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Airline allowances and mergers.

The introduction of the new technology has brought a number of changes in the way businesses are being done. Most company managers are now doing business reengineering and redesigning the way they carryout their operations. This has been seen in the air transport industry. In the year 2004 there was formation of alliance among some three airlines. They include sky team, star and one world, which accounted for seventy one percent of world international RPK provided by IATA airlines in the year 2004 (Millward, 2005).

Following announcement in mid of 2002 by KLM and air France of an unprecedented merger, the carriers seemingly gained approval of the European and US competition authorities in early 2004. This was a new development and strategy of staying competitive in the market. There was an agreement that was announced in October 2004 that aimed at placing SN Brussels Airlines and Virgin Express under the common ownership of SN Air holding. This was done after the organization realized that the revenues they were getting was just too small and was even decreasing.

Airline distribution Following the rapid increase in the rate of which technology is increasing and the insecurity caused by 9/11 created pressure to reduce costs involved in the travel. All the key players in the distribution chain were charged with a responsibility of evaluating its strategy and business processes. Airline websites were developed to provide fair transparency and the Internet travel agencies also led to a behavioural shift in consumer purchasing, with the Internet becoming a major distribution channel.

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During the year the industry used Internet to increase direct on line sales and put pressure on intermediaries to reduce fees. Electronic ticketing also emerged in Europe whereby over twenty percent if air tickets were issued on the Internet (Erick and Verdum, 2005). Market Analysis In the industry it can said that the leisure travel is growing faster than business travel as low cost carriers generate traffic.

The airline industry has long relied on the business travel market as a major source of profit. In the table below it is indicated that fifteen percent of the IATA airline, capacity is allocated to Business class that generates twenty eight percent of revenue realized. More importantly operating profit margin from Business in 2002 was twenty nine percent compared to just five percent from Economy class. Passenger services results by class of service 2002

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