anjalicutek
Anjali Khurana
Austrian Airlines is the principal airline of Austria headquartered in Office Park 2 on the grounds of Vienna International Airport in Schwechat, Wien-Umgebung and a subsidiary of Deutsche Lufthansa AG.[2][3][4] Together with regional subsidiary Tyrolean Airways (Austrian Arrows) and charter arm Lauda Air, it operates scheduled services to over 130 destinations. Its hub is Vienna International Airport, with a focus city at Innsbruck Airport.[5] It is a member of the Star Alliance.
Statistics:
Public Company
Incorporated: 1957
Employees: 4,700
Sales: EUR 1.38 billion (1998)
Stock Exchanges: Vienna
Ticker Symbol: AUAV.VI
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 56152 Tour Operators; 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing
Company Perspectives:
Forty successful years in aviation. As an Austrian aviation company, we have been providing services tailored to our customers on the global markets for 40 years now. As an Austrian aviation group, we work together with our partners Lauda Air and Tyrolean Airways to serve all segments of air transport, from scheduled and charter service to cargo service. To round out and optimize our range of services, the Austrian Airlines Group comprises numerous other companies associated with flight operations in the transportation, tourism, financing, IT and insurance sectors. We are the market leader in Austria, our home market. Our powerful domestic position provides a strong base for developing other expanding markets. At the center of these efforts is our further buildup of Vienna as a hub between West and East. Strategic alliances are the foundation upon which we are expanding our business. Through our close cooperation with other airlines, we offer our customer essential benefits while improving our own market position.
Key Dates:
1923: Österreichische Luftverkehrs-AG (ÖLAG), precursor to the current Austrian Airlines, takes wing.
1938: Deutsche Lufthansa acquires ÖLAG.
1945: Allies ban civil aviation in Austria.
1957: State-owned Austrian Airlines (AUA) founded.
1963: AUA commences domestic service after years of international flights and receives first jets.
1969: Extensive reorganization focuses company on the East-West connection.
1972: AUA begins technical cooperation with Swissair.
1976: AUA pays first dividend.
1988: Initial public offering launched in Vienna.
1990: AUA joins European Quality Alliance with SAS, Swissair, and Finnair.
1993: New dual presidency begins cutting jobs and costs as proposed Alcazar alliance with Swissair, SAS, and KLM falls apart.
1996: AUA signs huge $1 billion Airbus order with Swissair and Sabena.
1998: AUA joins Qualiflyer Group with ten other European airlines.
Company History:
Austrian Airlines AG (Österreichische Luftverkehrs AG) has traditionally been known as 'little brother' to its German rival, Lufthansa. Its strategic location at the crossroads of East and West helped Austrian Airlines (AUA) attain early dominance in the Eastern European market and the uncongested hub at Vienna International Airport has allowed for ferocious growth. Strategic alliances, such as with long-time partner Swissair and, more recently, the Star Alliance, have extended AUA's reach to all corners of the world. Although it carries three million passengers a year, the company typically makes more money through its financial services companies.
Early 20th Century Origins
Austria was a pioneer in scheduled international air service, introducing a Vienna-Krakow-Lvov-Kiev route on April 1, 1918. Vienna-Budapest followed within a few months. The original Österreichische Luftverkehrs-AG (ÖLAG) operated three-engined transports between 1923 and 1938 and never lost a passenger in nearly five million miles. ÖLAG was the fourth busiest European airline in 1935 after Deutsche Lufthansa, KLM, and Air France. It became a part of Deutsche Lufthansa in 1938.
Civil aviation was banned by the Allies after World War II until the signing of the State Treaty in 1955. The new Austrian Airlines (AUA) was founded on September 30, 1957 as a government-owned company with a start-up capital of A$ 60 million. The next year, AUA began flying four chartered Vickers Viscount 779s. Vienna to London was its first scheduled route; soon AUA was flying to several capital cities across continental Europe, including Rome, Warsaw, and Paris, as well as a few important German-speaking destinations. The company carried more than 25,000 passengers and 186 tons of freight in its first year of operations.
AUA bought six Vickers Viscount 837s of its own in 1960. Domestic air service was launched with a DC-3 in January 1963. AUA's first jet, the Caravelle VI-R, began operations the next month. By the end of the decade, AUA had begun flying a Vienna-Brussels-New York route in conjunction with Belgian carrier Sabena, which supplied the Boeing 707 flown on it. AUA received its first DC-9 in June 1971.
AUA underwent an extensive reorganization in 1969. Thereafter, it focused on developing its role as the link between Eastern and Western Europe. In 1972, it entered into a technical cooperation agreement with Swissair, the beginning of a close, long-lasting alliance. AUA also posted its first annual profit: A$ 8.6 million. It would remain profitable for the next two decades. In fact, earnings grew markedly, reaching A$ 17 million in 1972 and A$ 20 million in 1973. In 1976, it began paying its first dividend based on 1975 earnings of A$ 22 million.
In 1974, the growing carrier set up its own maintenance facility. Later, with 1977 earnings of A$ 35 million, AUA acquired a 50 percent interest in WA-Wien Airport Restaurant und Hotelbetriebsges.m.b.H., a catering company. This later became Airest Restaurant und betriebsges m.b.H., expanding beyond Vienna to several airports. In 1981, the company bought 50 percent of Touropa Austria, the country's leading tour operator.
In 1977, it placed its first orders for the DC-9-80. Later known as the MD-80, this plane would become a workhorse of the AUA fleet. In 1980, AUA and Swissair became launch customers for the DC-9-81 variant. In 1984, along with Finnair, AUA was a launch customer for the MD-87. The next year, it ordered two Fokker 50s for shorter routes.
In the mid-1980s, AUA was carrying two million passengers a year and posting profits of A$ 95 million. It started its own travel organizer, Austrian Holidays Ltd., London, in 1987. The next spring, AUA began listing shares on the Vienna stock exchange. Swissair acquired three percent, and the Republic of Austria remained the majority shareholder.
After the offering, AUA had cash and the newest planes kept arriving. Its first Airbus 310 was delivered in late December 1988 and an MD-83 was ordered the next year. Earnings remained robust, with profits of A$ 154 million in 1989. That May, All Nippon Airways bought 3.5 percent of AUA's shares as Swissair raised its holdings to eight percent. A year later, both increased their holdings again, to nine percent and ten percent, respectively. AUA placed the largest aircraft order in Austria's history in October 1990. The 13 Airbus A320s and A321s, due for delivery in 1996, were valued at ATS 22 billion. However, with existing planes flying only half full, AUA was not quite prepared for the coming deregulation of European aviation.
Expanding Horizons in the 1990s
Profits slipped to A$ 130 million in 1990. That year, AUA joined the European Quality Alliance (EQA), which then included SAS, Swissair, and Finnair. This extended AUA's long period of cooperation with Swissair. All four carriers operated the DC-9/MD-80 series of aircraft, making shared maintenance logical. This new teaming, however, extended into route selection and marketing as well. Together, the four airlines employed 80,000 people and carried 30 million passengers a year. They controlled 42 percent of the market for western-based carriers flying into Eastern Europe.
The dismantling of the Soviet Empire gave Austrian Airlines access to exciting new markets in Eastern Europe. With a strategy of connecting as many points as possible, AUA added frequent service to carefully selected destinations ranging across the Baltics, Ukraine, and Russia. It even fielded six flights a day to Prague and Budapest. By the mid-1990s, the Eastern European market was the world's second fastest growing after Southeast Asia, accounting for 40 percent of AUA's passenger load. Cooperation with local carriers extended AUA's reach further. These new routes provided the rationale for more larger, long-range aircraft.
In 1993, KLM, SAS, Swissair, and AUA discussed forming a new huge airline, named Alcazar after a Spanish fortress with four towers. It would have hubs devoted to specific regions: Copenhagen for northeast Asia; Amsterdam for the Americas; and Zurich for the southern hemisphere and southeast Asia. AUA would have held ten percent of the shares to the other carriers' 30 percent each. As Austria had not yet joined the European Union, Alcazar would have improved AUA's position with the coming liberalization of the aviation industry. Simultaneous talks with Air France, Lufthansa, and All Nippon Airways were revealed, however. Alcazar was to have been based at Amsterdam, with Swissair head Otto Loepfe as CEO. According to Air Transport World, it was KLM's insistence upon choosing Northwest Airlines as a U.S. partner that crumbled the concept. KLM owned 20 percent of Northwest. The other partners, however, preferred Delta Air Lines, feeling it to be more financially stable.
After Alcazar, AUA, Swissair, and SAS focused on their own existing EQA alliance. Each also looked for a partner among the European 'big three'--British Airways, Air France (which acquired 1.5 percent of AUA's equity), and Lufthansa (LH). Both LH and Swissair seemed likely merger possibilities for AUA. AUA promptly announced its own code-sharing link with Delta on the New York-Vienna route, whereupon Delta would rent seats on AUA's planes. The EQA was scuttled when SAS teamed up with Lufthansa, leaving AUA vying for a role in the Delta/Singapore Airlines/Swissair Global Excellence alliance.
AUA lost millions of schillings in 1993 and 1994 as the Alcazar drama played itself out. In addition to a global recession in the wake of the Persian Gulf war, the carrier faced relentless cost competition from Lufthansa and Lauda Air. A new dual presidency was appointed to meet the crisis. Marketing executive Dr. Herbert Bammer and Mario Rehulka, formerly chief of charter operations, took over in July 1993 and immediately set out upon a restructuring of the company. The two felt AUA had far too many vice-presidents. They cut 900 other jobs, leaving a work force of about 3,900. Since the company had so many new planes, heavy maintenance jobs were cut significantly. Some remaining employees worked longer hours.
In March 1994, AUA bought a 42.85 percent stake in Tyrolean Airways, into which it incorporated its subsidiary Austrian Air Services, Osterreichischer Inlands und Regionalflugdienst Gesellschaft m.b.H. This turned tiny Tyrolean, based in Innsbruck, into a serious regional airline, flying more than a million passengers a year. AUA enjoyed the benefits of a vigorous tourist market through its charter subsidiary Austrian Airtransport and Touropa Austria, wholly owned since December 1994. Charters accounted for half its European traffic.
AUA started service to Beijing, Tokyo, and Johannesburg with two Airbus A340s in early 1995. These long-range jets permitted the elimination of fueling stops on many routes. A new corporate identity appeared on new 'X-Large' Fokker 70 Jets delivered in October 1995. New staff uniforms were unveiled with the January 1996 maiden flight of the new Airbus 321 from Vienna to Moscow. In the mid-1990s, AUA's network incorporated 80 cities in 46 countries on four continents--an impressive task for a fleet of just 29 planes, as Air Transport World noted. AUA turned a $5.3 million profit in 1995, reversing two years of losses. It had to contend, however, with a domestic challenger, Lauda Air, founded by champion race car driver Niki Lauda in 1979 and 39.7 percent owned by Lufthansa.
New Alliances at the End of the Millennium
Swissair's purchase of a 49.5 percent stake in Sabena brought its partner AUA closer to the Belgian flag carrier. In late 1995, AUA, Swissair, and Sabena pressed on with a concept similar to Alcazar. Joined by Delta, they asked for a U.S. antitrust exemption similar to the one that allowed KLM and Northwest to join forces. By this time, AUA also had agreements with EVA Air, Asiana, KLM, Alitalia, Air China, and Air Mauritius. Swissair, AUA, and Sabena placed a $1 billion order for new Airbus A330 widebody jets in December 1996. Their first joint procurement order also included the lease of eight more A330s. In February 1997, the trio's collaboration with Delta took wing under the 'Atlantic Excellence' banner.
Lufthansa sold AUA a 19.7 percent stake in Lauda Air in April 1997. AUA had already acquired 9.7 percent from Niki Lauda and 5.9 percent from a private investor, giving it 36 percent control of voting capital. This kicked off consolidation among Austria's three carriers, AUA, Lauda Air, and Tyrolean. Lauda Air, a lean, stylish operator, specialized in leisure travel to Asia and the Pacific. It had 1,270 employees to AUA's 4,040 and Tyrolean's 810. Joint sales and increased bookings were expected to save the three carriers as much as $200 million per year. A reduction of fees at Vienna International promised more savings. In fact, profits of ATS 189.4 million for 1998 were the best in AUA's history.
Many alliances shifted in the late 1990s. In July 1998, AUA joined the Qualiflyer Group with ten other European airlines including Swissair, Sabena, Air Portugal, Turkish Airlines, Air Littoral, and Air Europe. In May 1999, All Nippon Airways sold its shares to Australian investors. After a capital increase, the Republic of Austria was left with a 39.7 percent stake. Delta Air Lines dropped its Atlantic Excellence partners (AUA, Swissair, and Sabena) in October 1999 to concentrate on its relationship with the much larger Air France. Swissair and Sabena were themselves working more closely with American Airlines on trans-Atlantic code shares. AUA announced plans to join the massive Star Alliance in the summer of 2000. Its expansion plans for the first few years of the new millennium called for an investment of EUR 1.5 billion to bring its fleet to 100 aircraft.
Principal Subsidiaries: AUA Beteiligungen Gesellschaft m.b.H.; Austrian Airtransport, Österreichische Flugbetriebsgesellschaft m.b.H. (80%); Tyrolean Airways, Tiroler Luftfahrt-AG; Lauda Air Luftfahrt AG (35.9%); GULET TOUROPA Touristik (50%); Österreichische Verkehrsbüro AG (13.4%); TRAVIAUSTRIA Datenservice für Reise und Touristik Gesellschaft m.b.H. (61%); Austrian Airlines Lease and Finance Company Limited (Guernsey); AUA Versicherungs-Service AUA Versicherungs-Service Gesellschaft m.b.H.; Airest Restaurant- und Hotelbetriebsgesellschaft m.b.H. (35%); Austrian Aircraft Corporation, Österreichische Luftfahrzeug Gesellschaft m.b.H. (51%); AVICON Aviation Consult Gesellschaft m.b.H. (38%); ACS Aircontainer Services Gesellschaft m.b.H. (76%); Österreichische Luftfahrtschule Aviation Training Center Austria Gesellschaft m.b.H. (26%).
Principal Divisions: Airline Companies; Tourism/Sales; Financial and Insurance Services; Other Services.
Principal Competitors: Deutsche Lufthansa AG.
Statistics:
Private Company
Incorporated: 1976
Employees: 85
Sales:$85 million (1997 est.)
SICs: 3465 Automotive Stampings
Company Perspectives:
Each successful year for Team Auto Value provides the building blocks and helps shape the plans for the next set of challenges and opportunities. What we've learned each year, what we've shaped and redefined and strengthened, provides new ideas and insights designed to compete even more aggressively in the coming year.
Company History:
Auto Value Associates, Inc. is an organization made up of 39 U.S. and Canadian automotive parts warehouse distributors, which own and operate over 100 distribution centers and facilities from the eastern shores of Canada to the islands of Hawaii. Although directly competing with such strong firms as Pep Boys, AutoZone, and Western Auto, Auto Value Associates is a leader in the field of automotive parts distribution. One of the reasons for the associations's success has been its ability to implement a highly effective and thoroughly comprehensive jobber support system, whereby affiliated auto parts installers display the Auto Value identification sign and take advantage of a full range of marketing programs, store merchandising materials, personnel training, seasonal promotions, advertising assistance, and quality automotive replacement parts. One of the most important factors that set Auto Value warehouse distributors and affiliated jobbers apart from the competition is that all decisions regarding products, pricings, promotions, and advertising methods are made regionally and in light of the prevailing local market conditions. In the late 1990s, Auto Value Associates decided to expand its activities and enter into the Mexican auto parts distribution and jobber markets.
Early History
During the early and mid-1970s, a number of leading automotive parts distributors began to form groups or consortiums in order to compete on a more equal basis with mass merchandisers, chain stores, such organizations as NAPA and APS, and various other participants in the automotive parts aftermarket. These "marketing groups" or "programmed distributor systems," as they called themselves, were initially formed to promote a common identification and to standardize advertising methods. However, within a short time of their formation, it became clear that these groups had come to represent a highly organized and significant degree of buying power, which possessed enormous potential in the marketplace. The ability of such groups to negotiate prices and terms of purchase gave them a distinct advantage over non-affiliated warehouse distributors.
Recognizing the developing importance and advantage of these marketing groups, four major warehouse owners arranged to meet in order to discuss and formulate a solution for warehouse distributors whose preference was to retain individual control over their marketing programs. As the meeting progressed, it soon became apparent that the four principal owners not only had a great deal in common, but also agreed on many issues related to marketing programs, automotive parts distribution centers, pricing systems, and purchasing strategies. The camaraderie and congenial relations, not to mention common business interests, that were a result of the meeting led to the creation of Auto Value Associates, Inc. in 1976, an organization established exclusively for the purpose of implementing combined purchase activities.
After forming a board of directors, S. R. Downey of Chattanooga, Tennessee, was elected as the association's first chairman. Downey brought extensive experience in the automotive parts aftermarket to the association and guided it through its initial stages of incorporation, organization, and systemization. Downey convinced the board of directors to headquarter Auto Value Associates in his hometown of Chattanooga and immediately went to work establishing a firm legal foundation for the association's activities. Paying particular attention to the possible liabilities of group buying, Downey contracted one of the most talented antitrust lawyers practicing in the United States and gave him the task of developing a stringent set of operating guidelines that would guarantee compliance with all the appropriate laws within the industry. Downey understood the need for credibility within the association, and the requirement that its success depended largely on forging on honest and open relationship with the general public. Pricings, vendor agreements, marketing campaigns, automotive parts warranties had to be clearly formulated and legally agreed upon. Within a few years, the chairman had developed the association into one of the most promising and fastest growing associations within the automotive parts aftermarket.
One of the important factors for the association's early success was its marketing and advertising program. Initially based in Springfield, Missouri, the original administrator of all marketing and advertising activities was Ozark Automotive, a firm highly committed to the growth of Auto Value Associates. Within two years, the marketing and advertising efforts of the group had expanded so quickly that the board of directors at Auto Value Associates decided to relocate the program to its headquarters in Chattanooga, Tennessee. By the end of the 1980s, the number of warehouse distributors belonging to Auto Value Associates had grown to over 30.
Growth and Expansion in the 1990s
During the early and mid-1990s, Auto Value Associates added a number of programs that significantly enhanced their share of the automotive parts aftermarket. The North American parts warranty program was one of the first of its kind within the industry. The warranty arranged by Auto Value Associates included coverage for all parts warranted by the original manufacturer, under the exact same conditions and terms, and period of the warranty, initially offered by the manufacturer. The attraction of the Auto Value Associates warranty program was that every customer could exercise his right to the warranty at all of the Auto Value stores, no matter where they were located. The store providing the warranty service would provide a brand new part in exchange for the defective or damaged part, and subsequently receive full credit for the part from its automotive parts warehouse distributor, which was part of the Auto Value Associates system. Since the association had expanded by this time to cover a broad geographical area, encompassing all of the United States, a large region of Canada, and certain portions of Mexico, a customer could get warranty service almost anywhere in North America.
A short time later, Auto Value Associates established the University of Auto Value jobber and installer training program. The purpose of the University was to provide current information and training programs for affiliated parts stores throughout North America. Management at Auto Value Associates was well aware of the pressure on installers to keep abreast of the continuously changing technology within the automotive parts aftermarket, and the introduction of the Installer Training Guide was instrumental in the development of this program. The Training Guide provided the phone number of manufacturers' technical service hotlines so that any participating installer could have access to information that was necessary in diagnosing or repair a difficult problem in a customer's vehicle. An additional section provided a listing and summary of manufacturer's warranty programs, so that an installer would be certain as to what he could or could not repair cost free to the customer. And finally, the Training Guide contained a lengthy list of videotapes that each Auto Value warehouse distributor kept in stock for installers to refer to in case there was more information needed on a specific automotive part or diagnostic problem.
In 1994, a new president of Auto Value Associates was chosen to lead the organization. Richard H. Morgan assumed his responsibilities as president having had many years of experience in the automotive part aftermarket. One of the first decisions that he made was to relocate the entire administrative operation of the group from Chattanooga, Tennessee, to San Antonio, Texas. The reason for this move was to take advantage of the dramatic growth in the automotive parts aftermarket throughout the southern and southwestern part of the United States. In addition, the move also facilitated the organization's expansion into Mexico, which was regarded by Morgan as one of the largest potential markets in the world.
Recognizing the importance of advertising, and the revenues it could produce if directed at the appropriate audience, Morgan implemented an aggressive strategy to put the name of Auto Value Associates at the forefront of the sports world. Working diligently since he was appointed president, within a short period of time Morgan was able to reach an agreement for Auto Value Associates to co-sponsor the Bondo/Mar-Hyde Super Car Racing Series of the Automobile Club of America. Held at many of the most prestigious racing tracks across the country, the Automobile Club of America sponsored races typically held a day before a major race such as the Winston Cup Series. Since the events were held at the same track and one day after the other, both events enjoyed and took advantage of comprehensive, worldwide press coverage. TNN, ESPN, and TBS provided national television coverage of all the Bondo/Mar-Hyde Super Car Races, for example, with significant excerpts shown on other televised sports programs across the United States. Morgan was able to arrange for Auto Value to be viewed in an innovative way; the name Auto Value would be placed on a stripe across the windshield of every car in the race. Thus in any publicity photo for the race, the name Auto Value was not only visible but prominent. The results of this advertising campaign were impressive. Auto Value figured that, after the first race of the series on February 12, 1995 at Daytona International Speedway in Daytona, Florida, the association had received a 24 percent return on its entire investment as a sponsor of the event.
The next step in the association's growth involved the development of a service center concept. In 1995, members of the association, with Morgan leading the discussion at the national marketing meeting in Salt Lake City, Utah, decided to develop an Auto Value Service Center to heighten the group's identification program. The program was designed to include interior and exterior identification elements, such as signs, awnings, mats, window-posters, and also personnel identification items, including uniforms, caps, and tee-shirts. Other components of the service center program involved cleanliness standards and the requirement to hire at least one ASE-certified technician. Cautious about its image, but committed to helping affiliated installers become more competitive in the marketplace, the association members agreed to develop a prototype before the actual program was implemented.
Competition and Success
By 1995, the number of warehouse distributors within the association had grown to 39, and the number of affiliated jobbers operating under the name of Auto Value Stores had grown to 1,500. By the middle of 1997, the number of affiliated jobbers had increased to over 1,800. The 39 warehouse distributors operated more than 100 distribution centers across the United States and Canada, with new locations in Hawaii and Mexico. By 1997, the number of distribution centers operated by warehouse distributors had also grown to more that 120 locations.
Although Auto Value Associates had implemented an aggressive campaign to attract new warehouse distributors and new affiliate jobbers, the automotive parts aftermarket remained a highly competitive industry. Nevertheless, the association's emphasis on marketing, with price savings for warehouse distributors and assistance for each new affiliated jobber to advertise his services, continues to attract new members within a rapidly consolidating market.
Statistics:
Public Company
Incorporated: 1957
Employees: 4,700
Sales: EUR 1.38 billion (1998)
Stock Exchanges: Vienna
Ticker Symbol: AUAV.VI
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 56152 Tour Operators; 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing
Company Perspectives:
Forty successful years in aviation. As an Austrian aviation company, we have been providing services tailored to our customers on the global markets for 40 years now. As an Austrian aviation group, we work together with our partners Lauda Air and Tyrolean Airways to serve all segments of air transport, from scheduled and charter service to cargo service. To round out and optimize our range of services, the Austrian Airlines Group comprises numerous other companies associated with flight operations in the transportation, tourism, financing, IT and insurance sectors. We are the market leader in Austria, our home market. Our powerful domestic position provides a strong base for developing other expanding markets. At the center of these efforts is our further buildup of Vienna as a hub between West and East. Strategic alliances are the foundation upon which we are expanding our business. Through our close cooperation with other airlines, we offer our customer essential benefits while improving our own market position.
Key Dates:
1923: Österreichische Luftverkehrs-AG (ÖLAG), precursor to the current Austrian Airlines, takes wing.
1938: Deutsche Lufthansa acquires ÖLAG.
1945: Allies ban civil aviation in Austria.
1957: State-owned Austrian Airlines (AUA) founded.
1963: AUA commences domestic service after years of international flights and receives first jets.
1969: Extensive reorganization focuses company on the East-West connection.
1972: AUA begins technical cooperation with Swissair.
1976: AUA pays first dividend.
1988: Initial public offering launched in Vienna.
1990: AUA joins European Quality Alliance with SAS, Swissair, and Finnair.
1993: New dual presidency begins cutting jobs and costs as proposed Alcazar alliance with Swissair, SAS, and KLM falls apart.
1996: AUA signs huge $1 billion Airbus order with Swissair and Sabena.
1998: AUA joins Qualiflyer Group with ten other European airlines.
Company History:
Austrian Airlines AG (Österreichische Luftverkehrs AG) has traditionally been known as 'little brother' to its German rival, Lufthansa. Its strategic location at the crossroads of East and West helped Austrian Airlines (AUA) attain early dominance in the Eastern European market and the uncongested hub at Vienna International Airport has allowed for ferocious growth. Strategic alliances, such as with long-time partner Swissair and, more recently, the Star Alliance, have extended AUA's reach to all corners of the world. Although it carries three million passengers a year, the company typically makes more money through its financial services companies.
Early 20th Century Origins
Austria was a pioneer in scheduled international air service, introducing a Vienna-Krakow-Lvov-Kiev route on April 1, 1918. Vienna-Budapest followed within a few months. The original Österreichische Luftverkehrs-AG (ÖLAG) operated three-engined transports between 1923 and 1938 and never lost a passenger in nearly five million miles. ÖLAG was the fourth busiest European airline in 1935 after Deutsche Lufthansa, KLM, and Air France. It became a part of Deutsche Lufthansa in 1938.
Civil aviation was banned by the Allies after World War II until the signing of the State Treaty in 1955. The new Austrian Airlines (AUA) was founded on September 30, 1957 as a government-owned company with a start-up capital of A$ 60 million. The next year, AUA began flying four chartered Vickers Viscount 779s. Vienna to London was its first scheduled route; soon AUA was flying to several capital cities across continental Europe, including Rome, Warsaw, and Paris, as well as a few important German-speaking destinations. The company carried more than 25,000 passengers and 186 tons of freight in its first year of operations.
AUA bought six Vickers Viscount 837s of its own in 1960. Domestic air service was launched with a DC-3 in January 1963. AUA's first jet, the Caravelle VI-R, began operations the next month. By the end of the decade, AUA had begun flying a Vienna-Brussels-New York route in conjunction with Belgian carrier Sabena, which supplied the Boeing 707 flown on it. AUA received its first DC-9 in June 1971.
AUA underwent an extensive reorganization in 1969. Thereafter, it focused on developing its role as the link between Eastern and Western Europe. In 1972, it entered into a technical cooperation agreement with Swissair, the beginning of a close, long-lasting alliance. AUA also posted its first annual profit: A$ 8.6 million. It would remain profitable for the next two decades. In fact, earnings grew markedly, reaching A$ 17 million in 1972 and A$ 20 million in 1973. In 1976, it began paying its first dividend based on 1975 earnings of A$ 22 million.
In 1974, the growing carrier set up its own maintenance facility. Later, with 1977 earnings of A$ 35 million, AUA acquired a 50 percent interest in WA-Wien Airport Restaurant und Hotelbetriebsges.m.b.H., a catering company. This later became Airest Restaurant und betriebsges m.b.H., expanding beyond Vienna to several airports. In 1981, the company bought 50 percent of Touropa Austria, the country's leading tour operator.
In 1977, it placed its first orders for the DC-9-80. Later known as the MD-80, this plane would become a workhorse of the AUA fleet. In 1980, AUA and Swissair became launch customers for the DC-9-81 variant. In 1984, along with Finnair, AUA was a launch customer for the MD-87. The next year, it ordered two Fokker 50s for shorter routes.
In the mid-1980s, AUA was carrying two million passengers a year and posting profits of A$ 95 million. It started its own travel organizer, Austrian Holidays Ltd., London, in 1987. The next spring, AUA began listing shares on the Vienna stock exchange. Swissair acquired three percent, and the Republic of Austria remained the majority shareholder.
After the offering, AUA had cash and the newest planes kept arriving. Its first Airbus 310 was delivered in late December 1988 and an MD-83 was ordered the next year. Earnings remained robust, with profits of A$ 154 million in 1989. That May, All Nippon Airways bought 3.5 percent of AUA's shares as Swissair raised its holdings to eight percent. A year later, both increased their holdings again, to nine percent and ten percent, respectively. AUA placed the largest aircraft order in Austria's history in October 1990. The 13 Airbus A320s and A321s, due for delivery in 1996, were valued at ATS 22 billion. However, with existing planes flying only half full, AUA was not quite prepared for the coming deregulation of European aviation.
Expanding Horizons in the 1990s
Profits slipped to A$ 130 million in 1990. That year, AUA joined the European Quality Alliance (EQA), which then included SAS, Swissair, and Finnair. This extended AUA's long period of cooperation with Swissair. All four carriers operated the DC-9/MD-80 series of aircraft, making shared maintenance logical. This new teaming, however, extended into route selection and marketing as well. Together, the four airlines employed 80,000 people and carried 30 million passengers a year. They controlled 42 percent of the market for western-based carriers flying into Eastern Europe.
The dismantling of the Soviet Empire gave Austrian Airlines access to exciting new markets in Eastern Europe. With a strategy of connecting as many points as possible, AUA added frequent service to carefully selected destinations ranging across the Baltics, Ukraine, and Russia. It even fielded six flights a day to Prague and Budapest. By the mid-1990s, the Eastern European market was the world's second fastest growing after Southeast Asia, accounting for 40 percent of AUA's passenger load. Cooperation with local carriers extended AUA's reach further. These new routes provided the rationale for more larger, long-range aircraft.
In 1993, KLM, SAS, Swissair, and AUA discussed forming a new huge airline, named Alcazar after a Spanish fortress with four towers. It would have hubs devoted to specific regions: Copenhagen for northeast Asia; Amsterdam for the Americas; and Zurich for the southern hemisphere and southeast Asia. AUA would have held ten percent of the shares to the other carriers' 30 percent each. As Austria had not yet joined the European Union, Alcazar would have improved AUA's position with the coming liberalization of the aviation industry. Simultaneous talks with Air France, Lufthansa, and All Nippon Airways were revealed, however. Alcazar was to have been based at Amsterdam, with Swissair head Otto Loepfe as CEO. According to Air Transport World, it was KLM's insistence upon choosing Northwest Airlines as a U.S. partner that crumbled the concept. KLM owned 20 percent of Northwest. The other partners, however, preferred Delta Air Lines, feeling it to be more financially stable.
After Alcazar, AUA, Swissair, and SAS focused on their own existing EQA alliance. Each also looked for a partner among the European 'big three'--British Airways, Air France (which acquired 1.5 percent of AUA's equity), and Lufthansa (LH). Both LH and Swissair seemed likely merger possibilities for AUA. AUA promptly announced its own code-sharing link with Delta on the New York-Vienna route, whereupon Delta would rent seats on AUA's planes. The EQA was scuttled when SAS teamed up with Lufthansa, leaving AUA vying for a role in the Delta/Singapore Airlines/Swissair Global Excellence alliance.
AUA lost millions of schillings in 1993 and 1994 as the Alcazar drama played itself out. In addition to a global recession in the wake of the Persian Gulf war, the carrier faced relentless cost competition from Lufthansa and Lauda Air. A new dual presidency was appointed to meet the crisis. Marketing executive Dr. Herbert Bammer and Mario Rehulka, formerly chief of charter operations, took over in July 1993 and immediately set out upon a restructuring of the company. The two felt AUA had far too many vice-presidents. They cut 900 other jobs, leaving a work force of about 3,900. Since the company had so many new planes, heavy maintenance jobs were cut significantly. Some remaining employees worked longer hours.
In March 1994, AUA bought a 42.85 percent stake in Tyrolean Airways, into which it incorporated its subsidiary Austrian Air Services, Osterreichischer Inlands und Regionalflugdienst Gesellschaft m.b.H. This turned tiny Tyrolean, based in Innsbruck, into a serious regional airline, flying more than a million passengers a year. AUA enjoyed the benefits of a vigorous tourist market through its charter subsidiary Austrian Airtransport and Touropa Austria, wholly owned since December 1994. Charters accounted for half its European traffic.
AUA started service to Beijing, Tokyo, and Johannesburg with two Airbus A340s in early 1995. These long-range jets permitted the elimination of fueling stops on many routes. A new corporate identity appeared on new 'X-Large' Fokker 70 Jets delivered in October 1995. New staff uniforms were unveiled with the January 1996 maiden flight of the new Airbus 321 from Vienna to Moscow. In the mid-1990s, AUA's network incorporated 80 cities in 46 countries on four continents--an impressive task for a fleet of just 29 planes, as Air Transport World noted. AUA turned a $5.3 million profit in 1995, reversing two years of losses. It had to contend, however, with a domestic challenger, Lauda Air, founded by champion race car driver Niki Lauda in 1979 and 39.7 percent owned by Lufthansa.
New Alliances at the End of the Millennium
Swissair's purchase of a 49.5 percent stake in Sabena brought its partner AUA closer to the Belgian flag carrier. In late 1995, AUA, Swissair, and Sabena pressed on with a concept similar to Alcazar. Joined by Delta, they asked for a U.S. antitrust exemption similar to the one that allowed KLM and Northwest to join forces. By this time, AUA also had agreements with EVA Air, Asiana, KLM, Alitalia, Air China, and Air Mauritius. Swissair, AUA, and Sabena placed a $1 billion order for new Airbus A330 widebody jets in December 1996. Their first joint procurement order also included the lease of eight more A330s. In February 1997, the trio's collaboration with Delta took wing under the 'Atlantic Excellence' banner.
Lufthansa sold AUA a 19.7 percent stake in Lauda Air in April 1997. AUA had already acquired 9.7 percent from Niki Lauda and 5.9 percent from a private investor, giving it 36 percent control of voting capital. This kicked off consolidation among Austria's three carriers, AUA, Lauda Air, and Tyrolean. Lauda Air, a lean, stylish operator, specialized in leisure travel to Asia and the Pacific. It had 1,270 employees to AUA's 4,040 and Tyrolean's 810. Joint sales and increased bookings were expected to save the three carriers as much as $200 million per year. A reduction of fees at Vienna International promised more savings. In fact, profits of ATS 189.4 million for 1998 were the best in AUA's history.
Many alliances shifted in the late 1990s. In July 1998, AUA joined the Qualiflyer Group with ten other European airlines including Swissair, Sabena, Air Portugal, Turkish Airlines, Air Littoral, and Air Europe. In May 1999, All Nippon Airways sold its shares to Australian investors. After a capital increase, the Republic of Austria was left with a 39.7 percent stake. Delta Air Lines dropped its Atlantic Excellence partners (AUA, Swissair, and Sabena) in October 1999 to concentrate on its relationship with the much larger Air France. Swissair and Sabena were themselves working more closely with American Airlines on trans-Atlantic code shares. AUA announced plans to join the massive Star Alliance in the summer of 2000. Its expansion plans for the first few years of the new millennium called for an investment of EUR 1.5 billion to bring its fleet to 100 aircraft.
Principal Subsidiaries: AUA Beteiligungen Gesellschaft m.b.H.; Austrian Airtransport, Österreichische Flugbetriebsgesellschaft m.b.H. (80%); Tyrolean Airways, Tiroler Luftfahrt-AG; Lauda Air Luftfahrt AG (35.9%); GULET TOUROPA Touristik (50%); Österreichische Verkehrsbüro AG (13.4%); TRAVIAUSTRIA Datenservice für Reise und Touristik Gesellschaft m.b.H. (61%); Austrian Airlines Lease and Finance Company Limited (Guernsey); AUA Versicherungs-Service AUA Versicherungs-Service Gesellschaft m.b.H.; Airest Restaurant- und Hotelbetriebsgesellschaft m.b.H. (35%); Austrian Aircraft Corporation, Österreichische Luftfahrzeug Gesellschaft m.b.H. (51%); AVICON Aviation Consult Gesellschaft m.b.H. (38%); ACS Aircontainer Services Gesellschaft m.b.H. (76%); Österreichische Luftfahrtschule Aviation Training Center Austria Gesellschaft m.b.H. (26%).
Principal Divisions: Airline Companies; Tourism/Sales; Financial and Insurance Services; Other Services.
Principal Competitors: Deutsche Lufthansa AG.
Statistics:
Private Company
Incorporated: 1976
Employees: 85
Sales:$85 million (1997 est.)
SICs: 3465 Automotive Stampings
Company Perspectives:
Each successful year for Team Auto Value provides the building blocks and helps shape the plans for the next set of challenges and opportunities. What we've learned each year, what we've shaped and redefined and strengthened, provides new ideas and insights designed to compete even more aggressively in the coming year.
Company History:
Auto Value Associates, Inc. is an organization made up of 39 U.S. and Canadian automotive parts warehouse distributors, which own and operate over 100 distribution centers and facilities from the eastern shores of Canada to the islands of Hawaii. Although directly competing with such strong firms as Pep Boys, AutoZone, and Western Auto, Auto Value Associates is a leader in the field of automotive parts distribution. One of the reasons for the associations's success has been its ability to implement a highly effective and thoroughly comprehensive jobber support system, whereby affiliated auto parts installers display the Auto Value identification sign and take advantage of a full range of marketing programs, store merchandising materials, personnel training, seasonal promotions, advertising assistance, and quality automotive replacement parts. One of the most important factors that set Auto Value warehouse distributors and affiliated jobbers apart from the competition is that all decisions regarding products, pricings, promotions, and advertising methods are made regionally and in light of the prevailing local market conditions. In the late 1990s, Auto Value Associates decided to expand its activities and enter into the Mexican auto parts distribution and jobber markets.
Early History
During the early and mid-1970s, a number of leading automotive parts distributors began to form groups or consortiums in order to compete on a more equal basis with mass merchandisers, chain stores, such organizations as NAPA and APS, and various other participants in the automotive parts aftermarket. These "marketing groups" or "programmed distributor systems," as they called themselves, were initially formed to promote a common identification and to standardize advertising methods. However, within a short time of their formation, it became clear that these groups had come to represent a highly organized and significant degree of buying power, which possessed enormous potential in the marketplace. The ability of such groups to negotiate prices and terms of purchase gave them a distinct advantage over non-affiliated warehouse distributors.
Recognizing the developing importance and advantage of these marketing groups, four major warehouse owners arranged to meet in order to discuss and formulate a solution for warehouse distributors whose preference was to retain individual control over their marketing programs. As the meeting progressed, it soon became apparent that the four principal owners not only had a great deal in common, but also agreed on many issues related to marketing programs, automotive parts distribution centers, pricing systems, and purchasing strategies. The camaraderie and congenial relations, not to mention common business interests, that were a result of the meeting led to the creation of Auto Value Associates, Inc. in 1976, an organization established exclusively for the purpose of implementing combined purchase activities.
After forming a board of directors, S. R. Downey of Chattanooga, Tennessee, was elected as the association's first chairman. Downey brought extensive experience in the automotive parts aftermarket to the association and guided it through its initial stages of incorporation, organization, and systemization. Downey convinced the board of directors to headquarter Auto Value Associates in his hometown of Chattanooga and immediately went to work establishing a firm legal foundation for the association's activities. Paying particular attention to the possible liabilities of group buying, Downey contracted one of the most talented antitrust lawyers practicing in the United States and gave him the task of developing a stringent set of operating guidelines that would guarantee compliance with all the appropriate laws within the industry. Downey understood the need for credibility within the association, and the requirement that its success depended largely on forging on honest and open relationship with the general public. Pricings, vendor agreements, marketing campaigns, automotive parts warranties had to be clearly formulated and legally agreed upon. Within a few years, the chairman had developed the association into one of the most promising and fastest growing associations within the automotive parts aftermarket.
One of the important factors for the association's early success was its marketing and advertising program. Initially based in Springfield, Missouri, the original administrator of all marketing and advertising activities was Ozark Automotive, a firm highly committed to the growth of Auto Value Associates. Within two years, the marketing and advertising efforts of the group had expanded so quickly that the board of directors at Auto Value Associates decided to relocate the program to its headquarters in Chattanooga, Tennessee. By the end of the 1980s, the number of warehouse distributors belonging to Auto Value Associates had grown to over 30.
Growth and Expansion in the 1990s
During the early and mid-1990s, Auto Value Associates added a number of programs that significantly enhanced their share of the automotive parts aftermarket. The North American parts warranty program was one of the first of its kind within the industry. The warranty arranged by Auto Value Associates included coverage for all parts warranted by the original manufacturer, under the exact same conditions and terms, and period of the warranty, initially offered by the manufacturer. The attraction of the Auto Value Associates warranty program was that every customer could exercise his right to the warranty at all of the Auto Value stores, no matter where they were located. The store providing the warranty service would provide a brand new part in exchange for the defective or damaged part, and subsequently receive full credit for the part from its automotive parts warehouse distributor, which was part of the Auto Value Associates system. Since the association had expanded by this time to cover a broad geographical area, encompassing all of the United States, a large region of Canada, and certain portions of Mexico, a customer could get warranty service almost anywhere in North America.
A short time later, Auto Value Associates established the University of Auto Value jobber and installer training program. The purpose of the University was to provide current information and training programs for affiliated parts stores throughout North America. Management at Auto Value Associates was well aware of the pressure on installers to keep abreast of the continuously changing technology within the automotive parts aftermarket, and the introduction of the Installer Training Guide was instrumental in the development of this program. The Training Guide provided the phone number of manufacturers' technical service hotlines so that any participating installer could have access to information that was necessary in diagnosing or repair a difficult problem in a customer's vehicle. An additional section provided a listing and summary of manufacturer's warranty programs, so that an installer would be certain as to what he could or could not repair cost free to the customer. And finally, the Training Guide contained a lengthy list of videotapes that each Auto Value warehouse distributor kept in stock for installers to refer to in case there was more information needed on a specific automotive part or diagnostic problem.
In 1994, a new president of Auto Value Associates was chosen to lead the organization. Richard H. Morgan assumed his responsibilities as president having had many years of experience in the automotive part aftermarket. One of the first decisions that he made was to relocate the entire administrative operation of the group from Chattanooga, Tennessee, to San Antonio, Texas. The reason for this move was to take advantage of the dramatic growth in the automotive parts aftermarket throughout the southern and southwestern part of the United States. In addition, the move also facilitated the organization's expansion into Mexico, which was regarded by Morgan as one of the largest potential markets in the world.
Recognizing the importance of advertising, and the revenues it could produce if directed at the appropriate audience, Morgan implemented an aggressive strategy to put the name of Auto Value Associates at the forefront of the sports world. Working diligently since he was appointed president, within a short period of time Morgan was able to reach an agreement for Auto Value Associates to co-sponsor the Bondo/Mar-Hyde Super Car Racing Series of the Automobile Club of America. Held at many of the most prestigious racing tracks across the country, the Automobile Club of America sponsored races typically held a day before a major race such as the Winston Cup Series. Since the events were held at the same track and one day after the other, both events enjoyed and took advantage of comprehensive, worldwide press coverage. TNN, ESPN, and TBS provided national television coverage of all the Bondo/Mar-Hyde Super Car Races, for example, with significant excerpts shown on other televised sports programs across the United States. Morgan was able to arrange for Auto Value to be viewed in an innovative way; the name Auto Value would be placed on a stripe across the windshield of every car in the race. Thus in any publicity photo for the race, the name Auto Value was not only visible but prominent. The results of this advertising campaign were impressive. Auto Value figured that, after the first race of the series on February 12, 1995 at Daytona International Speedway in Daytona, Florida, the association had received a 24 percent return on its entire investment as a sponsor of the event.
The next step in the association's growth involved the development of a service center concept. In 1995, members of the association, with Morgan leading the discussion at the national marketing meeting in Salt Lake City, Utah, decided to develop an Auto Value Service Center to heighten the group's identification program. The program was designed to include interior and exterior identification elements, such as signs, awnings, mats, window-posters, and also personnel identification items, including uniforms, caps, and tee-shirts. Other components of the service center program involved cleanliness standards and the requirement to hire at least one ASE-certified technician. Cautious about its image, but committed to helping affiliated installers become more competitive in the marketplace, the association members agreed to develop a prototype before the actual program was implemented.
Competition and Success
By 1995, the number of warehouse distributors within the association had grown to 39, and the number of affiliated jobbers operating under the name of Auto Value Stores had grown to 1,500. By the middle of 1997, the number of affiliated jobbers had increased to over 1,800. The 39 warehouse distributors operated more than 100 distribution centers across the United States and Canada, with new locations in Hawaii and Mexico. By 1997, the number of distribution centers operated by warehouse distributors had also grown to more that 120 locations.
Although Auto Value Associates had implemented an aggressive campaign to attract new warehouse distributors and new affiliate jobbers, the automotive parts aftermarket remained a highly competitive industry. Nevertheless, the association's emphasis on marketing, with price savings for warehouse distributors and assistance for each new affiliated jobber to advertise his services, continues to attract new members within a rapidly consolidating market.