Ajit Jaokar is the founder of the London based publishing and research company futuretext (
What can telecoms learn from the evolution of the airline industry
I was reading a book called ..
The Evolution of the Airline Industry By Steven Morrison and Clifford Winston
And it made me think that both telecoms and airlines have a ‘network’ and by understanding the historical implications of the changes in the airline industry .. We can gain some insights for the telecoms industry at its current time of transformation.
This well researched book gives some interesting analysis which I summarise below and also add some of my own thoughts ..
The 1938 civil aeronautics act was to regulate airfares for 40 years. The 1978 airline deregulation act effectively lifted the restrictions. The industry dynamics changed for ever.
The deregulation unleashed new competition but existing carriers like American airlines and United developed new innovations like frequent fliers programs, computerised reservations and the Hub and spoke system(transforming airports like Dallas and Chicago O Hare)
So, innovation came from the EXISTING players in addition to new players
Excluding notable exceptions like Southwest airlines , many new/niche players like Laker airways and Braniff did not survive
But .. Even so .. The airlines industry is still a difficult industry and the authors conclude that it was not due to lack of competition or lack of innovation(both from new and existing players) but due to the inability of the large airlines to accurately forecast demand ..
This is significant since I think that the smaller niche airlines like Southwest could forecast demand more accurately but the large national and global players found that it became much harder to predict economic cycles especially in light of a diverse ecosystem.
So, investments had to be made in advance(airplanes, airports) but the returns were not guaranteed ..
Sounds familiar ??
The book concludes that the Primary reason for low returns was not competition or structural factors but a failure to adapt efficiently to the business model. Coming from a formerly regulated economy airlines suddenly had a lot to learn and the management techniques used under regulation did not transfer effectively to a deregulated environment.
As I write a report on LTE and telecoms innovation .. This gives a sense of Déjà vu. ..
Comments welcome
Ajit,
Great comparison.
It’s the same reason why I believe all mobile VoIP companies will be washed away once operators decide they’re ready to roll out IMS.
It’s a simple matter of the big players adopting to market trends later than nimble start ups can – in most cases, the big brands still end up winning.
Comment by Tsahi Levent-Levi — September 29, 2009 @ 11:37 am