Business-to-Business Electronic Marketplaces in the Airline Industry: Tool for Enhanced Efficiency in a Volatile Business

Abstract

Airlines in all strategic sectors are experiencing ever-increasing competitive pressures. This paper focuses on the impact of business-to-business electronic marketplaces (e-marketplaces) on efficiency improvements. Of all airlines, 65% report using e-marketplaces in procurement operations. However, airlines' initiation and financial involvement in e-marketplaces is low. Low-cost airlines have taken the lead in using e-marketplaces in non-maintenance-related areas, and full-service airlines use them less often across all spending categories. Spares and repairs, office supplies, and tools and ground support equipment show the greatest potential for reducing costs and increasing efficiency. Airlines involved in strategic alliances exhibit greater levels of use of e-marketplaces than other airlines. Competitive pressures contribute to the urgency of the search for new tools to realize incremental cost savings. It is evident that e-marketplaces are one such tool, a lesson already well-appreciated by the low-cost sector. From Transportation Research Record: Journal of the Transportation Research Board, No. 1951, Washington D.C., 2006, pp.60-68. Posted with permission of TRB.

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