As an airline executive, once you have chosen the most potentially lucrative competitive position by market, you must consider how to best construct the business that will inhabit it. Does your airline have the elements — that is, network, fleet, operating model, a reasonable cost-to-serve structure, digital capabilities, and the right partners — needed to thrive in the envisioned business environment? If not, how will those elements be obtained — through organic growth, consolidation, M&A, or joint ventures?
The best answer to this question will depend on the market. In North America, for instance, M&A has been a beneficial option for incumbent airlines. Conversely, in Southeast Asia, where regulations discourage the presence of non-national airlines, alliances may be the best way to serve the regional market.
The need to address competitive positioning is made more serious by the fact that no market is safe from competitive threat. Massive investments in infrastructure in the Middle East (and expansion by the Gulf carriers) will ensure that the region continues to develop as a travel hub connecting the East and the West. Although China’s airlines are still focused on domestic demand, inevitably they will turn their attention outward — bringing huge fleets and large amounts of capital with them.