Carriers of globalization: Airline development between globalization and de-globalization, the case of Royal Dutch Airlines, 1980-2010

Abstract

To many the international airline industry appears to be an exciting and dynamic industry that operates at the frontiers of technological innovation. Airlines contribute to the globalization process: international trade, investment and finance, migration and tourism are highly facilitated by the airline industry (Held, McGrew 1999; Doganis 2006, IATA 2015). Conversely, globalization also had and has a huge impact on the airline industry itself. Few realize that, despite the glamour and the unmistakable role as drivers of global interconnectedness, most airlines did enter into serious problems when the extensity, intensity and velocity of global networks increased. Only few companies succeeded in achieving a long-term profitability and many carriers even ceased to exist. In order to survive, airlines had to adapt new strategies that fit the changing economic and institutional settings. The finding of an appropriate answer to the challenges and constraints of globalization (and de-globalization) became indispensable to develop a viable industry. This paper deals with the impact of globalization on the airline industry during the last decades of the 20th century and the beginning of the new millennium. It will introduce the case of Royal Dutch Airlines (KLM), founded in 1919 and one of the main airlines in Europe. How did the flag carrier of the Netherlands grow within the liberalized world (beyond borders) and how did the company cope with the risks and uncertainties of new markets and unknown competitors that entered the market? This paper will look at the instruments of coordination to structure and restructure power within the industry. It will highlight the consolidation process and the merger of Royal Dutch Airlines with Air France in 2004. Special attention will be paid to the relation of the Dutch and French airlines with the states that reduced their stakes on the one hand, but on the other hand were still important in the international regulation policies.