AbstMctThis paper examines the stock and accounting performance of three major airlines in the United States in the aftermath of the September 11, 2001, termrist attacks. September I I (9/1 I ) resulted in dramatic changes in the airline industry and had significant implications for the economic gains and future pmspects of most airlines. Our study focuses on the stock market's perception of the viability of low-cost versus full-service business models in the afermath of 9/11. We choose Southwest Airlines as a typical low-cost airline and compare its accounting and stock performance to two full-service airlines, Continental and Northwest. We find that Southwest's performance was highly superior to that of Continental and Northwest and argue that Southwest's business model, in the eyes of investors, provides the firm with significantly more financial and operational flexibility than full-service airlines. Southwest's lower operating costs, consumer trust, p d u c t offering, corporate structure, workforce and work practices, as well as operational pmedures are all factors that appear to contribute to Southwest's relative success. RCsudCet article dtudie la performance boursi2re et comptable & tmis gramis transporteurs driens oMmnt aux hats-Unis au l e h m a i n &s attentats du I I septembre 2001. Ces dvdnements ont entmfd &s changements m d i c u (2002,2003) discuss the strategies that both types of air-~~ We are grateful to two anonymous refand to colleagues at Coocordia University for useful comments. In addition, we wish to thank Dolrucdce 'Ihiengtham and Michael Yi Lin for providing superb rtscarch assistance. Address mrn?spondence to Triant Flouris. Director. International Aviation MBA Program, John Molson School of Business, Coocordia University. Montreal, QC. Canada H3G 1M8. Email: ttlouris@jmsb.concordia.ca OMAC 2005 3lines have pursued in reaction to the September 11,2001 (9/11) attacks and outline how those airlines have fared after 9/11. Although Lawton provides a brief review of the airlines' stock performance, his discussion is mostly qualitative in nature. Carter and Simkins (2004) provide a quantitative analysis of the stock performance of a sample of U.S. airlines after the events of 9/11, but do not focus on performance differences between lowcost and full-service airlines.formance or systematic and unsystematic volatility of the respective airlines. Our study fills this gap by providing a comprehensive quantitative analysis of a small sample of lowcost and full-service carriers around 9/11.
When Porter (1 980) introduced his typology of business strategies, he used Laker Airways' as an example to illustrate the danger of being stuck in the middle between the two basic types of competitive advantage, namely low cost and differentiation. However, the changing nature of competitive pressure in many business sectors and the accompanying need to perform well simultaneously in several aspects of operations performance, have eventually lead Porter (1 990) to revisit his early idea. When presenting Porter's generic competitive strategies, most strategy textbooks now offer a new choice, namely the "integrated cost leadershiptdifferentiation" strategy (Coulter, 2002;Hitt, Ireland, & Hoskisson, 2003), or the "best-cost provider" strategy (Thompson & Strickland, 2001). Given this background, the purpose of this theoretical paper is to build upon the strategic management and operations strategy literature to develop a conceptual framework that will subsequently be used to explore the extent that airline companies successfully pursue the best-cost provider (or integrated cost leadershiptdifferentiation) strategy, and how they manage to resolve the trade-off between low-cost and differentiation. We aim at revisiting the "stuck in the middle" prescription by demonstrating that a number of aviation strategic options exist between the ''traditional'' and "lowcost" model.
No abstract
The aviation industry has been hard hit in recent years. While there are numerous factors that have contributed to the industry's dilemma, rising and volatile insurance premiums-particularly after the events of 9/11-have posed a particular problem for many airline managers. Despite a general trend for accident rates involving commercial passenger airplanes to decrease as aviation technology has advanced over the years and airplanes have become safer, the aviation insurance market has been far from stable. This article provides an overview of how the aviation insurance industry works and how it has changed in recent years. We take a look at how the risk is spread between insurers, how insurers treat deliberate acts of violence, and lastly, how insurers price the risk. Our article shows that the aviation insurance market has undergone considerable changes in recent years and that it has adjusted to the post-9/11 aviation insurance realities being reasonably ready to handle events of an even more catastrophic magnitude.
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