TITLE: DO AIRLINES INDUSTRY OF THE WORLD NEED TO BE FULLY LIBERALIZED AND

DE-REGULATED?NURUL KAMILLA BINTI MOHD YUSOF53276113192AINA SHAFIA BINTI MASURI 53276113078NOOR HIDAYAH BT KAMARUDDIN 53276113094MUHAMMAD IZZUDDIN BIN MUSTAFA53276113029MOHD NAZMI BIN AHMAD MAHMOD 53276113048

BEFORE DEREGULATION: AIRLINES INDUSTRY• By the 1940s, federal economic regulation of the airlines was in full swing. Typical regulatory

thinking from the 1940s onward is evident in a Civil Aeronautics Board report: "In the absence of particular circumstances presenting an affirmative reason for a new carrier, there appears to be no inherent desirability of increasing the present number of carriers merely for the purpose of numerically enlarging the industry." 4 In effect, the CAB intentionally limited competition and consumer choice through a variety of regulatory tools and powers. During the era of airline regulation from 1938 to 1978, the CAB's anti-competitive powers included:

I. Entry restrictions: the authority to determine which airlines were certified to enter the market or a segment of the market;

II. Exit restrictions: the authority to control how and when a carrier could exit the market or a segment of the market;

III. Price controls: the authority to require carriers to file rate tariffs and to approve and disapprove those rates;

IV. Business structure restrictions: the authority to control mergers, acquisition, and joint ventures;V. Route controls: the authority to determine and micromanage the routes that carriers could fly and the

cities they could serve on those routes;VI. Service quality mandates: the authority to establish service standards for the industry;VII.Financial controls: the responsibility to monitor the financial performance and health of air carriers,

including the establishment of the allowed rate of return for individual companies;VIII.Cargo regulations: the authority to determine what type of cargo could be carried on a plane; andIX. Employment policy oversight: the authority to monitor day-to-day employment policies and practices

within the industry.

WHY THE NEED FOR DEREGULATION?

• In late of 1950s – 1960s, the turboprop - driven aircraft enter in the airlines market consist of low capacity but high demand on the capacity (cause spillage capacity management).

• In late of 1960s – 1970s, the turbojet – driven aircraft enter in the airlines market consist of slightly medium capacity but cannot minimized the excess demand (still spillage capacity management happen in airlines).

• In 1970s and above, the production of super jumbo jet driven aircraft enter in the airlines market bring a high capacity and try to fulfill the demand on the capacity management but however the government control make the prices of jet fuel increasing and also the airlines fares (cause higher fares but more supply than demand spoilage capacity management happen).

• The Civil Aeronautics Board (CAB) construct the airlines deregulation act in 1978 to overcome this problem, to organize the airlines and coordinated in proper coordination within specific routes and special destination among the airlines.

WHAT IS AIRLINES DE-REGULATION?• Airlines deregulation means is the process of removing government-imposed

entry and price restrictions on airlines affecting, in particular, the carriers permitted to serve specific routes.

• The Airline Deregulation Act was establishes on 1978 which federal law intended to remove government control over fares, routes and market entry (of new airlines) from commercial aviation but did not remove or diminish the regulatory powers of Aviation Administration and authorities over all aspects of air safety. The special board had been establish after the privatization after out of control by the local government authorities.

• For example, in US the established the Airlines deregulation Act 1978 only to remove government control over fares, routes and market entry (of new airlines) from commercial aviation but did not remove or diminish the regulatory powers of the Federal Aviation Administration (FAA) over all aspects of air safety. The Civil Aeronautics Board (CAB) had been develop to control and coordinate also the regulated all domestic interstate air transport routes as a public utility, setting fares, routes, and schedules. The CAB also was obliged to ensure that the airlines had a reasonable rate of return.

This figure show that the airlines before deregulation and after deregulation which had recommended by CAB, ICAO and currently IATA on using hub and spoke after deregulation.

WHAT IS AIRLINES LIBERALIZATION?

• Airlines liberalization means frees an industry from the state’s control over prices, entry and exit.

• It also called as open skies policy/agreement where the airlines can enter into the aviation market to give proper competition on the freedom of the air and give improvement to the airlines to provide a service with lower fares to their customers.

• Airline liberalization we can conclude that as Freedom of entry/exit - Freedom on capacity –Freedom on fares - Freedom of operations - COMPETITION

• In IATA statement, greater commercial freedom for airlines is vital for the long-term health of the industry and for the global economy. This research discusses the example of liberalization in other industries and the potential implications for the aviation industry.

WHY THE AIRLINES NEED TO BE DEREGULATED AND

LIBERALIZED?• Reason for deregulated:

• After failures to reach a multilateral settlement on traffic rights, pricing and capacity in Chicago (1944) and Geneva (1947), the regulation of these three important aspects largely became a matter for bilateral negotiations of individual governments and airlines. The following system developed

(Doganis 1995):• the exchange of traffic rights came to be settled by bilateral agreements between states;• control of capacities and frequencies was subject to inter-airline or bilateral state• agreements;• tariffs came to be set by the International Air Transport Association (IATA).

WHERE THE AIRLINES DEREGULATION AND LIBERALIZATION HAPPEN?

• Firstly it happen in United State by Civil Aeronautics Board (CAB) in 1978.• After that the European phase follow by 3 phase of packages of

liberalization after US-EU bilateral agreement.• Other nation such as ASEAN Single Aviation Market (ASAM) be implement

and do in 2015 onward.

HOW AIRLINE DEREGULATION HAS HELPED CONSUMERS?

I. Prices Have Fallen - Prices have declined steadily since deregulation. The best measure of trends in airline prices is the "yield" (revenue generated per passenger mile) that airlines receive. The inflation-adjusted 1982 constant dollar yield for airlines has fallen from 12.27 cents in 1978 to 7.92 cents in 1997. This means that airline ticket prices are almost 40 percent lower today than they were in 1978 when the airlines were deregulated. 

II. Prices have fallen at all airports - Airline deregulation might be considered a failure if fares at small and medium-sized airports had not declined as they did at large airports, but small and medium-sized airports have not been denied the benefits of lower prices and better service. An April 1996 General Accounting Office study found that "The average fare per passenger mile, adjusted for inflation, has fallen since deregulation about as much at airports serving small and medium-sized communities as it has at airports serving large communities." Furthermore, "The average fare per passenger mile was about 9 percent lower in 1994 than in 1979 at small-community airports, 11 percent lower at medium-sized airports, and 8 percent lower at large-community airports."

• Air Travel Is Safer - Airline safety has improved since deregulation. Between 1939 and 1978, fatal airplane accidents averaged six per year. After deregulation, from 1978 to 1997, the average was only 3.5 fatal accidents per year. The safety record of America's airways is determined more accurately, however, by examining how many airline fatalities occur annually relative to the overall number of miles flown by the nation's air carriers. As Chart 3 illustrates, the overall safety record of America's airlines has continued to improve since deregulation: During the 20 years since deregulation, fatal accidents have averaged 0.0009 per million aircraft miles flown. During the 40 years before deregulation, on the other hand, fatal accidents averaged 0.0135 per million aircraft miles flown.

• Airline safety has improved for airports of all sizes. The GAO also found that "for each airport group [small, medium-sized, and large], the accident rate was lower in 1994 than in 1987. The GAO study did not find any statistically significant differences between the trends in air safety for airports serving small, medium-sized, and large communities.

• Service Quality has Improved such as:1. There are more aircraft departures than ever before2. There are more departures for small, medium-sized, and large airports alike. 3. Airlines fly more miles. 4. More Americans are flying than ever before. 5. Airlines are more timely than ever before..6. New types of services have become available7. Airlines have developed new marketing options to serve the newly empowered consumer

more effectively.8. Frills and amenities may have declined slightly.

THE FREEDOM OF THE AIR.• Since the CAB has establish in 1938, they implement the

freedom to the airlines which control and coordinate any airlines to follow their specific freedom after deregulation and liberalization.

Figure 1 Figure 2

EXPLANATION OF THE FREEDOM OF THE AIR

Freedom Description Example

1st the right to fly over a foreign country without landing

Toronto - Mexico City by a Canadian company, overflying the USA

2ndthe right to refuel or carry out maintenance in a

foreign country without embarking or disembarking passengers or cargo

Toronto - Mexico City by a Canadian company, stopping for fuel in the USA

3rd the right to fly from one's own country to another Toronto - Chicago by a Canadian company4th the right to fly from another country to one's own Toronto - Chicago by a US company

5th the right to fly between two foreign countries on a flight originating or ending in one's own country

Doha - Bangkok - Kuala Lumpur by a Qatari company

6ththe right to fly from a foreign country to another

while stopping in one's own country for non-technical reasons

Dubai - Cairo - Paris by an Egyptian company

7th the right to fly between two foreign countries while not offering flights to one's own country Kuala Lumpur - Jakarta by an Italian company

8th the right to fly inside a foreign country, continuing to one's own country

Chicago - New York City - Toronto by a Canadian company

9th the right to fly inside a foreign country without continuing to one's own country Beijing - Shanghai, as an Italian company

PESTLE ANALYSIS: WHY THE AIRLINES NEED TO BE DEREGULATED AND

LIBERALIZED?• Political view• Economic view• Social view• Technology view• Legal view• Environment view

POLITICAL VIEWAirlines Deregulation

POLITICAL VIEW: AIRLINE MARKET DEREGULATION• US (1978) EUROPE (1993-1997) MALAYSIA (1993)• PAST : FIRST COUNTRY – US• The beginning of federal government regulation of the interstate airline industry can be

traced to the Air Mail Act of 1925 and the Air Commerce Act of 1926. Additional federal regulation of commercial aviation was imposed with the passage of the Civil Aeronautics Act of 1938.

• That Act created the Civil Aeronautics Authority, which became the Civil Aeronautics Board (CAB), and gave the CAB the power to regulate airline routes, control entry to and exit from the market, and mandate service rates, to investigate accidents, certify aircraft and pilots, to create rules for air traffic control (ATC) and to recommend new rules to prevent repetition of previous accidents.

• The CAB had three main functions: to award routes to airlines, to limit the entry of air carriers into new markets, and to regulate fares for passengers.

• The government decided to open up the airline market with the so called Airline Deregulation Act in 1978.  the structure of the industry changed: seat capacities and routes could be set by the airlines according to market demand, new airlines were allowed to enter the market and prices could be reduced. Resulting in higher benefits for their customers, not only in lower ticket prices but also in better services.

• SECOND COUNTRY – EUROPE• Due to market deregulation, traffic growth accelerated in the following years and

many new airlines, mainly Low Cost Carriers, entered the market. Due to their different business model which is based on reduced services and operational efficiency (e.g. fast turnaround times) they managed to achieve slim cost structures allowing them to stay profitable at significantly lower fares compared to the established carriers.

• How do they do it?• By achieving low operational costs, most strategies focus on simplifying the

business mode hence decreasing labour costs; which takes up around 30 per cent of the total operational costs for a full service airline. The table below compares the products in general between full service, charter and low-cost carriers; although not all difference apply to all airlines in that category.

• PRESENT : MALAYSIA• In Malaysia, airlines are separated into two; 1) Passenger airlines and 2) Cargo airlines• The passenger airlines in Malaysia are Air Asia, Malaysia Airline System Berhad (MAS),

Firefly which is owned by MAS, Layang-Layang Aerospace which is based in Sabah to provide air services to Layang-Layang Island, Berjaya Air which is owned by Berjaya Group, Sabah Air and last but not least Hornbill Skyways which is a helicopter service that operates in the rural area of Sarawak.

• There are also three cargo airlines that operate in Malaysia. They are the Athena Air services, MAS cargo and Transmile Air Services

• Despite the various kinds of air operators, the airline industry in Malaysia is being monopolized by two main operators.

• The first one is the Malaysia Airline System Berhad (MAS), which is Malaysia’s full service national carrier that first took the skies in 1947 under the name of Malayan Airways Limited.• MAS flew nearly 50 000 passengers daily to 100 destinations worldwide• Had been awarded as the World’s Best Cabin Crew’ in 2001 until 2004 and 2009, and

the ‘5 STAR Airline’ award from 2005 till 2009 by Skytrax UK.• MAS currently have 90 aircrafts for domestic and international flight. There are currently

20 Airbus and 70 Boeing.

Born of the low-cost budget airline business model and is the leading budget airline in Asia by other airline operator in Malaysia ,Air Asia Has flown over 55 million passengers across the region and continues to create more extensive

route network Increased number of routes flight frequencies and passenger growth of 24% This is due to its low fare structure making Air Asia the number one choice as opposed to MAS With its vision to be the largest low cost budget airline in Asia and serving the 3 billion people

who are currently underserved with poor connectivity and high fares, Air Asia had also made the nation proud.

Believes in serving the best to its customers with no frills, hassle-free and low fare business concept and under its philosophy ‘Now Everyone Can Fly’

Has sparked a revolution in the airline industry As advertising is the number one priority for marketing strategies, MAS markets will market its

brand name along with its ‘Going Beyond Expectations’ philosophy while Air Asia will ensure that their ‘Now Everyone Can Fly’

Route to Singapore Before Deregulation no flight to Singapore by MAS Competition Government policy

• FUTURE : ASEAN SINGLE AVIATION MARKET – RESULTED FROM DEREGULATION AND LIBERALISATION• The 10-member Association of Southeast Asian Nations (ASEAN) Single Aviation Market (SAM), dubbed the open

skies policy, seeks to liberalize air services under a single and unified air transport market in ASEAN by 2015. • Air travel is part of a larger discussion among the proposed ASEAN Economic Community (AEC), whose objective is

to increase economic integration among members through the harmonization of trade and investment policies under a single market and production base.

• The aviation policy was proposed by the ASEAN Air Transport Working Group, supported by the ASEAN Senior Transport Officials Meeting, and endorsed by the ASEAN Transport Ministers. The ASEAN-SAM is expected to fully liberalize air travel between member states in the ASEAN region, allowing ASEAN countries and airlines operating in the region to directly benefit from the growth in air travel around the world, and also freeing up tourism, trade, investment and services flows between member states. Since 1 December 2008, restrictions on the third and fourth freedoms of the air between capital cities of member states for air passengers services have been removed, while from 1 January 2009, full liberalization of air freight services in the region took effect. On 1 January 2011, full liberalization on fifth freedom traffic rights between all capital cities took effect.

• The ASEAN Single Aviation Market policy will supersede existing unilateral, bilateral and multilateral air services agreements among member states which are inconsistent with its provisions.

•The ASEAN Single Aviation Market (ASAM) is consisting of three key elements that act as guiding principles to ensure the ambition of this program become a reality. The key elements are:

All restrictions are been removed for designated ASEAN carriers on the operation of passenger and freight transport and associated

commercial activities within the Member States of the ASEAN region.

A common policy is adopted for user charges, tariffs, competitive behaviour and other forms of regulation.

Majority of ownership and effective control of designated carriers is vested in ASEAN States and or nationals in aggregate (i.e. the ASEAN

Community Carrier concept).

HYBRID AIRLINES'Hybrid' Carriers are a relatively new type of airline business model. They are characterised by literally being a hybrid of the traditional 'full service' and 'low cost’ models. The aim is to have the low operating costs of a Low Cost Carrier (LCC) combined with the levels of service of a traditional full service airline.Many wished to fly for cheaper prices, but they also wanted to purchase some services that would enhance comfort. Companies that saw the need developed intermediary models. Thus were born hybrid airlines.'Low Cost' traits Low base fares - base fares are intended to be low. In order to be able to advertise low headline prices fares go up as seats on the flight are booked. If a flight is particularly full (or if the airlines fare setting algorithm expects demand to be high) then prices can be very high for those last few seats. Baggage charging - All checked luggage must be paid for, there is no inclusive allowance. Some more expensive fares include a checked bag. No complementary catering - Food and drinks on board are chargeable. More expensive fares include a drink and a snack voucher.'Full Service' traits Reserved seating - Reserved seats are allocated at check-in instead of the free seating of 'pure' LCCs. Frequent flyer program – To achive passengers loyaltyEXAMPLE – MALINDO

ECONOMIC VIEW

The jet fuel chronology & their prices

THE FUEL CHRONOLOGY• Past – most of aircraft using kerosene in earlier development of aircraft engines. The

price between the fuel and the demand also increased day by day since the airlines services on demand.

• After the jet fuel kerosene less efficiency to the technology development of engines, the jet fuel wide- cut had been use in aviation industry since the density of the aircraft become more efficient to type of aircraft.

• Present – the established of aviation gasoline in aviation industry gain more demand and more efficient than jet fuel wide-cut since less density by high performances regarding to the engine types. However the aviation gasoline difficult to get so the prices increased drastically against the time.

• Future – the development of biofuel to reduce the carbon emission and the biofuel more efficient rather than aviation gasoline which higher in prices, the biofuel more comfortable for airlines to use it instead to get high revenue and reduce the cost of operation of their airlines.

Figure above is kerosene’s statistics of the years against the prices demand (in dollars per gallon) in US since 1980s until late 2010.

Figure above is wide-cut jet fuel’s statistics of the years against the prices demand (in dollars per gallon) in US since

1994s until late 2012.

Figure above are comparison between jet fuel and aviation gasoline almost in 2 years.The blue line is aviation gasoline’s statistics of the years against the prices demand (in dollars per gallon) in US since 2007s until late 2008.The green line is jet fuel’s statistics (both jet fuel types) of the years against the prices demand (in dollars per gallon) in US since 2007s until late 2008.

Figure above are comparison between jet fuel and aviation gasoline almost 30 years.The blue line is aviation gasoline’s statistics of the years against the prices demand (in dollars per gallon) in US since earlier 1983s until late 2012.The red/maroon line is jet fuel’s statistics (both jet fuel types) of the years against the prices demand (in dollars per gallon) in US since earlier 1983s until late 2012.

Figure above are the comparison between jet fuel and the aviation biofuel in future development (did not find the real statistics)

SOCIAL VIEWBenefit for consumer and producer

SOCIAL VIEW: LIBERALIZATION: COMPARISON BETWEEN

CONSUMER AND PRODUCER

Consumer • Lower prices had been promoted.• Increase the output and choices.• Improve service quality.

Producer • Improve capacity utilization.• Increase productivity• Transfer best practices.• Increase investment• Improve productivity• Increase a firm’s market value.

DEREGULATION AND LIBERALIZATION.

• Social• The current era of globalization has been define by as the systematic spread

of capital and open markets by fewer constraints.• It is imposed by institution or regulatory interventions and consequently

increase internationally integrated.

• Liberalization of the social services (including privatization and decentralization) in the following areas:• Pensions• Publics employment services• Education • Labour market training• Health services (including mental health services and nursing home provision

care services for particularly prisons)• Care work services.

TECHNOLOGY VIEWTypes of aircraft and the capacity of the aircraft.

TYPES OF AIRCRAFTSituation Type of aircraft

usedCapacity management

Types of capacity situation

Examples of aircraft used

Before deregulation (Past)

Smaller aircraft Limited capacity Spillage capacity Bombardier CRJ700 (75 pax per seat)

After deregulation(Present)

Super jumbo jet Bigger capacity Spoilage capacity Boeing 747-8 (467 pax per seat)

Future re-regulation(Future)

Medium jumbo jet (wide-body/narrow-body)

Moderate capacity Optimized capacity (min spillage & spoilage)

Airbus A350 XWB (276-369 pax per seat)

Types of aircraft enginesI. Turbojet engines (past – 1940s until 1979s)II. Turboprop engines (past present – 1950s until 1990s)III. Turbofan engines (present – 1990s until now)IV. Super turbofans engines (future – RR to Airbus A350 XWB)

Past : Bombardier CRJ 700

Picture the seat and interior design of Bombardier CRJ 700

Boeing 747-8

Picture the seat and interior design of Boeing 747-8 seat and interior design

Current modern aircraft: Airbus A380

Picture the seat and interior design of Airbus A380

Future aircraft: Airbus A350 XWB

Picture the seat and interior design of Airbus A350 XWB seat and interior design (preliminary)

Type of aircraft engines

1. Turbojet engine(Ilyushin 82)

2. Turboprop engine (ATR 72)

3. Turbofan engine (Boeing 777-ER)

4.Super Turbofan engine (Airbus A380)

LEGAL VIEW• Bilateral, multilateral and plurilateral agreement review.

• Airlines Deregulation Act 1978 review.• Airlines Liberalization package (European review)

• A bilateral air transport/services agreement (also sometimes called a bilateral air service agreement or ATA or ASA) is an agreement which two nations sign to allow international commercial air transport services between their territories.• EU-US Open Skies Agreement (2007 – eff 2008)• Bilateral Interline E-Ticketing Agreements (BIETA)

• A multilateral air transport/services agreement is the same as bilateral agreement, the only difference being that it involves more than two contracting states.• ASEAN Multilateral Agreement on Air Services (2009 – eff 2015)• Multilateral Interline Traffic Agreements (MITA)

• A plurilateral air transport/services agreement on trade in civil aircraft from the minority interest to the majority interest had a narrower group of signatories.

• Airlines deregulation Act 1978 publish to guide the airlines between airlines policy/provision/agreement that be guided by Aviation Authorities for example Civil Aeronautics Board (CAB) regarding fares, fuel prices restriction and more benefit between two or more airlines.

• The European Open Skies Policy consist of three packages:• First Package or December 1987

• Declared flexible terms concerning the fares • Abandoned the single designation provision • As well as had released any capacity restrictions

• Second Package (June 1990)• Released even more the provisions of the first one • Allowed multi-designation of airlines on specific routes • As well as it allowed operations under the Third and Fourth Freedom of air into inter-continental flights

• Third Package (January 1993)• Came into effect in 1997• Was the basis for the creation of the ‘open skies’ agreement with full traffic rights everywhere in the community• Freedom in entry and exit• At any capacity• At any route • At any rate determined

ENVIRONMENT VIEW• Competition environment• Surrounding environment

COMPETITION: DOMESTICS AND INTERNATIONAL FLIGHT IN THE WORLD

Base on the yearly review by CAPA statistics, the domestics flight (blue colour) passengers demand conquer the graph than follow by international flight (green colour) and last the regional flight (red colour) after the deregulation and liberalization. Seem that the domestic flight shown the low fares had high opportunity as passenger choices to travel by their desires. The international flight even though had higher fares than regional flight, the desires of the passenger determine that the passenger choose their flight on the derived demand than the regional flight.

COMPETITION: FLEET MOVEMENT

The international fleet movement conquer on the statistics rather than the domestics fleet movement because the capacity of the aircraft between both fleet are different. The domestic flight using the smaller capacity on their domestics fleet movement rather than international flight is vise versa on their international fleet movement. The total amount the passenger in international is higher than the domestics flight instead of the aircraft type of capacity.

SURROUNDING ENVIRONMENT• Airbus & Boeing aircraft - environment I. Continuous innovation

• Aircraft entering today's fleet are 70 percent more fuel efficient than early commercial jet airplanes, consuming about 3.5 liters per passenger per 100 km. Technological innovation is a fundamental part of this industry.

II. Noise reduction • Boeing continually pursues noise-reducing innovations, making each new airplane quieter than its predecessor. New

technologies promise even greater improvements.III. Sustainable biofuels

• Boeing is actively driving the development of sustainable biofuels for use by the aviation industry. Technology is advancing faster than expected. Many airlines could be flying on a percentage of biofuels within the next five to ten years.

IV. Air traffic efficiency • Today's airspace systems are inefficient. Though safe, the current model is serving increased demand with outmoded

technologies - the result: system congestion and delays that waste fuel and increase emissions. Boeing is helping solve this complex problem by collaborating with governments and industry partners.

V. Renewable energy • Advanced technologies for generating and harnessing energy are reducing the need to produce electricity from non-

renewable resources. Boeing is developing applications within key energy harvesting technologies, including electro-dynamic, thermoelectric, piezoelectric, hydrogen fuel cells and solar cells.

SWOT ANALYSIS: THE OVERALL ON THIS RESEARCH

OVERVIEW

Strengthens • Large route network

• provides it with a resource not available to all its competitors as its customers can reach an airport close to almost any destination at a price below the competition.

• Network of business partners• extending its value chain from just the

traditional revenue stream of selling seats in an aircraft

• to generating revenue both up and down the value chain from pre-flight revenue.

• Non-scheduled revenues• bring in substantial ancillary revenue and

profits through low-cost ventures with various partners based on commission, which limits its risk exposure.

• offering these services online through their website, reducing the costs of providing the services to a minimum.

• Financial resources• have the financial resources to force its

competitors to retreat in price wars

Weakness • The service factor

• poor customer care in resolving complaints, and limited ability to attract business travellers.

Opportunity • Introducing the “Eighth

freedom of the air”– take on revenue passengers and

freight in a second state to a destination within the state

• Industry consolidation– there has been a tendency for

consolidation in the full service airline business as airlines such as KLM and Swiss has been acquired by Air France and Lufthansa

Threat • Expansion of network

• opening new intercontinental routes, and forming joint ventures or other strategic alliances with competitors in markets not currently served by the airline.

• Smaller airlines can gain greater access to markets in the region through joint ventures and strategic alliances that allows airlines to code share, which involves transporting passengers using aircraft from two or more airlines.

• Oil prices• will be hit harder if they do not introduce a fuel

charge to off-set the rise, as their average fare• price is lower, hence the will the fuel cost be a higher

percentage of the total fare price than• airlines with higher fares.

• Air disaster• air accident• management indiscipline ( internal affair )

CONCLUSION AND RECOMMENDATION• Recommendation

• Conclusion

RECOMMENDATION• After we had making the PESTLE analysis, we can make some

recommendation regarding to our research on the airlines deregulation and liberalization in our opinion base the finding :

I. Privatize airports to expand airport capacity and improve infrastructureII. Allocate and allow market-based pricing at airports for takeoff times,

slots, and gatesIII. Privatize the air traffic control system to reduce congestion and improve

safetyIV. Control and cut airline fees and taxesV. Encourage increased foreign competition for the domestic marketplace

with the circumstances and been coordinated by Aviation Authorities that suitable to handle the aviation market.

CONCLUSION• Liberalization and deregulation have their own advantages and

disadvantages in term of PESTLE and SWOT analysis.• In airline industry, deregulation and liberalization has develop into whole

new level in providing air transportation services.• In our point of view, airlines should not to be fully deregulated and

liberalized because we need to maintain the aviation market capability. Yet, government still has to much to do to ensure that the airline market will thrive in the future.