Porter Airlines

Executive Summary

This report takes a look at the current environment and gives key recommendations on which steps to take in the near future during these uncertain times. The key objective is to ensure the success of Porter Airlines as a whole by helping to maintain and/or increase both profitability and long term success. The recommendations, given after having concluded a comprehensive environmental scan as well as a SWOT analysis, recognize Porter Airlines’ unique competitive standpoint and keep in mind their key focuses on their speed, convenience and service.

Our analysis has shown that Porter Airlines is actually standing on a very firm base in terms of internal structuring and marketing. Past marketing initiatives have been strong and successful, positioning Porter as the airline for leisure and business travellers. Choosing key cities to expand in, the Company has kept their operations small and efficient, both in terms of cost and control. Their investment in the technologically advance Q400 airplanes have been timely and have also enabled them to reduce costs where possible. However, external factors are proving to be difficult with political factors creating a possible monopoly for the Star Alliance group (major competitor Air Canada is a founding member)[1] as well as the overall economic slump giving the entire industry a hit. Major competitors are in an easier position to negotiate lower operational costs but Porter still has a safety cushion if the need to cut costs proves itself.

Because most of the factors affecting Porter currently are external, Porter Airlines will have to mainly weather the storm. However, because competitors must do the same, Porter can use this time to expand and develop their rewards program (which is not as diverse as the competition) as well as spend more money on product-driven advertisement since the mindset during the economic crisis focuses more on value for the dollar. With their physical expansion, they can also start negotiating competitive prices to lower operational costs.

Environmental Scan

Internal Environment

Past and Present Marketing Activities

Since its launch, the marketing activities undertaken by Porter Airlines have evolved slowly but surely into a comprehensive program that acts as a solid base for the Company’s continued expansion. Porter’s beginning steps in brand marketing were integral with their slogan “Flying Redefined” and their commercial that emphasizes their focus on speed, convenience and service. Their marketing program started evolving afterwards to include product-driven advertising (such as their direct flights to and from New York) as well as creating the VIPorter rewards program. Last year, they also started “building hotel, transportation, retail and entertainment partnerships”[2] as they planned to expand in the United States.

All of the mentioned activities were logical continuations of the one before and definitely proved to be a beneficial influence on their overall sales. Their branding has been strong enough to elicit images of their technology advanced Q400 airplanes and business friendly services (instead of rude service and uncomfortable seating with other families)[3]. Because of this, their marketing budget should see a shift in emphasis so that the majority is spent on two main aspects. The first is a continuation of their product-based advertising (with a highlight on the new flights to Calgary, Vancouver and Florida). This advertising will help bring their already strong branding home, connecting their service with the consumers’ needs and wants. The second aspect is to continue developing their VIPorter rewards program by continuing to expand their existing partnerships with varied services in the cities they fly to. By doing so, they can create an unbeatable package with little or no cost to Porter themselves.

Human Resource Capacity

One of the three aspects that Porter Airlines prides themselves on is their exceptional service. The level of professionalism that they maintain is crucial in staying competitive. Because of their relatively small number of staff, they can continually train their staff, keeping them up-to-date with new policies and procedures at less cost than larger airlines.

Operational Capacity

Success in the airline industry means more sales volume while continuously maintaining low operational costs. In terms of both, Porter Airlines seems to have remained steady in keeping up its competitive edge. With the new incoming batch of Q400 airplanes (more due at the end of the year), Porter has been able to enjoy better performance at less cost (less vibrations, good speed, and gas efficient). This coincides as well with more capacity for new flights if needed.

Financial Strength

As stated in the brief, Porter Airlines has received $2,000,000 in investments for the new flights. In our preliminary analysis, this investment should be enough but our assessment will continue to be revised as the economic crisis continues. However, with four major investors, Porter should rest assured that they can get past the economic slump.

External Environment

Political/Regulatory Environment

In the larger more broad sweep of the political environment, factors that affect airlines in general include the tighter restrictions placed on air travel due to terrorist attacks internationally. This is especially important to Porter Airlines since a portion of daily flights goes to and from Canada to the United States. Because of the increase in security, passengers will be subject to longer and more stressful customs/border experiences. Another factor that may hold bearing on Porter’s activities is the re-election of the Conservative Party as Canada’s leading political party. The Conservative Party has, in the past, been more partial to economics and may relax business regulations that may benefit, or at least affect, Porter Airlines.

In a more direct environment, recent U.S. regulatory activities show plans that will grant anti-trust immunity to different airlines that are related to Air Canada. This has direct impact on Porter Airlines as these airlines would have complete monopoly (or lion shares) of flights in certain areas (such as from Toronto to New York)[4].

Economic Environment

One of the largest and most prominent problems right now is the world economic slump. Coinciding with fluctuating gas prices, companies everywhere are finding it hard to keep a stand. Because Porter Airlines targets two different audiences, the economic slump can affect them in two ways. The first is, as is normal in any economic slump, their leisure travellers may find it harder to spend money on vacations or personal trips. The second is that business travellers may not find a reason to travel. With the new U.S. president pushing for a protectionist economic position, Canadian companies may find it hard to continue to stay in the American market. This may however be negated by the fact that business travellers will be flying out even more often to ensure their business stays afloat.

A trump card in this economic crisis is the slowly increasing trend of people taking personal vacations when they lose their job. Many are purposely taking a vacation to a different place to get away from their stressful lives.

Social and Cultural Environment

In general, quick weekend trips have become more common with the “yuppie” generation. People are taking longer to get married and prefer to spend their extra money on quick vacations for themselves and/or with friends. These types of people expect good service and the ‘bang for the buck’ which positions Porter Airlines quite well since their service is customer oriented but also gives more for the dollar.

Technological Environment

Today’s world is seeing technology move forward at a rapid pace. Because of this, people expect a good service oriented company to stay ahead of the times. Airlines are no exception, especially when the targets are people whose lifestyles are submerged in technology as well (with their Blackberries, laptops and other mobile technology). Porter Airlines should not have a problem in this aspect however since their air fleet boasts new and technology advanced Q400s. The consumer can also feel at home with the personal lounge in the boarding zone that offers complimentary wireless internet and business work stations.

Competitive Environment

Competition is tough in Canada with heavyweights Air Canada, their discount company Jazz, and WestJet holding a predominant position. After breaking into the American market, Porter Airlines also has to compete with major U.S. airlines. Because of their size, they can negotiate for cheaper operational costs which then lead to their ability to cut air fares.

However, Porter Airlines holds key advantages with their flights flying straight to the city centers which minimize travel costs for consumers. They also offer complimentary refreshments and internet at their boarding zones along with onboard meals- both of which have been cut from larger airlines. Furthermore, their fare structure and their “green” airplanes give them a perceptive edge in a society that has become more environmentally aware but also appreciates flexibility in pricing.

SWOT Analysis

Internal Factors
Activity
Impact
Strengths
Past and present marketing activities:

Past Branding campaigns in creating positive image -“Flying Redefined”

Product-driven advertising

VIPorter rewards program – needs to be developed but has good foundation

High

High

Medium

Strengths
Human Resource Capability:

Small numbers- easily trainable staff (cost efficient)

Training programs held relatively often to keep staff professional and up-to-date

Medium

High

Strengths
Operational Capability:

Increase market share by providing exceptional service at a valued price

New batch of Q400s more cost-efficient, helps to

Additional capacity for new flights with incoming airplanes at end of year

High

High

Medium
Strengths
Financial Strength:

Secured funding to execute marketing plans

Varied investors for market security

High

Low
Weaknesses
Past and present marketing activities:

Need to further develop VIPorter rewards program/ expand partnership base to make program more comprehensive

Medium
Weaknesses
Operational Capability:

Incoming fleet may prove to be weak link if economic crisis lasts too long- sales volume may not be high enough to fill new airplanes

Medium

External Factors
Activity
Impact
Opportunities
Political/Regulatory:

Conservative government may create good business environment

Low
Opportunities
Economic Environment:

Vacation trips may be on rise as people pamper themselves after losing job in economic crisis

Medium
Opportunities
Social and Cultural Environment:

Quick vacations to other cities are becoming norm with ‘yuppie’ generation

Porter’s quality for the dollar fits expectations and brings them above airlines with perceived bad service

High

High
Opportunities
Technological:

Fuel efficient plane allows Porter to save fuel cost

Technology-welcome atmosphere (waiting zones) provides better more accommodating atmosphere for business travellers

Medium

Medium
Opportunities
Competitive Environment:

Porter provides free onboard meals, complimentary refreshments and other services that have been cut out of other airlines

Fleets are ‘green’ with good speed and performance for less fuel- marketable aspect

High

Medium
Threats
Political/Regulatory Environment:

Uncontrollable factors (terrorist attacks, etc) have led to stricter security measures with customs leading to negative flying experiences

U.S. regulatory plans in favour of competition

High

High
Threats
Economic Environment:

Given recession, business and leisure travelers will reduce significantly

High

Threats
Competitive Environment:

Other major carriers have economic clout to enter price war

Other carriers offer better more comprehensive loyalty rewards programs which affects market share distribution

High

Medium

Question #3: Considering the current state of the economy and nature of the product, discuss opportunities for future product development in the airline industry.

As is recognized by the Chairman of Porter Airlines, Donald Carty, the economy is in a state of crisis and has of yet, still to improve. It is acknowledged that because of this, most consumers will “hunker down” and decide to spend less. This in turn affects companies where they maintain heavy operational costs in hopes of justifying it enough with volumes of sales. In the case of Porter Airlines, it seems like they will be able to weather through the crisis with their 1) lowered operational costs because of cost-efficient Q400s, 2) smaller operational costs with lower cost structure and fewer staff , 3) newer incoming fleet still months away which will avoid more costs of flying without full capacity. They still have flexibility in terms of pricing since they offer more than the major competitors and can brave the political landscape better without having to lay off large numbers of staff.

The economic crisis is projected to last until 2010. Until then, Porter Airlines can use the time to further expand and develop their rewards program, expanding it to include partnerships with other companies. By doing so, they can make it more comprehensive and competitive with existing programs by other airlines.  They can also continue to stay ahead in technology and invest in customer oriented services. With their expansion, they will also have more leverage in their negotiations for lowered operational costs.

This year is an ideal time to do the above as larger companies will be more concerned with cutting costs and capacity. Their services and programs will stay stagnant or only improve slightly. Because of this, Porter should continue to expand and look to develop in order to come out on top when the economy has balanced out.

Question #4: In your opinion, do you believe the airline industry market will continue to grow as industry consultants predict?  Why or why not?

The airline industry will definitely run into some obstacles before it can improve. Before the economic hit, the airline industry was already under a lot of pressure to lower costs because of soaring fuel prices. Sales took a hit and companies were forced to lay off workers and cut capacity. Now, with the economy in its slump, the United States is taking a protectionist stance and consumers feel the need to save instead of spend. The airline industry is, in effect, taking hits left, right and center. Larger airlines will be forced to cut down in size, shedding off excess bulk that cannot be used at this time.

However, once the economy has bottomed out, the airline industry may see a healthy boost again. In the last decade, there has been an increasing trend whereby middle-high income earners choose to enjoy life and travel around for awhile before settling down. Indirectly, this also means that there will be the need again for an airline, such as Porter, that offers services that bring city dwellers to experience life elsewhere. This was not possible before since people settled down earlier, raising families at an early age. Business travelers are also expecting their travel to suit their lifestyle so services such as Porter’s passenger lounge with business workstations will become more prevalent. Additionally, services once cut by larger airlines will be added again to their flights in order to add more of a competitive edge in the new playing field after the slump.

Therefore, in the short run, the airline industry will experience a ‘shedding’ but will come out in the long run as a market ready to become sleeker, less bulky and more user friendly.

[1] http://www.thestar.com/Business/article/580507
[2] www.flyporter.com
[3] http://www.thestar.com/comment/columnists/article/408791
[4] http://www.thestar.com/Business/article/580507

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Malaysian Airlines vs Air Asia

Malaysia Airlines Introduction Malaysia Airlines, the country’s national carrier, was first incorporated as Malayan Airways Limited (MAL) on 12 October 1937. It was a joint initiative of the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore and Imperial Airways which led to a proposal to the Colonial Straits Settlement government to run an air service between Penang and Singapore. On 2 April 1947, MAL took to the skies with its first commercial flight as the national airline.

Fuelled by a young and dynamic team of visionaries, the domestic carrier turned into an international airline in less than a decade. With the formation of Malaysia in 1963, the airline changed its name to Malaysian Airlines Limited. In 1965, with the separation of Singapore from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines (MSA). However, in 1973, the partners went separate ways. Malaysia introduced Malaysian Airline Limited, which was subsequently renamed Malaysian Airline System or in short, Malaysia Airlines.

Today, Malaysia Airlines flies an average of 43,000 passengers daily to some 100 destinations worldwide and holds a lengthy record of service and best practices excellence. It was the recipient of the inaugural “World’s Best Cabin Staff” award by Skytrax,UK in 2001 and continued to retain this title for 2002-2004, 2007 and 2009 – the most for any airline. In 2010, Malaysia Airlines was recognised as the ‘World’s Leading Airline to Asia’, ‘Asia’s Leading Airline’ and ‘Asia’s Leading Business Class Airline’ by World Travel Awards (WTA). This year, WTA honoured Malaysia Airlines as ‘Asia’s Leading Airline’ and ‘Asia’s Leading Airline Lounge’.

The national carrier’s engineering subsidiary, Malaysian Aerospace Engineering (MAE), has also been acknowledged as the top airline affiliated Maintenance and Repair Organisation (MRO) in the world by Aviation Week’s Overhaul & Maintenance magazine. Its current fleet includes Boeing 747-400, B777-200, Airbus 330-300, Airbus 330-200, Boeing 737-800 and Boeing 737-400. By the second quarter of 2012, Malaysia Airlines will also join the league of the Airbus A380 operators, when the first of the six aircraft ordered enters into service. The national carrier will be the eighth airline in the world to operate this biggest commercial aircraft.

Malaysia Airlines is set to join oneworld by end of 2012, adding one of aviation’s most frequent award winners to the world leading quality airline alliance. When it becomes part of oneworld, its customer will gain access to the alliance’s truly global network. It will expand oneworld’s global coverage to almost 950 destinations in 150 countries, served by a combined fleet of more than 2,600 aircrafts operating some 10,000 flights a day. AirAsia Introduction AirAsia is a Malaysian-based low-cost airline. AirAsia is Asia’s largest low-fare, no-frills airline and a pioneer of low-cost travel in Asia.

AirAsia was established in 1993 and began operations on 18 November 1996. It was originally founded by a government-owned conglomerate, DRB-Hicom. On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit with USD 11 million worth of debts. Fernandes turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as MYR 1.

In 2003, AirAsia opened a second hub at Senai International Airport in Johor Bahru near Singapore and launched its first international flight to Bangkok. AirAsia has since started a Thai subsidiary, added Singapore itself to the destination list, and started flights to Indonesia. Flights to Macau began in June 2004, and flights to mainland China (Xiamen) and the Philippines (Manila) in April 2005. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia.

On August 2006, AirAsia took over Malaysia Airlines’s Rural Air Service routes in Sabah and Sarawak, operating under the FlyAsianXpress brand. The routes were subsequently returned to MASwings a year later, citing commercial reasons. Qualitative characteristics Qualitative characteristics of accounting information refer to the characteristics that must be present in the accounting information to make it useful. These characteristics are divided into two categories; primary and secondary qualities. primary qualities The primary qualities of accounting information are relevant and reliability. a) Relevant In everyday terms, we might describe relevant as important or being related. In accounting, relevant is described as something that makes a difference in arriving at a decision. In other words, something is said to be relevant if it influences or affects the decision being made. The extent to which information is considered relevant depends on its importance in decision making and may differ between one decision maker to another. Information that is relevant to you might not be relevant to another person and vice versa.

To become relevant, the information must have three characteristics, namely feedback value, forecast value and timeliness. (i) Feedback Value Relevant information must be able to assist users in substantiating or correcting early expectations matters at hand. (ii) Forecast Value Relevant information must be able to assist users in forecasting. (iii) Timeliness Relevant information must be obtained before it becomes obsolete or unusable. (b) Reliability Reliability means that users can rely or depend on the said information to make good decisions.

This characteristic is important because users might not have the time or expertise to evaluate some information. Generally, users simply depend on the information presented by the related entity and assume it to be true. This information is then used in decision making. Reliability does not mean that the said information must be precise. This is because in accounting there are a lot of information that involves estimation and approximation that might not be precise. What is important is that the estimation and approximation made must be reliable.

Reliable information must have the following characteristics: (i) Verifiable This means that the accounting information could be verified objectively by another person using the same method. (ii) Objective Objective in this case means that the information is not biased. Information contained in the financial statements must be able to fulfil the requirements of various users and not concentrating on certain groups only. (iii) Trustworthy Information presented is based on the actual result of economic activities using specified methods. secondary qualities. The secondary qualities are comparability and consistency. c) Comparability Comparability means that the information can be compared whether among companies, industries or different periods. This will enable users to identify the similarities or differences that might exist in the said information. This characteristic is important because information that can be compared is more useful. (d) Consistency Consistency means that an entity must use the same accounting procedures in every period. It is for the purpose of enabling comparison to be made more effectively. In other words, a company cannot change their accounting procedure every year.

This does not mean that the company cannot change the accounting procedure at all. Changes can still be made, but the company must make complete disclosure in the financial statement to explain to the users why they are making the changes and the effect of the changes towards the financial statements. In summary, accounting information is only useful if it has relevant, reliability, comparability and consistency qualities. Statement Of Comprehensive Income Referring to the Annual reports for the year 2010 and 2011 it shows Air Asia gained a revenue of RM 4,495 Million for the year 2011 as compared to RM 3,948 Million for the year 2010.

There was an increase of 547 Million, However, the net profit of the company after tax have shrunk down from RM 1,061 Million in 2010 to RM 555 Million Therefore, The company’s profit after tax have reduced by RM 506 Million. Malaysian Airlines gained revenue of RM 13,901 Million for the year 2011 as compared to RM 13,585 Million for the year 2010. There was an increase of 316 Million, However, company is facing a big loss after tax for the two years A loss of RM 237. 3 Million in 2010 to a loss of RM 2,521. Million in 2011 Therefore, with this information available the investors can see that Air Asia is having a good profit after tax but Malaysian airlines is in big loss after tax. Statement of Financial Position Total asset of Air Asia as on 2010 is RM 13,240 Million and got increased to RM 13,906 Million in 2011. Malaysian Airlines had a total asset of RM 613,639 Million in 2010 and increased to RM 815,468 Million. Statement Of Cash Flows One of the important point investor should look for when investing in a potential company is the company’s ability to produce cash.

Just a pointer it is not necessary for a company that shows a profit in an income statement does not mean that it cannot get into problems later because of insufficient cash flow According to the Statement of Cash Flows in the annual report of Air Asia, The cash flow from operating activities is RM 1594 million in the year 2010 and RM 1404 Million in the year 2011 The cash flow from investing activities is RM 1868 Million in the year 2010 and RM 487 Million in the year 2011 The cash flow from financing activities is RM 1031 Million in the year 2010 and RM 300 Million in the year 2011 The net cash flow for the year 2010 is RM 757 million and RM 617 Million for the year 2011.

According to the Statement of Cash Flows in the annual report of Malaysian Airlines, The cash flow from operating activities is RM 105. 5 million in the year 2010 and RM 960 Million in the year 2011 The cash flow from investing activities is RM 3362. 6 Million in the year 2010 and RM 1341. 6 Million in the year 2011 The cash flow from financing activities is RM 2922. 4 Million in the year 2010 and RM 1310. 4 Million in the year 2011 The net cash flow for the year 2010 is RM 1851 million and RM 860 Million for the year 2011. Statement of Changes in Equity The statement of changes in equity represents a company profit or loss for an accounting period.

The items of income and expense which is recorded in the Statement of Comprehensive Income for the period, the effects of changes in accounting policies and corrections of error recognised in the period, and the amounts of investments by, and dividends and other distributions to, equity investors during the period. (didn’t find much info) ASSESSMENT OF INFORMATION RELEVANCE Information relevance refers to the feedback value, forecast value and timelines. If the net income and its components confirm investor expectations about future cash-generating ability, then the net income has feedback value for investors. This confirmation can also be useful in predicting future cash-generating ability as expectations are revised. For information to be relevant, it needs to be predictable. By looking at the data, forecast can be made whether income will be acquired. The last characteristic is timelines.

To be relevant, the data should be up to date not outdated. The annual report of both Air Asia And Malaysian Airlines is available in their official website. There, they have an archive that lets you download the annual report according to year.. ASSESSMENT OF INFORMATION RELIABILITY Sometimes, the information given by the organization is the only data that the user depends on. This could be because of lack of knowledge to assess the information and lack of time to do so. In this case, the user must make sure the information given can be relied upon. To assess reliability, we have to think about three matters which are verifiable, objective and trustworthy.

Verifiable means that the information can be validated by someone else. Both Air Asia and Malaysian Airlines annual report can be downloaded by everyone who owns a laptop or desktop. That means that the information can be verified by everyone else. From the 2009 annual income to the the 2010 net profit, it can be checked by everyone else. It is important to get someone who knows what to look for to validate the information for you. Without their validation, decision making can be hard to do. Make a conclusion that air asia is having a good profit but Malaysian airlines is going with heavy loss So its safe to invest with air asia than with Malaysian airlines

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Benefit Programs in the Major Airline Industry

The Human Resource topic that we selected is to analyze the benefit programs of four major airlines. Benefits are important to employees as well as their families, and can be a powerful recruiting tool. Benefits also play a major role in managerial decisions and wise benefit choices can have a long-term impact on the quality of life. Some characteristics of a sound benefits program are, they must have clear specific objectives, they must allow for employee input, they must be responsive to societal and environmental change, provide for flexibility, and there must be clear communication with employees.

One of the main challenges that companies face are the overall costs of these benefit programs to the companies themselves, as well as staying competitive in hopes to attract high quality employees. Almost 40% or $14,678 per employee is spent on benefit programs per year. American Airlines like many other airlines are facing many challenges in the HR area of benefits and incentives. American Airlines as we all know is one of the leading airlines in today”s airline industry. This status reflects upon Americans benefit program.

American Airlines realizes that it must stay competitive in this area to ensure that they get the most qualified employees. American Airlines offers many benefits and incentives for their employees with hopes to attract the best. Many of the benefits are standard and required by law such as social security, unemployment, workers compensation, and leaves without pay. What really must be paid attention too are the benefits and incentives that are offered in addition to the ones required by law. These benefits and incentives are what attract individuals to work for American rather than another airline.

Benefits such as a 401 K – Super Saver, which allows up to an ample 20% tax provision, a stock purchase plan, a credit union which could help one to buy a house, and personal emergency coupled with sick pay, just to name a few. American Airlines also recognizes ten major holidays for which employees do not have to work, yet they still get paid. Most of these are benefits that competing airlines offer, but one benefit stands out. American Airlines pass travel program is a benefit that many do not tend to overlook. American does not offer free stand-by tickets to its employees until they have been with the airline for 10 years.

What they do offer are special discounted rates. This is the major weakness in their strategy to attract employees with benefits. American offers a very long list of benefits and incentives but this is one that is left out. I believe that American Airlines is making a big mistake by not allowing employees to fly for free. To become more effective American Airlines should add this benefit to its list so that it can be competitive with the other airlines. American has many strengths which include benefits that the other airlines do not offer such as a 401 K plans of up to 20%, and a credit union.

Although at the same time it has a very large weakness, which is their travel plan that only offers its employees discounted rates, instead of free airfare. American Airlines must feel that it does not have to offer this benefit to attract potential workers, because it has so many other benefits to offer. Continental Airlines prides itself on offering a wide variety of benefits to their employees. The eligibility for these benefits varies according to the length of time an employee has worked for the company, and the position that they hold.

One challenge that Continental Airlines face is the cost of providing these benefits to their employees. They have to make sure that they are financially able to provide these benefit programs, while still attracting high quality employees to their company. Some of these benefits include travel passes, profit sharing, stock purchase plans, retirement plans, 401(k) savings plan, vacation and sick pay, an expense reimbursement plan, medical and dental insurance, vision insurance, life insurance, and accident insurance.

Although Continental employees and their families are able to travel at reduced rates; they are not able to fly completely for free, which may be considered unfavorable by some employees. Continental employees are also able to share in the financial growth of the company by purchasing Continental stock at a discounted rate. Continental also provides a fully funded retirement plan, which employees vest in after five years of service. It also provides the 401(k) savings plan, which is a great way for employees to save for retirement. The employees can save up to 19% of their salary before taxes are withheld.

Continental also matches a portion of their employees” contributions to the 401(k) savings plan. Full and part time employees of Continental are able to take advantage of paid vacations, as well as the sick leave policy which gives employees time off from work, with pay, when they are ill or unable to work. Continental also provides immediate accident insurance upon employment for all of their employees. Continental does provide many benefits upon the initial employment of their employees; however, some benefit plans are not available until seven months after they have been employed.

These include medical and dental insurance, vision insurance, long-term disability plan, and life insurance. Most of the plans are pre-tax, which allows employee tax savings. For every employee, there is a benefits program that best suits him or her. Younger employees who do not have the responsibility of families may not be looking for the same benefits as an older employee with a family. Continental needs to realize these differences in employees, in order to provide a benefit program that will attract the high quality employees they are looking for.

Southwest Airlines is currently the fastest growing airline in the business. Over the past 10 years Southwest have grown its revenues by 388% and its net income by 1,490%. Some of the things that have helped Southwest to grow so quickly are their personnel. They have found ways to hire employees that have out-performed every major airline for the past three years. Their hiring tactics can be accredited to a healthy business network, in-depth research, a good job database, strong recruiting staff, and an outstanding benefits program. Southwest offers its employees a very competitive benefits program.

Their program offers passes and travel privileges, medical insurance, dental insurance, life insurance, long term disability insurance, sick leave, vacation and holiday pay, profit-sharing, 401 (k) plan, stock purchase plan, and a employee assistance plan. One of the special benefits to working at Southwest is flying for free on Southwest and flying free or at a reduced rate on other carriers with whom Southwest has a pass agreement. Effective from the first day of employment, all employees, their spouses, dependant children, and parents of employees all have unlimited travel privileges on Southwest.

An employee may view this as a huge benefit when they decide they would like to travel. On the downside of this part of the benefit program, Southwest does not fly everywhere in the United States, and that may pose a problem for an employee that would like to travel somewhere that Southwest does not offer service. Another benefit is Southwest”s medical, dental, and life insurance plans. Employees may choose to incorporate their families with their medical and dental plans in order to save the employee money.

The medical and dental plans will cover 100% of the employee”s medical and dental needs, as well as their families needs, with minimal cost to the employee. For the life insurance plan, employees may choose coverage up to 4 times their base annual income in order to protect their family. The long-term disability program is set up in case an employee becomes disabled and can no longer work. Funds are still paid to the family in order to compensate for the employee”s inability to work due to disability. Depending on employment classifications, employees are able to gather time off for personal illness and vacations.

Employees celebrate several paid holidays throughout the calendar year, based on their employment classification. Southwest offers its employees a 401-(k) plan. The plan is designed to help employee”s plan for their retirement. Eligible employees may contribute up to 15% of their pay to the plan on a pre-tax basis. Employees direct their investments and may borrow against their account balance. Employees are the basic fiber of Southwest Airlines, so they feel that employees should be able to share in the success of the company by investing in Southwest Airlines Co. tock through payroll reductions.

Employees pay only 90% of the market value for the stock, and broker commissions are paid for by Southwest. Southwest cares very much for their employees well being. They offer their employees an assistance plan that helps when employees need it most. The plan provides professional assistance for employees and their families in order to solve personal problems that may arise that would cause their personal lives and job performance to suffer. Southwest Airlines realizes that without its employees the company would cease to work.

Southwest offers these benefits to help keep their employees happy and provided for and in return their employees strive to keep Southwest on top. United Airlines is a true global airline that has over 140 stations in more than 30 countries around the world. United prides itself on being a company where opportunity and advancement are determined solely on merit and individual achievement. United supposedly values diversity not only because it is the correct thing to do, but because it is the right business thing to do. United”s stated position is that all employees should be treated with respect and dignity.

The policy not only extends to employees, but to United”s customers, vendors, and independent contractors as well. Some of the benefits that United offers to its employees are; company-paid medical, dental, life and long-term disability insurance, pension plan, paid vacations, travel passes, stock purchase plan, 401(k) plan, and credit union. Going against the company”s policy, United Airlines has been in litigation with the city of San Francisco concerning the “Equal Benefits Law”. Last year United Airlines supposedly negotiated a two-year exemption from the law in order to renew a 25-year lease with the San Francisco Airport.

After opposing letters from the National Writers Union (NWU) United Airlines has joined with Air Transportation Association (ATA) in a lawsuit against the city of San Francisco challenging the ordinance. United claimed they never made an agreement with San Francisco and has not yet made a commitment to providing domestic partner benefits. The ordinance states that any entity that contracts with the city of San Francisco must provide equal benefits to its employees” registered domestic partners that it provides to married spouses.

Out of its 94,000 hired employees, United currently has approximately 10,000 lesbian, gay, bisexual, and transgender employees. We believe that United is not very committed to diversity. It is obvious to see that United is trying to limit their benefit packages to those individuals that are not registered domestic partners. Some states still do not recognize domestic partners as legal binding marriages, and as a result, these individuals cannot receive equal benefits. United”s problem is that almost 11% of its total workforce is comprised of lesbians, gays, bisexuals, or transgenders.

If United is committed to having diverse employees they should also be diverse in their benefit coverage. United should recognize that they have a diverse background and these select individuals need to be given equal benefits regardless of the added costs. The text mentions that part of providing a sound benefit package is allowing employees to given input into the benefit system. Having employees participate in designing benefits programs would help ensure that management is moving in the direction of satisfying employee wants.

To meet the many changes occurring in society, management must reflect these changes in the employee benefits programs. The fact is that benefit plans sometimes provide little advantage to employees. Even though United might be trying to save money, their treatment towards domestic partners are limiting the organization”s ability to attract and retain quality employees. Some of the most effective policies and strategies for dealing with benefit programs are encompassed within each of the four airlines benefit programs offered.

There are several benefits that are required by law, which include Social Security, Unemployment, Workers Compensation, and Leaves without Pay. Overall, American Airlines seemed to offer the most versatile benefits program. Although other programs offered similar benefits, we found that American Airlines offered the most conservative program. For example, United Airlines, and Southwest Airlines both offer free flights to all employees as well as their families, which may be more appealing to a young employee without a family.

On the downside, we discovered that Southwest Airlines has a limited flight area, which minimizes their costs when employees take advantage of these programs, and allows them to offer these strategic benefits. We feel that American and Continental Airlines are overlooking an important strategic hiring strategy, by not offering free flights to all their employees, since cost of flights are fixed. For example, a flight that is only at 85% capacity will fly for the same price as a flight that is at 100% capacity.

Continental Airlines, has a competitive benefits program as well, but it lacks the flight area which both United and American Airlines offer. We felt that American and United Airlines offered the best benefit programs, although American does not offer free flights from day one of employment, they offer many other compelling incentives such as, personal emergency assistance, vacation buying programs, credit union assistance, as well as flight discounts for their employees.

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E Commerce. Impact of Internet for the airline industry.

Executive Summary Aviation and air services industry is a large, competitive, and challenging industry, characterized by high capital and labor requirement, together with customer participation during transactions hence service fulfillment. Providing great reach and the potential for rich interaction, the internet is a natural medium for travel transactions. Airlines are turning to e-commerce to keep business flying, and the reason they are focusing on selling tickets through their Web sites is that it is the cheapest distribution channel. From the customers perspectives, Internet have revolution the way of buying flight ickiest.

Customers can now purchase their tickets directly from the airlines via the Internet using intermediaries and/or subsidiaries in order to find the possible cheapest ticket. Moreover, online discount travel services, such as Principle and Hotelier, allow airlines to dump excess inventory. They can use these channels, along with their own online specials, to drive traffic to less-popular routes, such as flights with inconvenient connections. Airlines are also using electronic channels to keep business travelers informed of potential delays and schedule changes.

Furthermore, Industry players use different technologies to differentiate their services to customers, to create customer loyalty, and serve them faster and in more convenient ways than their competitors do. Therefore, flight companies have developed some tools to communicate with their customers as in-flight broadband service and new mobile service, Air Flight industry is moving into an environment characterized by an abundance of information – the new source of airfare information is the Internet, especially the WWW.

Therefore any player in this industry needs to produce informative materials n digital form, which can be disseminated using the new information technologies. 1. 0 Introduction Few inventions have changed how people live and experience the world as deeply as the invention of the airplane. Until now, the airline industry has progressed to the position where it would be hard to think of life without air travel. It has shortened travel time and altered the concept of distance, making possible for people to visit and conduct business in places once considered remote.

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Commercial Airline Industry

Commercial Airline Industry February 17, 2014 Bargaining Power of the Buyer The power of the buyer is extremely low in this industry for a variety of reasons. An airline customer is looking for a specific flight time and the final destination cannot be switched. This lowers the customer’s power to have an immediate threat on the airline because the convenience and efficiency of using a plane over another form of transportation is too high.

Although the customer may have loyalty to certain airlines depending on if they want a flight that offers comfort at a higher cost or offer lower cost but do not focus on the amenities as much, they still will stayed within the airline industry for transportation. Recently customers have increased the want of flying premium, such as first-class and business-class, which has airlines looking into more amenities for the customers rather than finding the cheapest flight from point A to B. (“You still fly,” 2008)A new group of buyers that has entered the market recently are web portals, such as orbits, seductiveness, and kayak.

Bargaining Power of the Supplier It is very difficult for the airline to switch between suppliers. The top manufacturing companies for the airline industry are Boeing and airbus. The planes that most airlines use are standardized between those two manufactures and the amenities they offer is what makes them different. The capital needed to enter the airplane manufacturing business is extremely high that many of the suppliers rely on the airlines for their business. Many manufactures offer long term contracts to airline companies as a way to make it more difficult for the companies to switch between appliers.

As mentioned in the previous section, customers have made an increase in flying premium which has increased the sale and demand of business aircrafts. (“You still fly,” 2008) Threat of New Entrants Capital Requirements: Airline industry requires a huge amount of capital in order to enter the industry. Product differentiation: All airlines use the same products By agonizing focusing on cost or amenities. (Killing, 2014) Switching Cost: They are low because customers have very specific times and locations which limits them on options.

Customers tend to have loyalty to certain airlines making it difficult for new entrants that are not known as well. Government Policy: are highly regulated by the Federal Aviation Administration and the Department of Transportation. Rivalry among Existing Firms Number of Competitors: The airline industry has reached its mature stage and the number of competitors stays relatively the same. Amount of Fixed Cost: The amount of fixed cost is very high because many of the airlines are long term contracts with the manufactures.

Height of exit barriers: Since the airlines are in long term entrants it makes it that much harder for a company to leave the industry. Rate of growth: although the industry has reached its mature stage, customers do seem to want more amenities and are willing to pay higher price. (“Transportation Business journal,” 2010) Threat of Substitutes The airline industry does have some form of threats of substitutes causing there to be risk but not enough to make it an extremely high risk. Customers do have other transportation options such as train, cars, and bus.

Although it becomes costly to witch to these methods because of the convenience that airlines offers as well as the fact that many customers have a limited time to travel. Since time is a high cost it doesn’t risk the threat of substitutes to the airline industry. Also gas prices have gone up in the recent years making it more costly for customers to use their cars to travel long distances compared to an airplane. Relative Power of Other Stakeholders The airline industry is highly regulated by the government through two departments, The Federal Aviation Administration and the Department of

Transportation. They make sure that airlines are following the safety regulations and pilots have the experience before being allowed to fly a plane. Sources You still fly commercial? That’s so down-market. (2008, June 17). The New York Times. Retrieved from http://search. Riding. Com/texts/rd/suite/ Industry: An Application of the Porter Model. ” Transportation Journal 35. 2 (1995): 26. Protest. “Research and Markets; US Airlines Industry – Porter’s Five Forces Strategy Analysis. ” Transportation Business Journal (2010): 18. Protest.

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Business analysis of uk no-frills airline industry

These carriers were aimed towards serving the ‘tour’ industry. Holiday companies would arrange holidays with charter airlines which included flights to and from their destinations. Tickets are not sold to individuals by the charter airlines instead; bookings are done on a large-scale from holiday companies. Charter carriers achieved economies of scale by focusing on cheaper operation costs and higher density seating. They also claimed to have laid the foundation for ‘low-cost’ carriers.

The UK no-frills industry http://www. belfasttelegraph. co.uk/multimedia/archive/00257/flights1_257265a. jpg Figure 4: domestic and international routes of UK no-frills airlines No-frills carriers are airlines primarily characterised by its low fares with a focus on reducing operating costs. This type of airline mainly operates on a point-to-point network and offers no-frills services. A study conducted in 1998 by the UK CAA (civil aviation authority) described the advent of the no-frills model as a ‘third way’ way in European aviation. The emergence of Ryan air and Easy jet led to the development of no-frills carriers in Europe.

Ryan air, an Irish carrier was the first no-frills carrier to evolve. The company re-organized its operations in 1991 and adopted the no-frills model using the same technique provided by the US no-frills carrier ‘Southwest airlines’ which have been in existence since 1971. Ryan air started its no-frills operations by selling seats on flights between Ireland and UK focusing on some regional UK airports such as Luton while Easyjet started its operation in 1995 offering flights between Luton and Scotland.

The market became deeply competitive with new entrants such as British airway’s Stanstead-based subsidiary ‘GO’ which was purchased by easy jet in 2002 and also KLM UK’s new brand ‘buzz’ which was launched in 2000 and was purchased by Ryan air in 2003. That wasn’t the end of the intense competition; British European also re-launched itself by adopting the no-frills model in 2002 as ‘Flybe’. Ryan air and Easyjet grew dramatically in the late 1990’s focusing on cost reduction and cheaper flight tickets and also extending their current operations beyond existing markets to cover routes across Europe.

In Europe, No-frill carriers’ benefit from a 28% in market share which is a significant increase from the 13. 6% occupied in 2002. IATA (International Air Transport Association) projects that the market share of No-frill carriers in the UK will increase to 35. 7% by 2010. According to Mintel reports, in the past two years, one in three British adults have flown with a no-frills airline. About 19% have flown with easyJet and 14% with Ryanair. The table below illustrates the use of no-frills airlines as at March 2007.

In November 1995, easyJet started flights from Luton to Glasgow and Edinburgh with Boeing 737-300 which had a capacity of 148 seats offering prices of i?? 29 one way. Seats were being sold over telephone reservation system only. As at 1996, easyJet receives delivery of its first completely owned aircraft and goes international with first services to Amsterdam from Luton. A year later (1997) easyJet launched its website, easyjet. com which from 1998 onwards formed a fundamental part of its business concept.

(Providing for about 90%of its bookings today). In August 2002 easyJet expanded its fleet and routes by acquiring British Airways’ low-cost subsidiary ‘Go’. Also, later on that same year, October 2002 the airline signed a deal to purchase 120 Airbus, which will facilitate the airline’s ongoing growth strategy. In April 2008 the airline won the Hitwise award for the ‘most visited commercial airline website’ also winning the award for the ‘most visited transport website. ‘

The ongoing changes within the society make an environment uncertain therefore impacting on the operations of the no-frills industry. According to Kotler (1998), the PEST analysis can be defined as a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The analysis examines the influence of certain factors such as political, economic, socio-cultural and technological on the no-frills industry.

EU Expansion: In 1997, the European Union deregulated the air industry permitting airlines from one EU country to operate flights between other EU member states which provided access to new markets for many no-frill carriers. The expansion of the EU in may 2004 to include 10 more member states has given no-frill carriers renewed momentum with new services starting from central and eastern Europe as a result of the deregulation that comes with EU membership resulting in an increase in traffic of 10% in 2005.

The EU is expanding the aviation markets beyond its boundaries signing agreements in morocco, Turkey and Ukraine. Airlines are taking advantage of this expansion for example; Ryanair has invested heavily in expanding the volume of its fleet with a list of 115 European destinations being served by more than 750 fleets a day pioneering services to and from airports such as Frankfurt Hahn and Stockholm Skavsta. EU abolishment of Duty free sales: Duty-free sales occur wherever international travel takes place such as airports.

Most of the duty-free goods are mainly dominated by alcohol and perfumes. The idea behind duty-free sales is that passengers can purchase goods free of taxes as long as the goods will be consumed at the consumer’s proposed destination. In July 1999, the EU abolished duty-free shopping of which according to the EU regulatory body, the idea behind the abolishment was that duty-free shopping distorts trade by substituting the place of ‘duty-paid sales’ which according to the EU officials, leads to a reduction in income for the EU exchequer.

The abolishment of duty-free sales would have serious implications for no-frill airlines especially for airlines that accrue a certain percentage of revenues from having airport retail outlets such as ‘Aer Rianta’. According to an interview with the Group commercial manager of Aer Rianta Frank. O Connell, he said that ” The abolishment of duty-free and its loss of revenue will not be helpful for its international retail business”. He further emphasised that the abolishment of duty-free sales in the EU could cost Aer Rianta up to 20million.

Climate protection change: International aviation emissions are becoming a growing concern in the UK in terms of its impact on climate and the environment. Between 1990 and 2003, the UK greenhouse gas emissions (carbon dioxide, nitrogen gas and water vapour) increased by nearly 90% due to the growing influence of cheap-flight revolution (no-frill airlines).

The latest white paper on ‘The future of transport’ (Dft, 2004b) states; “if UK aviation is defined as all international departures from the UK, then the aviation sector currently contributes about 5.5% of the UK’s CO2 emissions but because of radioactive forces, 11% of total UK “. The EU is keen to take the matter through legislation. According to mintel reports, EU airlines have decided to join the EU Emissions Trading Scheme by 2011. Airlines exceeding emissions limits will be forced to buy carbon credits from other industries. No-frill airlines have expressed their concern. European airline associations estimates that only a third of the EU scheme will be recoverable from passengers.

Increased Trade-union pressure: In terms of industrial relations, trade unions have been very significant. Trade unions are known for concentrating on negotiating acceptable terms and conditions for their fellow colleagues in their employment sector. In other words they act as the ‘Voice’ of their fellow employees. In relation to no-frill carriers, trade unions have been trying to enlist new members to gain recognition and strengthen their bargaining power however they have faced hostility on different occasions. Ryanair is known to operate a very hostile anti-union policy.

In 1998 the company opposed a union recognition by their baggage handlers in Dublin who were protesting poor pay in relation to their counterparts in other airlines resulting in a disagreement. In addition, the airline also rejected to deal with unions representing pilots protesting a comparable pay with staffs of other airlines in the sector. Due to this reason, the International Transport workers Federation (ITF) has set up a website (www. ryan-be-fair. org/) to give Ryanair staffs freedom of speech in discussing their employment conditions and other related problems.

In 2005, the ITF’s secretary explained that the website had been very useful. He also claimed that the contributions on the website have been shocking with tales of job threats and bulling within the sector. It is assumed that the continuous neglection of trade unions within the UK no-frill airline will result in an enormous loss of staffs and passengers in the future 4. 1. 5 Threat of war and terrorism: After the July 7 bombing in 2005 which was assumed to be a response by terrorists to Britain’s participation in Iraq’s invasion, the EU made counter-terrorism its top priority.

The EU union laid a proposal to amend existing regulations of aviation security in September 2005. The sole aim of the proposal was to bring into line current rules on aviation security and introduce new measures on in-flight security. In addition, the recently foiled attempt of 24 people suspected of planning to smuggle liquid explosives onto aircrafts, has pushed the UK to raising its terrorist threat alert to the highest level also tightening airport security resulting into a disruption in air travel.

Due to this increased threat of terrorism, No-frill airline Ryanair threatened to claim compensation from the UK government if airport security measures were not restored to normal. The airline estimates that the disruptions to flight schedules have cost up to i?? 2million. The chief executive Michael O’Leary said: “If they allow these restrictions to stay in place, then the government will have handed the extremists an enormous PR victory.

” Other airlines such as easyjet, flybe, Aer rianta have also vowed to claim compensation if security is not restored to normal because they claimed it didn’t give passengers a calm environment to travel in. Looking at the whole industry, consumers of no-frills airlines are scared of travelling due to the increased threat of terrorism resulting in a loss of revenues and increased costs for no-frills airlines. Consumers might begin to look for alternative mode of transport if the threat continues.

Allegations of misleading advertising: In 1997, the Air Transport users council (ATUC) complained to the Advertising Standards authority (ASA) about allegations of misleading advertising by airlines. They claimed that airlines were advertising fares net of taxes which consumers complained was unfair. Due to this reason, the ASA carried out a research on airline websites and found out that additional charges often totalled up to more than the basic ‘fare’ of which they emphasised its very common with no-frills carriers including easyjet, flybe, Bmibaby and most of all Ryanair.

It was also found that the taxes, charges and fees charged quoted by different companies differed even on the same route. In addition, other forms of misleading advertising were also noticed for example, Ryanair was ordered by the ASA to stop advertising its flights from London to Brussels are faster than rail connection ‘Eurostar’ on the basis that the advertisement was misleading due to required travel times to the airports mentioned.

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Human resource strategy in the airline industry

To understand human resource strategy in the airline industry in the 21st Century one must look to the roots of commercial aviation beginning in 1944. In 1944 the International Air Transport Association (IATA) held a conference of fifty two nations known as The Chicago Convention of 1944. The Chicago Convention formed the basis of governmental accords that are used today to regulate the airline industry through complex bilateral and multilateral agreements (OECD, 1988). The agreements reached at the Chicago Convention were of great significance to the future of the airline industry for a number of reasons.

Of particular importance was the establishment of the principle of “air space” rights. The principle established that each country had sovereignty over the skies of their own country (OECD, 1988). This was of great importance to commercial aviation because it gave each country the ability to dictate which airlines could operate within its own geographical territory. This ability gave each country the right to establish state-owned airlines, or in some cases privately-owned airlines, to serve the domestic market.

Because each nation had the right to enforce their sovereign rights to air space, competition in commercial aviation was regulated by each of the respective governments that signed up to the Chicago Convention. Often these regulations gave each nation the ability to establish state-owned commercial aviation duopolies or oligopolies (Doganis, 2001). The purpose of this assignment will be to demonstrate that deregulation has created serious competitive issues throughout the airline industry. The issue of competition is the single most challenging aspect of the human resource strategies facing the airline industry.

By means of a political, economical, social, technological, environmental and legal (PESTEL) analysis, our team will analyze the typical HR strategies pursued by leading firms within the airline industry. Our PESTEL analysis will also examine the means by which the traditional airlines are reducing labour costs in order to gain competitive advantage. We will then compare the business strategies adopted by a high cost airline with one that offers ‘low fare – no frill’ services in order to establish how the human resource strategies change in accordance with the type of business strategy pursued.

Finally we will explore the future of the airline industry and forecast the direction of human resource strategies in the days to come. 1. The work team should conduct an industry analysis Political Factors Deregulation and Normalization Despite deregulation and liberalization of the regulatory environment of the airline industry, the skies above us are still not as “open” as they could be. Although the United States as the forerunner of deregulation in the 70’s was first to enter into agreements to open its skies, the current state of deregulation in the United States reflects the general reluctance to fully open up markets to competition.

(Chang) Since the late 70’s the United States has entered into a series of bilateral open skies agreements succeeding in opening its air transport market, however the bilaterals still contain many restrictions aimed at protecting the US commercial air transport market, including cabotage, what are known as ‘seventh freedom rights’ and the continued restriction on foreign ownership of airlines. (Doganis: 70) Many of these as well as further restrictions are still the norm abroad.

(Article that Tyler gave me: 601) Despite deregulation most air travel is still regulated through a series of bilateral agreements negotiated between two respective countries. (Doganis: 69) The situation in Europe however is slightly different. While the European Union has entered into multilateral open skies agreements which have effectively opened the skies in respect to intra-European Union air transport, air travel beyond the European Union is still regulated through traditional bilaterals in which each individual state negotiates directly with third countries.

(Daniel Chan: 491) “On many international air routes a traditional and highly regulated market environment persists. Elsewhere the economic regulation of air transport has been progressively relaxed as a result of pressure from the United States, the European Union and several other states. Thus regulated and so-called ‘open skies’ markets exist side by side. ” (Dognis:2) Although steps have been taken to deregulate local markets the idea of a truly open global air transport market is still somewhat a dream.

“Even governments of the USA and EU, strong proponents of deregulation and international market forces, have taken positions contrary to their avowed free market beliefs whenever these were deemed to be against their national interests (O`Connor, 1995 in :Daniel Chan The Development of the Airline Industry from 1978 – 1998: 491) The future of deregulation and globalization of markets still hinges upon governments protectionist attitudes.

(Eaton: 18) “Although there has been a tendency of states to reduce their stakes in airlines, national governments still defend their flag carrier for both strategic and symbolic reasons. ” (Hi?? tty/Hollmeier 2003) Thus government regulation plays and will continue to play a large role in the development of the airline industry. Labor Unions Deregulation and Liberalization of the airline industry has left its mark not only upon the industry itself but also upon the people who keep it running.

Prior to deregulation most airlines were state owned “flagship” a carrier who’s bottom-line was not or did not have to be keeping costs down. The airline industry was not a profit maker and didn’t have to be because of its nationalized status and the common practice of government subsidies. (Doganis) However, deregulation, the subsequent trend toward privatization changed not only the regulatory environment, but the employment situation as well.

As airlines worldwide inched towards privatization during the 80’s and 90’s the focus turned toward competition, more specifically toward the cost efficiency and productivity of its work force. (Chang) The subsequent restructuring in order to prepare for privatization meant that redundancies and layoffs were inevitable. Today, in lieu of fierce competition and the excess of airline capacity induced by the current economic downturn, the role unions play within the traditionally unionized airline industry in dealing with the pressure to cut costs at the personnel level will continue to be a pivotal issue. (Eaton 82-83)

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