are no different.
International expansion allows airlines to enter new markets and diversify their revenue streams, reducing their dependence on any one market, and, at the same time, enabling them to strengthen their position in the industry.
There are many benefits to going global, and Airlines know that.
It also allows them to spread their risk and reduce their exposure to economic downturns if one country shuts down for political or natural catastrophes.
International expansion can also lead to operational efficiencies, as airlines can benefit from economies of scale and reduce their costs through increased efficiency and productivity.
Finally, expanding internationally also means that airlines can access a larger pool of talent, providing them with access to skilled employees and specialized expertise that they wouldn’t otherwise reach in their home base.
While expanding into new markets poses challenges, the benefits of going global significantly overshadow the drawbacks. They allow airlines to tap into new markets, diversify their revenue streams, and gain operational efficiencies.
As the aviation industry continues to evolve and to become more profitable, we can expect to see more airlines expanding their reach beyond their home countries to serve an always more global customer base.
As more and more airlines decide to go global, Value Group keeps on providing its 360° support to passengers by combining the physical presence of our staff all over the world with the innovation of our systems to ensure a positive passenger experience in the event of disruption.
If you want to learn more, please visit our solutions page or email us at info@valueg.com.
Sources:
- Wizz Air’s aggressive expansion strategy points to a bright future, by Globaldata, 2021
- Global strategies of the airline industry: a case study of Ryanair, Emirates, Netjets, and Thomas Cook by Abdul-Kadir Ameyaw and Ameyaw Ahmed Sadat, 2020
