Identify the driving and hindering forces that changed the European airline industry in the mid-1990s.
What will be an ideal response?
? While some of the driving and hindering forces are mentioned in the case
example, students should start to conduct a PESTEL analysis when answering
this question. While not all information is given in the text, students should (when
thinking about the industry) come up with some of the ideas mentioned below.
Students should simultaneously mention whether these external reasons for
change are driving or hindering forces for change.
o Political: EU deregulation (driving force)
o Economic: Increasing oil prices due to the Iraq war at the beginning of the
1990s (driving force); and new business model in the industry established
by low-cost airlines (driving force)
o Social: Society’s changing perception of flying as a luxury (driving force)
o Technological: (see point 2 below)
o Environmental: Increasing carbon emissions (hindering force)
o Legal: Safety and maintenance demands for airplanes (hindering force)
? External reasons for change mostly support instead of hinder the establishment of
a low-cost model.
? Students should then analyse the internal reasons for change by taking the
position of a specific airline company. This should allow them to come up with
the following ideas: declining sales (driving force), fear of losing customers
(driving force), increasing cost sensitivity (driving force), economies of scope
(driving force), defending the traditional market position and remaining leader in
the industry (driving force), image/reputation damage for the premium flight
segment (hindering force), financial and human investments (i.e. marketing,
training, etc.) to position the new low-cost model in the market (hindering force),
and complexity of managing distinct business models (hindering force).
? As the results mentioned above show, there exist good internal reasons for and
against change. This allows the instructor to explain why some of the established
companies (e.g. Lufthansa) reacted very late to the changing market conditions
because they feared the damage to their established business model in the
premium segment.
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