The article on the Southwests of Europe (Airline Business, June) brought this idea of the carbon copy strategy into my mind again. I find it amazing how companies always want to duplicate something which has been successful elsewhere, with the idea that they also will get a competitive advantage out of it.
The Aviation Development Foundation is a non-profit organisation involved in applied research on strategic business modelling for the air transport industry.
In the years we have been involved in airline strategy, only two constants can be identified in the industry - lack of profitability and lack of creativity. It is amazing how quickly and easily airlines are willing to duplicate each other's innovative ideas.
For example, a few years ago we were one of the few recommending that airlines should keep first class. Instead, some of our strategic models supported the idea of upgrading business to first while reducing the price gap to give customers a better feeling about the perceived value of their (expensive) ticket. Not one airline chose to follow this advice. Today most of them are re-upgrading their business class product to something similar to, or even better than, the former first class they cut two years earlier!
This poses a serious question about the capability of those airlines' strategic analysts. The airlines lost the commercial and marketing edge which could have been created by a more realistic strategy, leaving them with costs and no substantial added value for the change.
The case of airlines looking to duplicate the Southwest success is also significant. Whether Southwest could be successful if it were to start now remains highly questionable. Its success was linked to the fact that it developed a successful differentiation strategy when and where there was a market pending for that type of product.
The chances of success when duplicating such a strategy 10 or 15 years later, in a market which has no similarity with the market where Southwest developed are, as far as we can tell, nil.
The Aviation Development Foundation has been involved in two cases where strategic business models were developed for a low cost, high density European airline. Neither showed any substantial longterm returns - though this does not mean that one cannot be a low-cost carrier.
However, the myth of becoming the Southwest of Europe by merely duplicating an outdated strategy should better be exchanged for the idea of becoming a new Southwest - that is, developing a totally new concept of airline with that differentiation that will make it unique and successful in Europe (or wherever).
Cost differentiation is not the only way to be different. Southwest developed more differentiating factors than costs. Besides, in a market where competition is distorted by monopoly and subsidy, it is questionable whether cost leadership could be a sustainable differentiation factor when it can be undercut by any subsidised competition at any time. A prime example is Sabena, which is now competing with EBA out of Brussels with similar fare deals by just adding some more red ink to its bottom line.
Our conclusion is: be innovative! There is not just one formula for making your airline different and unique. And while cost differentiation is one of the possibilities, one should certainly not focus on it. It would be better to investigate all the other ways to become that unique European airline which so many monkeys will try to ape in three, five or 10 years from now.
E van de Winckel
Director
Aviation Development Foundation
Breda, The Netherlands
Source: Airline Business
