Aviation Value Chain, Legal Framework, and Airline Strategy

Posted on Nov 14, 2025 in Architecture

Aviation Value Chain and Legal Framework

The Aviation Value Chain

The aviation value chain encompasses several critical sectors:

  • Production Facilities: Airframe and engine manufacturers, leasing companies (e.g., Airbus, Boeing).
  • Infrastructure: Airports, Air Traffic Control (EUROCONTROL), and Weather Service (DWD).
  • Special Services: Computer Reservation Systems (Amadeus) and airline services (SkyChef).
  • Regulation: Authorities (e.g., LBA, FAA).

National and Supranational Institutions

German National Institutions

  • BMVBS: Federal Ministry of Transport and Housing.
  • DFS, Offenbach: Air Traffic Control.
  • LBA, Braunschweig: Office of Civil Aviation.
  • BFU, Braunschweig: Air Accident Investigation Department.
  • DWD, Offenbach: Weather Service.

International Organizations

  • International Civil Aviation Organization (ICAO): A sub-organization of the United Nations. They develop and harmonize standards for operating and safety procedures around the globe.
  • International Air Transport Association (IATA): An airlines association, acting as an interest group and service provider to the world’s airlines.
  • European Aviation Safety Agency (EASA): Develops and decrees European construction standards, operating, licensing, and safety procedures for civil aviation.
  • European Organization for the Safety of Air Navigation (EUROCONTROL).
  • Important national Civil Aviation Authorities (e.g., Federal Aviation Administration).

Deutsche Flugsicherung GmbH (DFS)

DFS maintains offices at all German transport category airports.

Area Control Centers

  • Lower Air Space: Berlin, Munich, Langen, and Bremen.
  • Upper Air Space: Berlin, Karlsruhe, Munich, and Maastricht.

Core Functions of DFS

  • Air Traffic Control (ATC) for air space and airports.
  • Aeronautical Information Service (ALS): Acceptance of flight plans, publishing air navigation charts, etc.
  • Construct and maintain air traffic control devices.
  • Training of air traffic control staff.

Legal Framework

International Regulation: Worldwide Scope

Multilateral I: Foundational Conventions

  • Paris Air Navigation Convention (1919): Established that each state has absolute sovereignty over its own air space.
  • Warsaw Convention (1929): Governed entitlement to carrying contracts, liability, and specifics of carriage by multiple carriers.
  • Chicago Convention (1944): The foundation of modern international civil operations, defining rights and responsibilities of contracting states. It constituted ICAO and developed 18 annexes, which have largely been incorporated into national law by member states.

Multilateral II: Modern Liability

  • Montreal Convention (1999): A thorough reform of the aging Warsaw Convention-based system (signed by 52 states). The guiding principle is consumer rights. Airlines’ liabilities significantly increased in case of personal injuries, damaged or lost cargo and luggage, as well as delays. An adaptation clause provides for regular updates of indemnification in case of liability every five years.

Eight Freedoms of the Air

  1. The air carrier is granted the right to overfly the territory of a contracting state.
  2. The air carrier is granted the right of non-commercial, technical stops. Passengers, cargo, and mail must not be disembarked nor taken on board.
  3. Right to carry passengers, cargo, and mail from the airline’s home state to a contracting state.
  4. Right to carry passengers, cargo, and mail from a contracting state to the airline’s home state.
  5. Right to carry passengers, cargo, and mail between two contracting states. The flight must originate or terminate in the home country.
  6. Right to pick up passengers, cargo, and mail in a contracting state, and carry them onwards to another contracting state after stopping over in the home country.
  7. Right to carry passengers, cargo, and mail between two contracting states, without touching down in the airline’s home state.
  8. Right to carry passengers, cargo, and mail between two points within a contracting state (cabotage).

International Regulation: European Scope

Common objectives include deregulation and harmonization of the legal framework in air traffic, creation of a liberalized aviation market and a single European air space, characterized by a multitude of regulations and provisions.

Schengen Convention

  • Elimination of border controls between contracting states.
  • Airports need to physically separate passenger flows on Intra-Schengen flights from non-Schengen flights.

Airline Business Models

Business Models and Network Strategy

Hub Carrier / Network Carrier

  • Network: Connecting flights via a central hub airport.
  • USP: Connections.
  • Fleet: Short- to medium-haul aircraft and possibly long-haul aircraft.
  • Target Customers: Business and leisure travelers.

Point-to-Point Models

Regional Carrier
  • Network: Direct flights.
  • USP: Routes.
  • Fleet: Regional aircraft.
  • Target Customers: Business travelers.
Low Cost Carrier (LCC)
  • Network: Direct flights.
  • USP: Low price.
  • Fleet: Short- to medium-haul aircraft and high-density seating.
  • Target Customers: Leisure travelers and possibly business travelers.
Leisure Carrier
  • Network: Direct flights.
  • USP: Origins and destinations.
  • Fleet: Short- to medium-haul aircraft and possibly long-haul aircraft.
  • Target Customers: Leisure travelers.

Feeder, Production, and Platform Models

  • Network: Feeder flights from originating airports to a larger airline’s hub.
  • USP: Alliance partner.
  • Fleet: Regional aircraft.
  • Target Customers: Business travelers and possibly leisure travelers.

The business model defines important strategic and operational issues that the airline faces. Among others, the airline business model impacts decisions and setup of the following factors: route network, fleet strategy and planning, product characteristics, flight scheduling and rostering, pricing and revenue management, marketing and sales, etc.

Fleet Planning

Fleet management is among the most important strategic decisions that an airline must take. The objectives are fleet composition that is as homogenous as possible but as diverse as necessary.

Parameters that Influence the Decision

  • Forecast of traffic development and long-term business prospects.
  • Data of network strategy.
  • Market situation: cost of purchase, prices, and discounts.
  • Ability of the respective airline to finance the purchase.
  • Operating cost and financing cost of the aircraft.
  • Target fleet age.
  • Environmental aspects.
  • Customer appeal.

Impact and Influencing Factors

Fleet planning is important because of the economic life of transport category aircraft, the significance of investment, and strong interdependence with the airline’s product and business model.