Restructuring / Turnaround Strategies Case Study

Case Title:

European Railways Revamping Model to Combat Low-Cost Airlines: Will it Succeed?

Abstract:
Since 1990s, European Railways were facing stiff competition from discount airlines. While the Low-cost airlines achieved strong growth in all areas of Europe, the European Railways' market share declined from 8% in 2003 to 7.5% in 2004. In order to compete with Budget Airlines, European Railways reduced fares. However, low-cost carriers with a market share of 16.3% in 2006 still maintained a lead. To beat the competition, European Railways decided to form a new model of partnership - including seven European Rail companies and their subsidiaries - named 'Railteam'. The Rail team initially planned to cover more than 100 cities and grow to 400 destinations covering 15000 km by 2020. The alliance aimed to reach 50% share of the travel market by 2020. However analysts were skeptical about the success of European Railways' new model over Low-cost airlines in Europe.

Pedagogical Objectives:

• To understand the operating structure of European Railways
• To understand the stiff competition faced by European Railways to discount airlines
• To understand the competitive strategy adopted by European railways.

Keywords : European Railways; Low-cost Airlines; operating cost structure; Restructuring / Turnaround Strategies Case Study; Operating cost analysis; Railwaysvs budget airlines; yield management system; Railteam; airline-style alliance; rail network; budget airlines; Eurostar; Yield Management system ingradients; marketing; business model; Reformation