Airlines

Competitive Environment in US Airline industry

The American aircraft industry has long been considered one of the most extraordinary Airlines. In the country there are more than 25 such industries. Countless are controlled through autonomous associations, but have been contracted by real transporters, and through names like “American Express”. The real change in this part starts with the ordinary flying miracle.

According to the Explorer’s view on the safety of turbo propaircraft, various associations, one of the leading organization, Continental Express is a strong need for a mission that changed all unpretentious commonplace aircraft. Air Shipment make up a huge piece of business. These are not target motion options, but this snippet just integrates the air travel section. This section is home to the most productive associations possible perceptible of all the surrounding transport classes.

Regardless of the achievements of the 1990s passed to passengers enterprises, various associations are caught in a slippery slope. With the high level of commitment reported by the interests of various associations, voyager travel’s downturn even has a large number of key transporters scrambling to survive.

Almost most of the Big 6 key aviation Airlines of the past have filed for economic failure or the hunt for the government. Employment is the route of these associations, because their cost is considered to be 40% of the business. Regardless of the grim scanning business, there is trust between the employees. The key is in fitting their strengths, wages, work and arrangement to the key organization. (Heimlich, 2019)

This business is currently focusing on the expansion that development needs to continue. Shockingly, it is difficult to produce sound gauges for specific aviation Airlines due to a variety of factors, from horrific terrorism to confusing government rules. We may see new ways and components to create a light for the survival struggle within the air transport industry; in any case, they will meet the key needs of travelers and payloads that need to accomplish their goals (M.A. Hitt, Strategic Management, 2013)

Porter’s five forces on the analysis of the United States aviation industry

Porter’s Five-Force analysis is an important method and tool for exploring the external conditions of any industry. (Porter, 2013)Following are the points included in five forces analysis of US Airline industry.

Supplier power supply

The power of the suppliers of commercial services in transport is enormous in the way of light, where the three sources of contributions that aviation Airlines have: fuel, the degree of airplanes and work are influenced by external conditions.

For analysis, there is a risk of an adjustment of the cost of flying fuel to the oil market as a whole, because of geopolitical and unique factors, the oil market may change drastically. That is the reason why the power of the supplier is high in the extent of the three sources of contributions they need, according to Porter’s Five-Force Framework. (MAZZEO, 2013)

Buyer power

With the increase in online ticketing and transport structures, Flyers depend on themselves for their ticketing needs. Apart from that, the entrancelittle rate transporters greatly benefit the flyer. In addition, strict rules regarding the conspiracy to carry the business suggest that navigators and fliers have been verified by the controllers, which infer that equality of forces is meant to help them. (Airlines, 2019)

Entry and exit barriers

Air transport operations require huge capital assumptions to enter, although when carriers need to leave the sector, they need to record and absorb various difficulties. This provides a high level of preparedness for aircraft operations.

Being into the Airplanes business requires high injection of capital and only one out of every 10 person can get into the business, besides that, requiring current learning and tilting the player, which is a hindrance. The barriers to leaving are also subject to the rules as controllers in the United States do not allow passengers to leave the business except in cases where they are satisfied that there is a veritable business clarification behind the ratio. (T.J. Hannigan, 2011)

Alternative and complementary threats

Transshipment operations in the United States are not at risk alternatives and complementarities unlike any way on the production site, customers generally do not experience by train or vehicle. This means that the flight for the customer is a trademark Marvel, it replaces the train and transport to the extent that its impact is not important. Apparently, a variety of Americans (additionally using their cars for longer trips), suggesting that there is a danger of this alternative.

Competition intensity

As mentioned in the introduction,the aircraft business in the United States is incredibly powerful in terms of different reasons which joins negligible exertion transshipment zones, where prosperity eventually focuses on Fanning high work-cost business in addition to any other aspect. The competition in Airline business makes better services and low-cost tickets.(Porter, 2013)

Southwest Airlines

Competitive Environment of the Airline Industry

Five Forces Analysis:

In order to examine the advanced state of Southwest Airlines and investigate the possibility of the association check, this work uses Porter’s Five-Force model. (Porter, 2013)

• Center for competition

There are different aviation Airlines making the transshipment business really rush forward. Regardless of the 1992 concentration of three companies, and 8 companies obsessed with 92%, the passengers of the cost of fighting the way makes this business more powerful than the numbers may suggest the way.

• Airplanes Industry barriers

There are high barriers to entry into this industry, as it takes a broad start of investment. Determining the war with self-esteem and low net income, it is over difficult to gain an edge in this industry. It is surprising that the typical aviation ship expanded in response to its expenditure. (Juneja”, 2013)

• The dangers of alternatives

For long zonal trips, such as vehicles, trains, Airlines, there are various alternatives; these are usually more affordable. In any case, air travel has an excellent location. Therefore, the risk of alternatives is quite low.

• Power suppliers

Boeing and Airbus are the key aircraft suppliers for huge aviation Airlines. Boeing is a supplier of aircraft to Southwest Airlines. In the latest years, Southwest Airlines has re-established an airplane with a section of the Boeing 737-800 aircraft and plans to change completely in the future (Southwest, 2011) without full removal.

Due to the high cost of the transaction of the South-West Airlines from Boeing to Airbus-in connection with the cost of the arrangement of the pilot and the readiness of the modeler to follow the changes in the Airbus flight machines-the trading power of Boeing is high.

In a similar way, Southwest Airlines relies heavily on the net income of oil, which is derived from the cost of high rotation and trading power of oil suppliers. (Pratap, 2013)

• Power of Buyers

Customers have high management capabilities, which largely thanks to their cost-based trends. To tolerate a comparable organization, buyers will pick a transport vehicle that provides their best motivation for their money. Thanks to the fully available information advance tool, customers can check the flight organization and expenses before settling their final decision. Due to the low cost of the client’s transaction, the buyer’s trading power is high. (Porter, 2013)

Drivers of industrial change

• The rise of the internet economy

Network and online business have completely balanced the transport process (airline ticket booking and ticketing for voyagers). With the advent of electronic tickets, wayfarers can be reached via the passenger’s destination.

• Globalization

The growth potential of the overall tourism grandstand has sparked a global drive for the development of industries around the globe. To support all-inclusive progress, American aircraft are competing for the”Open Sky” deal between the United States. At present, the United States has set up more than 60 routes of action in the open sky separately from countries around the world.(Mauborgne, 2015)

• Negligible exertion competition

The rise of linear carriers forced a change in the dynamics of the aviation industry. Southwest, JetBlue, and AirTran,among others, worked out a framework for negligible play, allowing them to offer universal low fares. These low tolls put weight on the entire business and force opponents to cut costs and lower their tolls to remain centered. (M.A. Hitt, Strategic Management, 2013)

Key factors for Competitive Success

1. Airplanes Industry, organization of aviation Airlines
   The possibility of modifying the geographic market clearly is the main passengers of business. The aircraft needs to provide courses between the business units required and used by the customer. (Ocean)
2. The cost structure of an aircraft carrier
   The cost inherent in the practice of the transporter is for the purpose of certification of the imprisonment of low fares.
3. A team of employees of anAirplane and its collaboration with the customer
   An employee of a transporter can describe the customer’s impression of the image of an aviation vessel. A pleasant workforce can strengthen the business. (M.A. Hitt, Strategic Mangement, 2013)

Strengths:

Understanding the internal resources (features and flaws) of the association and the external market opening and risks are the basis for the incredible strategy development. Following are the strengths of Southwest Airplanes:

• Low tolls through vehicle development
• Customer service is portrayed as pleasing, interesting and novel
• Rapid turn at the entrance (10-20 minutes)
• Two-stage open / closed peak evaluation structure
• Reliability of punctual organization
• Ticket office missing line
• First aircraft introduction to ticketless air travel
• Flexible key arrangements
• Employee-oriented mentality has realized the advantages of more and more enthusiastic service to customers
• Attractive long-term customer program. (rodrigo, 2014)

Inadequacies:

Every productive association has some shortcomings, on whether the problem is huge or insignificant, there is always an opportunity for improvement. Following are the weakness:

• The Battle of the court left a small beginning to work
• The absence of selected seats led to a”first come, first served” technique, which is a source of some disappointment for customers.
• Flight service is required to play out additional commitments (garbage pickup, cleaning aircraft) to make the smart turnaround.
• No mealtime facility, just peanuts being lifted.
• Luggage will not be associated with the flight deals, which caused a surge of customer trouble.
• There is a shortage of staff in a well-defined area, and the real goal is to reduce the cost of work. (rodrigo, 2014)

Opportunities:

Now that we see the Association, the time has come to see the outside market opportunities, make a strong advantage, and the system.

Everything considered, an association needs to look for progress after each open entrance, anyway there are certain options that a company needs to make to arrange their own advantages, to get the best of the powerful advantages.

The most suitable southwest market openings are those that offer useful improvements, specific channels and the potential for maximum placement. The proximity of the southwest to the base of contact in the smaller air terminal closer to the huge urban territory makes it progressively invaluable for the customer.

Development time in a smaller aircraft terminal is reduced, the aircrafts are less, and Southwest can get more air travelers from city to city. In long-distance travel, the south-west should consider the organization or common cause of cooperation with the European Air Transport Association and make travel abroad easier.

In Europe there are many urban territories, and within many miles, the Southwest can give humility, recognition, and novelty to the flying Foundation. Since they ordered short courses for small aircraft, the southwest could obtain some more prominent aircraft and perform cross-domain or all-inclusive outings for trivial movements. (Sundaresan, 2011)

Risks

• Quite consecutive insignificant exertion challenger (JetBlue) is gaining general business with similar strategy.
• When it comes to the airline industry, everything that is said to be done is vulnerable to the huge fluctuations in the execution of currency-related cycles and significant concerns
• Since September 11, 2001, the risk of terrorists has been taken away some specific customers
• Traditional competitors are developing their own direct organization
• The new government security rules will cause disappointment to customers, increase airfare, and dispirit entertainment for adventurers.(Davis, 2013)

The current strategy of the south-west Airplanes Industry

The current strategic effectiveness

The Southwest has managed to end up in business the best low-section aircraft. Its framework is fundamental and gives its customers and laborers the best help. The company check will reveal if the current program southwest is being used to be productive. It will limit in a similar way what changes should be made to remain potent. (SPICER, 2018)

The central location compared to competitors

The booming of the south-west Airplanes Industry is clearly correlated with its sharp appreciation of the key achievement factors associated with it. As should be clear below, the southwest guides the customer to organize quality KSF, and in this way they have won Triple Crown with a minimum of customer complaints, the most punctual channel, and the most important quality stuff organized. (Juneja”, 2013)

Go-forward stratagem

The Southwest has organized its strategy around its most basic resources and constraints. It should limit its increase to those activities in which it has an indisputable high ground. Southwest should try to create by repeating its success to the new market and realizing the economies of scale and clear learning more and more obvious.

The Southwest should not try to change its model and strive to fight with other standard Airplanes by flying the entire arrangement of flying and setting the focus point. Doing all theconsidered things would weaken the southwest fixation and shield it using high grounds that have served well for over twenty years.

In order to continue to be successful and grow, the south-west Airplanes Industry should be more likely to support and develop its current heights.

Strength-he Southwest should focus on making its capacity more extreme than its benefits. The Airplanes business is known for its back-to-back shock and depression cycles, the south west should reliably focus on making its current first mover and diverse central focus intense by keeping its laborers agitated and keeping its emphasis on providing the necessary, direct air travel.

Transferability and replicability-the south-west should focus on making its capacity less transferable and reproducible. In a similar way, less respect for whether a competitor receives comparative resources (aircraft, laborers, etc.).) Capacity in the south-west Airplanes Industry is difficult to trade and rebuild. (mis.kent, 2013)

Southwest future plan

• Growing to the overall markets in the world
• Developing Southwest into Minor Marketplaces
• Development through Merging with other organizations
• Emerging Southwest into a Bigger Air company

Conclusion and Recommendations

We believe that the Southwest is best served by finding a system after the overall increase in nerve. Venturing into the humble market or forming a larger passengers with a larger aircraft can empower the association to infiltrate certain client pieces and geographic markets. In any case, the association may need to abandon their systems by establishing that the various associations through acquisitions can enable the association to enter certain neglected markets.

In any case, it may also, on the contrary, influence the currentcorporate culture in the southwest Airplanes Industry, where certain business sectors may have the incredible potential for improvement and, across the tourism industry.

The Southwest should first look for an easy passengers in the business sector, such as European and Latin American associations. To provide a match of operational skills, as well as resistance to remote rules and legislative issues of the annex, can benefit more time. The south-west can begin to go directly to the”open sky” areas, such as the Netherlands, and give their mark point-to-point system between global targets.

If the south-west could give it all the surrounding arrangements of culture, its strict cost control, its strong organization abroad, it could be converted into an important force far and wide, and also because it has been officially established in the interior of the United States.(M.A. Hitt, Strategic Management, 2013)

References

• Airlines, A. (2019). Fernfortuniversity. Retrieved from http://fernfortuniversity.com/term-papers/porter5/analysis/2528-american-airlines-group-inc-.php
• Davis, B. (2013). Competitive Analysis: American Airlines.
  Heimlich, J. P. (2019). Airlines. Retrieved from http://airlines.org/blog/the-nature-and-status-of-u-s-airline-competition-beyond-the-80-percent-rhetoric/
• Juneja”, P. (2013). management study guide. Retrieved from https://www.managementstudyguide.com/porters-five-forces-analysis-of-airlines-industry-in-united-states.htm
• M.A. Hitt, R. I. (2013). Strategic Management. 208-222.
• M.A. Hitt, R. I. (2013). Strategic Management. 211.
• M.A. Hitt, R. I. (2013). Strategic Mangement. 221.
  Mauborgne, W. C. (2015). Blue Ocean Strategy.
• MAZZEO, M. J. (2013). Competition and Service Quality in the U.S. Airline industry.
  mis.kent. (2013). mis.kent. Retrieved from http://mis.kent.edu/Users/weinroth/public/July%208%20Southwest%20Progress%20Report.htm
• Ocean, B. (n.d.). Management. Retrieved from http://blueoceanuniversity.com/frontpage/hbrcase/17797-southwest-s-southwest
• Porter, M. (2013). Competitive Strategy. In M. Porter, Competitive Strategy.
  Pratap, A. (2013). Five Forces Analysis of Aviation Industry.
  rodrigo. (2014). , PESTEL and Five Forces Analysis.
• SPICER, R. (2018). Driven by Competition, The Airline Industry is Taking Off.
  Sundaresan, S. R. (2011). Competitive Strategy.
• T.J. Hannigan, R. D. (2011). “Competition and competitiveness in the US airline industry”. Competitiveness Review, Vol. 25 Issue, pp.134-155.

“Everybody Can Fly” was the famous tagline of AirAsia, AirAsia was able to fulfil their tagline AirAsia implement the low cost operations into their management. The operating fees were as low at the minimum wage. Low airport fees, for example at Kota Kinabalu International airport most people can see that the technology or systems that was being use by AirAsia was totally different compare to MAs.

Other than that, AirAsia also using only one type of Airplane for every flight this is because AirAsia will only need the same engineers for every airplane in order to save the cost. In the management level, all the staff of AirAsia was the contributors where there are no ranks or hierarchy in the company where the upper management and their staff will be in the same room. However, all the staff was concern and focused to their customer needs such as offering the lower fares during festive season.

AirAsia business model was also proven that they was able to offer the lowest fares, where in every year AirAsia was hold the highest ranking of demand from the customers, and each year also AirAsia was gain profit. Other than that, most of the sales of AirAsia were from online, online ticketing was introduced by AirAsia. AirAsia offered a simple product. The fares were not include the meals and if the customers request a meal then additional fee will be charge. Other than that, Airasia also does not offered a VIP seat.

However, due to the lowest cost of operating by AirAsia the service resources is limited. Limited aircraft causes AirAsia was cannot prepare of standby aircraft if there is any problem in the operation. Due to the limited number of human resources it causes AirAsia could not handle irregular situation such as when there is high demand from customer they cannot fulfil each demand because there is no enough of workers, it causes some of the customer go to another airlines. Another weakness that AirAsia face is, government interference and regulation on airport deals and passenger compensation.

If government announce that any flight from Malaysia to country that was having crisis, will affect AirAsia and any flight schedule will be delay until there is an announcement again from government. It is compulsory for each airlines to follow the government order. Other that, AirAsia also must follow each regulations that was been set up by the government and if there is any changes of the regulation AirAsia must changes they operation accordingly to the new regulation on the airport. AirAsia also was also must deal with the passenger compensation if there is any delay of flight and it will causes the passenger/customer facing loss.

1. Outlook of Domestic and International Tourism in the Philippines: •According to the Philippine National Tourism Development Plan 2011-2016, DOT wanted the Philippines to be a must-experience destination in Asia. With that strategic vision, they established a general goal which is to develop an environmentally and socially responsible tourism that delivers more widely distributed income and employment opportunities as indicated by 6. 6 M international arrivals and 34. M domestic travellers generating PhP1,759 billion in total expenditure, contributing 6. 78% to GDP and employing 6. 5 million people by 2016. With that being said they created objectives to achieve the goal which is to improve market access and connectivity by rapidly expanding capacity of secondary international airports, expanding connectivity between Philippines and its key growth markets and implementing a strategic access infrastructure program between secondary international airports and strategic destinations.

Developing and marketing competitive tourist destinations and products by implementing a sustainable tourism destination infrastructure program, developing diversified tourism products that engage local communities, implementing a PPP-based mandatory tourism enterprise accreditation system and facilitate tourism investment and lower cost of business safeguarding natural & cultural heritage and vulnerable groups PPP-based marketing strategy and action plan.

Lastly, improving tourism institutional, governance and human resource capacities by institutionalizing roles and responsibilities of DOT and LGUs, developing a competent well motivated and productive tourism workforce and improving governance in the area of safety, security, and in dealing with tourists. (http://asiapacific. unwto. org/sites/all/files/pdf/philippines_5. pdf) •As of January 2013, DOT Secretary Ramon Jimenez, have missed the target of 5 million tourist arrivals by less than 300,000 (4. 6 Million), and is eyeing the 5 million by the end of 2013.

He will do it by intensifying the marketing campaign overseas, increasing the number of hotels and room accommodations, and most importantly, improving the so-called one of the worst airports in the world which is NAIA. (http://www. abs-cbnnews. com/business/01/17/13/dot-misses-2012-tourist-arrival-target) 2. Interest of Air Asia and Tiger Airways in the Philippine Operation: •AirAsia has affiliates in Indonesia and Thailand, both of which could have an IPO later this year, as well as long-haul associate AirAsia X. It has also announced plans to start up an affiliate in the Philippines.

Clark will be the 13th regional hub of the AirAsia group, in addition to its bases in Malaysia, Thailand and Indonesia. Increasingly, however, AirAsia is finding that it has to share its turf with Singapore Airlines’ associate Tiger, which has announced plans of its own for the Philippine and Thai market. Accoording to AirAsia’s chief executive Marianne Hontiveros, “Our choice of Clark underlines the airline’s commitment to developing transportation and tourism hubs outside Manila. This is part of our plan to contribute to the development of the country as a whole. Last February 2011, Tiger said it would buy a 32. 5% stake in Philippine low-cost carrier Seair, following a marketing partnership between the two airlines late 2010. Tiger’s chief executive Tony Davis says that by taking a stake in Seair, his airline would be able to take a bigger share in “a major market opportunity for low cost airlines”. The move would also allow Seair to compete more effectively against local market leader Cebu Pacific, which had a successful IPO last year and is rapidly expanding both its fleet and network. (http://www. flightglobal. om/news/articles/low-cost-carriers-growth-expectations-355702/) •The year 2012 put the global spotlight on the Philippine aviation industry, largely due to the phenomenal performance of the low-cost carriers flying domestic and international routes. The share of budget carriers in the the Philippines in the first 9 months of 2012 has soared to an average of 60%, reflecting one of the highest in the world, according to business consultancy firm Innodata. Almost 80% of the domestic market’s 15. 5 million passengers and about 30% of international’s 12. 5 million flew budget airlines in January-to-September.

Since budget flights were introduced to Filipinos in 2005, the number of passengers hopping from one of the archipelago’s 7,100 islands to the next, or to Asian destinations less than 4 hours away, have been growing by leaps and bounds. The year 2012 saw the highest jumps. The promise of low fares and new destinations were key reasons for this exponential growth. Budget carriers, in turn, battled it out in this increasingly competitive playing field by acquiring fuel-efficient aircraft and testing new markets. Some beefed up their war chest by getting new owners or partners with deeper pockets or wider reach. http://www. rappler. com/business/18371-low-cost-carriers-drive-aviation-growth) •“Tiger Airways, however, said the long-term potential of the Indonesian and Philippines air travel market is promising. ” (http://www. interaksyon. com/business/53511/tiger-airways-says-seair-unlikely-to-turn-in-a-profit-in-2013) •The resulting operational and cost efficiencies will ensure more low fare seats are available and contribute to the growth of SEAIR and the Clark gateway, benefiting customers in the Philippines and across the Asia Pacific region.

Avelino Zapanta, SEAIR’s President and CEO, said, “With this new collaboration with Tiger Airways, we will also be able to serve more international visitors to the Philippines by offering more destinations with great value, low fares. In addition, the introduction of these new jet services will create a welcome boost to the Philippines tourism industry and create more high calibre local jobs. ” Chin Sak Hin, Chief Financial Officer of Tiger Airways Holdings Limited, said, “We are very excited to be working with SEAIR as the first “Partner Airline” of tigerairways. com.

Besides the cost advantages resulting from basing aircraft and crew in Clark, SEAIR’s extensive experience and brand recognition will ensure that more customers in the Philippines and internationally can access the same low fares offered by Tiger Airways when using the leading regional travel portal “tigerairways. com”. Together with Tiger Airways’ strong marketing and distribution platform in Singapore and across major markets in the region, it will be a powerful combination that offers unbeatable value and fares to even more travellers. (http://www. tigerairways. com/news/OA_20110224_Tiger_Airways_Plans_To_Purchase_Major_Stake_in_SEAir. df) •“Our choice of Clark underlines the airline’s commitment to developing transportation and tourism hubs outside Manila. This is part of our plan to contribute to the development of the country as a whole. AirAsia, Inc. is excited to start contributing to the economy of Clark and the rest of the country by boosting tourism and offering job opportunities to Filipinos,” said Marianne B. Hontiveros, chief executive of AirAsia, Inc. ” •“We plan to make Clark the hub for flights to popular destinations including Singapore, Hong Kong, Taiwan, China, Thailand, Korea and Japan.

Travel will become much easier and more affordable for tourists and overseas Filipino workers,” Hontiveros added. Hontiveros, Antonio O. Cojuangco Jr. and Michael L. Romero own 60% of AirAsia, Inc. in equal partnership. The remaining 40% is owned by AirAsia Berhad. 3. Relevance of the Philippine population in the regional LCC’s interest of operation According to the Pacific Asia Travel Association, as of 2011, there are 114 million online visitors who check out the internet for Airlines which are aged 15 and above and who have internet access in schools, works, homes, etc.

In the Philippines, 11% of the total population has access to the internet and check out these sites for low-cost airfares. This study shows that the higher the population is the more online hits and the more famous the air carrier gets when it comes to low-cost fares. AirAsia has topped the list of most-visited websites with 3,380,000 visits and second is, Tiger Airways which increased 226% from 554,000 to 1,805,000. Low-cost airlines in Asia Pacific have already seen substantial growth, even just in the past year.

With many of these carriers adopting highly web-centric models, it is significant that they attract more than their fair share of the young Internet users in the region. For these young travellers, low-cost airlines may be the first time that they have to book and buy their own travel, providing for many the portal into continued use of the web as an e-commerce channel. Significant upside in the market remains as Internet penetration increases in the region, and people who could not afford to travel before can now take cheaper flights.

The younger generation as well as the continued improvements in site usability and security will also begin to influence older Internet users to adopt the web as a channel for researching and booking travel. “PATA sees low-cost carriers as an increasingly important part of the travel ecosystem in Asia Pacific and this study has proven that,” remarks John Koldowski, Deputy Chief Executive Officer and Head, Office of Strategy Management, PATA. “As consumers across demographic segments continue to turn to the web for their travel needs, it

AirAsia was launched in 2002 by Tony Fernandes, at the time a pioneer of low-cost flights in Asia. At first, the company operated three Boeing 737s. In 2004, after a very successful public offering, AirAsia was listed on the Malaysian Stock Exchange and from there grew rapidly. As of 2011, the AirAsia Group has 93 aircraft spread across 12 hubs (see appendix 1) and is flying to more than 60 destinations in 16 countries with 130 domestic and international routes.

AirAsia operates 3,500 flights every week on domestic and international routes from nine regional hubs in Malaysia, Thailand (Thai AirAsia), and Indonesia (Indonesia AirAsia). AirAsia’s head office and its main base is the Low-Cost Carrier Terminal at Kuala Lumpur International Airport. This terminal handles 48. 4% of AirAsia’s traffic (see appendix 2). AirAsia is the leading low-cost carrier in the world and won the Skytrax award for World’s Best Low-Cost Airline in 2009 and 2010.

In addition, the company is Asia’s largest low-fare, no-frills airline and has a long-haul arm, AirAsia X, which currently flies to China, India, Iran, Taiwan, the UK, and Australia with plans to launch services to Japan and South Korea. This report will use the PESTEL framework to evaluate the opportunities and threats presented by AirAsia’s external environment. It will then apply a SWOT framework to analyze the Strengths, Weaknesses, Opportunities, and Threats of the AirAsia group.

Finally, this report will list three recommendations, to be evaluated by the AirAsia board of directors before implementation. To begin, a PESTEL framework will enable us to understand all the macro-environmental factors affecting AirAsia.

1. Political Opportunities

Deregulation and privatization present Air Asia with opportunities for new routes. For example, the ASEAN governments signed the ASEAN Multilateral Agreement on the Full Liberalisation of Passenger Air Services (an open skies policy) in 2010.

From 2015, designated airlines from ASEAN countries will be able to fly to any city with an international airport in a member nation. AirAsia will therefore have the opportunity to penetrate undeveloped markets in the ASEAN region by opening new routes. However, it should be noted that foreign competitors will have the same opportunity and new routes will require the utilization of more aircraft. The Malaysian Government has always supported the Malaysian airline industry. One example of this is the opening of the Low-Cost Carrier Terminal at Kuala Lumpur International Airport.

Further, the Malaysian Government has helped all low-cost carriers (LCCs), and in particular, AirAsia, to develop a competitive edge by reducing their operating costs and improving their logistics. Secondly, the Malaysian Government has given AirAsia, along with all Malaysian airlines, significant tax incentives (see appendix 3). These tax-incentives in fact helped AirAsia to cover a substantial part of its loan interest when purchasing aircraft. It is also important to highlight that other Southeast Asian countries are often substantially state-owned.

This allows the government to control the airline and protect it from the competition. As an example, AirAsia established a joint venture with Shin Corp when it began operating in Thailand with Thai AirAsia. AirAsia had a holding of 49% of Thai AirAsia while the remainder was held by Shin Corp., owned by the former Thailand Prime Minister Thaksin Shinawatra (2001 -2006). Threats AirAsia and its competitors can also be negatively affected by government decisions. For example, unless the Malaysian government makes an effort to minimize crime, travelers may choose to visit other destinations.

Low-cost carriers are also suffering from recent delays in the construction of a new permanent low-cost carrier terminal (Expected to open in October 2012), work being undertaken by the Malaysian government. These delays reduce the ability for low-cost carriers to expand their capacity by catering to new passengers. Barriers to trade between countries may also inhibit low-cost carriers in Malaysia from entering more protected markets like China where the government tightly controls the airline industry.

Civil conflicts and conflicts between regional governments can also affect AirAsia’s operations. For instance, there has been a resurgence of violence in Southern Thailand and terrorist attacks have occurred in the rest of Thailand and Indonesia. Additionally, Malaysia’s recent decision to explore oil-rich waters off the coast of Borneo has led to increased tensions with Indonesia. These tensions could harm customer confidence and affect all businesses operating in Southeast Asia.

2. Economic Opportunities

The economic situation in Malaysia is stable. As an illustration, from 2004 to 2010, Malaysia’s average interest rate was 2. 91%, its average inflation rate was 2. 77% and its average unemployment rate was 3. 43%. In addition, the Government of Malaysia has a current account surplus that enables them to continuously boost domestic demand, resulting in average annual GDP growth of 4. 5% between 2000 and 2011. The global forecast for all Asian countries for 2011 anticipates average GDP growth of at least 3% for 2011.

Countries like China, India, and Indonesia are expected to experience GDP growth exceeding 6% (see Appendix 4). Although, economic downturns are always complicated for any business to negotiate, they can also present certain opportunities for companies like AirAsia because, for example, aircraft leasing costs are often reduced by about 40% at such times. Thus, companies with ‘deep pockets’ are able to invest and expand their fleet at a very competitive price. Threats Fluctuating oil prices are a major challenge for airlines.

For example, in 2009 and 2010 the price of jet kerosene price represented between 40 to 55% of AirAsia CASK (cost per available seat kilometer). From the latest information, the fuel price in 1Q11 was US$117 per barrel, relatively high when compared with 1Q10 when the price was only US$99. 6 per barrel. Fluctuating oil prices have a major impact on operational costs. This is why all airlines use fuel-hedging contracts to stabilize the price they pay for the purchase of jet kerosene. By hedging fuel, Air Asia paid an average price of US$107 per barrel in Q1 2011 from (see Appendix 5).

The last decade was very prosperous for several Southeast Asian airlines and the Asia Pacific domestic LCC penetration by capacity has expanded rapidly and has reached a saturation level in several countries. For instance, in countries like the Philippines (61. 8%) or Malaysia (56. 5%), more than half of the region’s airline seats are supplied by low-cost carriers compared with the world average of 24% (see Appendix 9).

3. Social/Cultural / Demographic Opportunities

Firstly, Southeast Asia offers an important advantage to airlines because the region is comprised of multiple ethnic groups that are able to speak several languages. For example, Malaysia is composed of several ethnic groups – Malay, Chinese, Indian, and Thai – and this provides a company like AirAsia with the ability to find staff that can speak several languages, something which is useful as they rapidly expand their business outside Malaysia. Secondly, the rapid urbanization of Southeast Asia clearly helps airlines because it forces governments to develop important infrastructures and open new airports in order to facilitate the flux of people between countries.

According to the UN, seven out of the 15 most populated cities in the world (;10 million) are predicted to be in Asia by 2025 (see Appendix 6). Thirdly, rapid economic growth also drives rapid growth in the middle class within Asia’s large population. According to the latest OECD forecast, the amount of money spent by the Asian middle class is expected to represent 59% of the total amount spent by the middle class in the world by 2030 (see Appendix 7).

By analyzing average household consumption within Asia, we can also confirm that the communication and transport spending category will increase from less than 10% in 1995 to 15% in 2015 and this will definitely increase the demand for air travel between Asian countries (see Appendix 7). Threats The emergent middle class is growing more rapidly in countries like India and China. It is likely that these countries will develop foreign LCC competitors that will have a higher growth rate as well as a larger economy of scale than Malaysian airlines like AirAsia.

4. Technological Opportunities

By utilizing information technology, airlines have been able to reduce their operating costs. LCCs were clearly the most effective players in the airline industry at implementing breakthrough information technologies. By implementing e-ticketing systems and using e-commerce to bypass traditional travel agents, LCCs have been able to ‘lean’ their processes by removing unnecessary costs. Furthermore, new, state-of-the-art aircraft are more fuel-efficient than older models, and this has helped airlines to reduce their fuel consumption.

AirAsia has implemented these technologies and they have contributed to their operational efficiency. Today, AirAsia has the world’s lowest CASK (cost per available seat kilometer), at just US$3. 52 in 2010 (see Appendix 8). It has achieved this by implementing the following best practices: a powerful Yield Management as well as Computer Reservation System (Novitiate Open Skies), a global Enterprise Resource Planning System (powered by Microsoft Business Solutions), and a Customer Relationship Management system provided by Siebel.

Threats By being highly dependent on technology, LCCs incur costs in ensuring that their systems operate smoothly and safely (i. e. from backup systems and maintenance). In addition, by relying heavily on online sales, LCCs expose themselves to large financial losses when system disruption occurs.

5. Environmental/Legal Opportunities

Firstly, AirAsia has the youngest fleet in Asia, with the new Airbus A320 and A330 providing improved fuel efficiency.

This is fortunate because the EU has adopted a new policy (coming into effect January 1, 2012) that requires all airlines to pay for greenhouse gas emissions released on journeys to and from EU airports. Secondly, labor unions in Asia are relatively weak when compared with the EU or the USA and this helps airlines in Asia to remain competitive by reducing their overhead cost to a minimum. Threats Natural disasters force airlines as well as airports to reduce or shut down their operations for hours or even days.

In the last decade, airlines have been exposed to Hurricanes, snow, fog, H1N1 influenza pandemic, volcanic eruptions, and earthquakes.

SWOT

Recommendations

1) Load factor As can be seen from the SWOT analysis, AirAsia is outperforming its competitors in terms of operation in several fields. It has the world’s lowest CASK, the world’s highest ancillary revenues per passenger, and is the largest discount carrier in South East Asia.

However, by analyzing the cost structure of Air Asia, it is clear that revenue can be improved by increasing the passenger load factor from 75% to more than 85%, something Easyjet has been able to do (see Appendix 10 for more information). The CI team must be deployed to investigate in detail the strategy that Easyjet has used.

2) LCC penetration in Southeast Asia is reaching the maturity level need for diversification Appendix 9 and the SWOT together highlight the fact that domestic LCC penetration by capacity (seats) within Southeast Asia is starting to reach its maturity by exceeding LCC penetration worldwide (30% of Southeast Asian flights are supplied by LCCs compared with 24% in the world).

Countries like the Philippines and Malaysia are clearly the most mature, with more than 50% of airline seats supplied by low-cost carriers. By analyzing LCC penetration per country, we can see that AirAsia can leverage its AirAsia subsidiaries(Thai AirAsia and Indonesia AirAsia) to enter new countries with very low LCC penetration rate, such as Taiwan, Indonesia, China, and Japan. The recent partnership of AirAsia with the Japanese airline ANA underlines the possibilities of this strategy. LCC penetration within Japan is only 9. 1%, far more than China with 6%, Indonesia with 5. 2%, or the empty market in Taiwan with 0%. Meanwhile, Air Asia X (in which Virgin Group has an ownership position along with Air Canada) could be used to enter the difficult market in China more deeply.

CI teams (AirAsia, Virgin Group, Air Canada) should be able to share information and knowledge in order to define several scenarios for future collaboration within China.

3) IPO to finance growth The construction of the new, world-class low-cost carrier terminal in Kuala Lumpur is expected to be completed in October 2012. Once built, it will be able to serve over 30 million passengers a year and, with expansions, will have the capacity to serve up to 45 million passengers a year. By analyzing the forecasted growth of AirAsia as well as its cost structure (see Appendix 11) we can see than the current economic downturn has increased the cost of aircraft by 212%, mainly due to the credit crunch.

In addition, AirAsia’s ability to finance the expected growth forecasted is limited because its current structure includes only one publicly listed company that is used to finance all the capital expenditures for Thai AirAsia, Indonesia AirAsia, and AirAsia X. One solution to cope with this situation of high growth and important capital requirements are to launch IPOs in 2011, especially because AirAsia X and Thai AirAsia are performing very well in 2011. The proceeds of IPOs could enable AirAsia to buy new planes and fund growth in order to compete with Singapore Airlines and Thai Airways who will start their own LCCs in 2011. In order to optimize the IPO, the CI team will evaluate the best time for implementing this strategy.

In, addition, the CI team will also evaluate the possible risks that IPO will have on the autonomy of AirAsia.

Appendixes:

1. Appendix 1 AirAsia Group fleet composition: Q1-2011 Source: http://www. airasia. com/iwov-resources/my/common/pdf/AirAsia/IR/AA_1Q11_Analyst_Presentation. pdf
2. Appendix 2 AirAsia’s extensive domestic and regional network Source: http://www. airasia. com Source: http://www. centreforaviation. com/profiles/airlines/airasia-ak
3. Appendix 3 Malaysian government Tax Incentive Source: http://www. centreforaviation. com/profiles/airlines/airasia-ak
4. Appendix 4 Asian countries GDP Forecasts
5. Appendix 5 Jet Kerosene prices Source: Centre for Asia Pacific Aviation & US Energy Information Administration
6. Appendix 6 Top 15 most populated cities in the world (>10 million) are predicted to be in Asia by 2025
7. Appendix 7 Emerging middle class in Asia Source: http://www. oecd. org Source: http://www. adb. org
8. Appendix 8 AirAsia has the world’s lowest CASK (Cost per available seat kilometer) with 3. 52 USD in 2010. Selected airlines RASK and CASK: Three months ended 30-Jun-2010 (RASK = Revenue per available seat kilometer and CASK = Cost per available seat kilometer)
   

   Airline	RASK	CASK
   AirAsia	USD 4. 87	USD 3. 52
   Air Arabia**	USD 4. 88	USD 4. 43
   Tiger Airways	USD 4. 61	USD 4. 58
   JetBlue	USD 6. 72	USD 6. 04
   COPA	USD 7. 37	USD 6. 58
   Norwegian Air Shuttle	USD 7. 34	USD 6. 82
   Southwest	USD 7. 73	USD 6. 84
   Vueling	USD 7. 68	USD 6. 91
   China Southern Airlines**	USD 7. 32	USD 6. 98
   Thai Airways	USD 6. 76	USD 7. 15
   WestJet	USD 7. 95	USD 7. 43
   Continental Airlines	USD 8. 25	USD 7. 52
   Virgin Blue**	USD 7. 43	USD 7. 52
   GOL	USD 7. 99	USD 7. 71
   Air New Zealand**	USD 9. 22	USD 7. 71
   Delta	USD 8. 65	USD 7. 74
   US Airways	USD 8. 93	USD 7. 88
   United Airlines	USD 8. 82	USD 8. 08
   Air Berlin	USD 7. 76	USD 8. 12
   Jet Airways	USD 8. 09	USD 8. 20
   American Airlines	USD 8. 51	USD 8. 22
   Cathay Pacific	USD 9. 55	USD 8. 41
   TAM	USD 8. 54	USD 8. 44
   China Airlines**	USD 10. 60	USD 8. 49
   Air China**	USD 9. 75	USD 8. 60
   China Eastern Airlines**	USD 9. 25	USD 8. 63
   Malaysia Airlines	USD 7. 90	USD 8. 75
   Singapore Airlines	USD 9. 61	USD 8. 92
   LAN	USD 10. 31	USD 9. 18
   British Airways	USD 8. 88	USD 9. 21
   EVA Air**	USD 10. 47	USD 9. 38
   Qantas**	USD 9. 84	USD 9. 68
   Iberia	USD 9. 78	USD 9. 75
   Korean Airlines	USD 12. 65	USD 9. 82
   Finnair	USD 10. 20	USD 10. 68
   Asiana	USD 12. 48	USD 10. 69
   Air France	USD 12. 05	USD 12. 51
   SAS	USD 15. 03	USD 14. 18
   Lufthansa**	USD 16. 41	USD 16. 49
   easyJet	USD 6. 99	n/a

   Source: Centre for Asia Pacific Aviation and company reports

9. Appendix 9 Asia Pacific domestic LCC penetration by capacity 2011: Source: Centre for Asia Pacific Aviation & OAG Facts
10. Appendix 10 Passenger load factor Easyjet, Ryanair vs AirAsia Selected European airlines intra-Europe passenger load factor and passenger load factor growth: Mar-2011 AirAsia load factor development: 2Q2008 to 2Q2010. Source: Centre for Asia Pacific Aviation and AirAsia AirAsia cost structure. Source: Centre for Asia Pacific Aviation & AirAsia
11. Appendix 11 AirAsia A320 and A320neo aircraft delivery schedule: 2011 to 2026. Source: Centre for Asia Pacific Aviation and Ascend AirAsia cost breakdown / ASK: 1Q08 vs 1Q09. Source: Centre for Asia Pacific Aviation & Airasia

Banking history in Nepal: In the context of Nepal, it is very difficult to trace the correct chorological history of the Banking systems in Nepal because there are no sufficient historical records and data about Banking in Nepal. Nepal bank Ltd. is the first modern bank of Nepal. It is taken as the milestone of modern banking of the country. Nepal bank marks the beginning of a new era in the history of the modern banking in Nepal. This was established in 1937 A. D. Nepal Bank has been inaugurated by King Tribhuvan Bir Bikram Shah Dev on 30th Kartik 1994 B.

S. Nepal bank was established as a semi government bank with the authorized capital of Rs. 10 million and the paid -up capital of Rs. 892 thousand. Until mid-1940s, only metallic coins were used as medium of exchange. So the Nepal Government (His Majesty Government on that time) felt the need of separate institution or body to issue national currencies and promote financial organization in the country. Nepal Bank Ltd. remained the only financial institution of the country until the foundation of Nepal Rastra Bank is 1956 A.

D. Due to the absence of the central bank, Nepal Bank has to play the role of central bank and operate the function of central bank. Hence, the Nepal Rastra Bank Act 1955 was formulated, which was approved by Nepal Government accordingly, the Nepal Rastra Bank was established in 1956 A. D. as the central bank of Nepal. Nepal Rastra Bank makes various guidelines for the banking sector of the country. A sound banking system is important for smooth development of banking system. It can play a key role in the economy.

It gathers savings from all over the country and provides liquidity for industry and trade. In 1957 A. D. Industrial Development Bank was established to promote the industrialization in Nepal, which was later converted into Nepal Industrial Development Corporation (NIDC) in 1959 A. D. Rastriya Banijya Bank was established in 1965 A. D. as the second commercial bank of Nepal. The financial shapes for these two commercial banks have a tremendous impact on the economy. That is the reason why these banks still exist in spite of their bad position.

As the agriculture is the basic occupation of major Nepalese, the development of this sector plays in the prime role in the economy. So, separate Agricultural Development Bank was established in 1968 A. D. This is the first institution in agricultural financing. For more than two decades, no more banks have been established in the country. After declaring free economy and privatization policy, the government of Nepal encouraged the foreign banks for joint venture in Nepal. Today, the banking sector is more liberalized and modernized and systematic managed.

There are various types of bank working in modern banking system in Nepal. It includes central, development, commercial, financial, co-operative and Micro Credit (Grameen) banks. Technology is changing day by day. And changed technology affects the traditional method of the service of bank. Banking software, ATM, E-banking, Mobile Banking, Debit Card, Credit Card, Prepaid Card etc. services are available in banking system in Nepal. It helps both customer and banks to operate and conduct activities more efficiently and effectively.

For the development of banking system in Nepal, NRB refresh and change in financial sector policies, regulations and institutional developments in 1980 A. D. Government emphasized the role of the private sector for the investment in the financial sector. These policies opened the doors for foreigners to enter into banking sector in Nepal under joint venture. Some foreign ventures are also established in Nepal such as Nepal Bangladesh Bank, Standard Chartered Bank, Nepal Arab Bank, State Bank of India, ICICI Bank, Everest Bank, Himalayan Bank, Bank of Kathmandu, Nepal Indo-Suez Bank and Nepal Sri Lanka Merchant Bank etc.

The NRB will classify the institutions into “A” “B” “C” “D” groups on the basis of the minimum paid-up capital and provide the suitable license to the bank or financial institution. Group ‘A’ is for commercial bank, ‘B’ for the development bank, ‘C’ for the financial institution and ‘D’ for the Micro Finance Development Banks. Generally banks in Nepal are opened 9 am to 3 pm Sunday to Thursday and 9 am to 1 am on Friday. But nowadays most of banks in Kathmandu are opened throughout the week.

There are 32 commercial banks, 79 development banks, 79 financial companies, 18 micro credit (Grameen) development banks and 16 saving and credit co-operation(licensed by Nepal Rastra Bank) are established so far in Nepal. The bank with the largest network in Nepal is The Nepal Bank Ltd. These commercial banks and financial institutions have played significant roles in creating banking habit among the people, widening area and business communities and the government in various ways.

The Challenge Rapid and intense change in today’s business climate reshapes the fundamental approach to strategic decision-making. New thinking for ways to face the two vital strategy issues – where will the airline be in the future and how to get there – must emerge so that a modern air carrier can leverage its strength and capitalize on opportunities. Creating innovative strategies for the new business paradigm marks a proactive approach to the challenges in the volatile, yet exciting, airline business.

Airlines that embrace a dynamic outlook for strategic planning are positioned favorably to prosper financially and operationally in face of uncertainties and complexities in this business. The strategic plan and its components influence every aspect of running a commercial air carrier. As such, it is critical to devise effective strategies and execute them efficiently. Organizational units depend on clear understanding of the strategic issues so that they can plan accordingly and carry out the responsibilities created by the strategic plan.

Strategic planning brings about an opportunity to examine carefully ways that the airline is conducting its business, and finding new methods to do a better job. Designing and delivering the airline’s services in today’s demanding marketplace requires sophisticated coordination between business units of the airline. Strategic planning serves as a mechanism to create a framework for integrating various contributions to deliver the airline’s offerings. Strategy-based planning addresses both the resource allocation and organization structural issues.

Developing a business model for the airline based on a strategic analysis of opportunities and requirements form a platform for planning resources going forward. It also responds to:  limitations in utilizing resources uncertainties of the future dynamics of the airline business Business Requirements Strategic Management Strategic management is a disciplined yet adaptive endeavor to chart the future of the airline and align the activities of all business units in that direction.

This attempt must be flexible, not rigid, so that the roadmap that it creates can be applied in building sensible operating and tactical plans that can incorporate new realities as the future unfolds. The strategy-savvy airlines reap the rewards of performing better while avoiding the detrimental effects of unstructured, undisciplined response to strategic challenges. Over time, only the airlines will survive that can master designing an advanced yet pragmatic strategic planning process.

Such a process must encompass all significant considerations for constructing a blueprint of actions and allocating resources for properly executing those actions. CA Advisors 1250 Aviation Avenue Suite 200M San Jose, California 95110 USA Tel: 408-295-7730 Fax: 408-280-5700 www. ca-advisors. com Gesellschaft fuer Markt und Strategieberatung Sonnenberger Strasse 52 65193 Wiesbaden GERMANY Tel: 0611-37577-39 Fax: 0611-37577-40 www. gms-beratung. com What is the airline trying to achieve? How is the airline going to achieve it? Objectives Strategy Strategic Analyses Structure

How will the airline organize its resources? Business Model Policies What are the operating rules and boundaries? Strategy-based Planning Structured Approach to Strategic Planning Seminar agenda… Day One Introduction – strategic management perspective – structured approach to strategic planning. Day Two  Planning Optimization – allocating resources – developing prioritization. Airline Business – unique features – models and economics Financial Planning – investment analysis – financing methods Strategy Development – practical considerations – innovative approaches  Asset Valuation Real Options methodology – managing uncertainties  Strategic Planning Process – components and requirements – execution and evaluation Integrated Strategic Management – thriving financially – performing operationally Who should attend… This seminar delivers methods and tools for creating innovative strategies and executing strategic plans at both the corporate level and organizational units. Lessons learned can be quickly applied, facilitating the complex process of strategic decision-making. Airline corporate development and strategic planning executives, managers, and analysts directly profit from this seminar.

Those responsible for long-range planning of various functional areas, business development, fleet planning, product and service development, corporate finance, treasury and financing, financial and investment analysis, financial planning and budgeting who directly face the challenges in strategic planning are the primary audience. Others in scheduling, marketing, and operations, who are impacted by strategic plans, are also encouraged to attend so that they can benefit from understanding the difficult and complex process of developing strategies and implementing strategic decisions that significantly impact the airline.

Benefit from experienced leaders… Two experts who combine extensive experience in strategic planning, airline strategies, and market development with knowledge of advanced quantitative planning and management science techniques will present the seminar. Jahan Alamzad Email: jahan. alamzad@ca-advisors. com Jahan Alamzad is president of CA Advisors. He has served as advisor to Applied Decision Analysis (ADA), a unit of Standard & Poor’s Corporate Value Consulting, where he was previously the director of airline practice. (ADA was a wholly owned subsidiary of PricewaterhouseCoopers LLC between 1998 and 2001. ) Mr. Alamzad has been a management consultant in the airline and aerospace industries for the past seventeen years. Before his consulting career, he worked at American Airlines and United Airlines. Mr. Alamzad holds a masters in operations research from Stanford University, as well as a masters in industrial and systems engineering from the University of Southern California, and bachelors degrees in civil engineering and electrical engineering from the University of Illinois. He has served on the faculty of the Department of Aviation at San Jose State University, and has collaborated in publishing a textbook entitled Airline Management.

Maciej Mazurowicz Email: maciej. mazurowicz@gms-beratung. de Maciej Mazurowicz is managing partner of Gesellschaft fuer Markt- und Strategieberatung (GMS). Prior to GMS, Mr. Mazurowicz worked at Lufthansa German Airlines in different strategic management positions. At Lufthansa Consulting, he managed a variety of business development projects for airlines worldwide. Mr. Mazurowicz holds a Master of Business Administration and bachelors in business from the University of Kiel. His publications include articles on behalf of the German Ministry of Economics concerning product development and management of innovations.

About CA Advisors… www. ca-advisors. com CA Advisors is a management consulting firm dedicated to providing state-of-the-art analytical services. By applying powerful and practical tools, the firm helps its client understand their business positions and improve their strategic and operational decisions. To ensure the success of its work, the firm is committed to collaborating closely with its clients, communicating clearly about its approach, and delivering valuable results that are logically sound. For many years, the work of CA Advisors rofessionals has pned a wide range of projects. The firm has a focused and dedicated practice in the airline industry, with a breath of expertise in aerospace and aviation. The experience of the firm’s professionals extends from traditional applications in logistics and resource allocation to more innovative applications in strategic planning. GMS is a management consulting company supporting clients in strategic planning and business development. GMS focuses in planning, marketing and sales, and assists clients in developing and implementing business strategies.

GMS experts facilitate the evaluation of the business environment, forecast and analysis of market scenarios, and development of organizational structures by applying a wide range of state-of-the-art analytical tools and business methods, resulting in optimized financial and operational performance of clients. GMS ensures efficient project realization through a network of cooperation partners – from complete IT solutions up to personnel training. About GMS… www. gms-beratung. de

It Pays to Fly Full-Service Rene Gonzalez Jr. Ashford University Managerial Marketing BUS 620 Larry Flegle November 28, 2011 It Pays to Fly Full-Service In this essay I will create a nine-component marketing plan on flying full-service business class with Delta opposed to flying with a discounted low-fare carrier like Southwest. As the economy struggles and air travel becomes more competitive it is not easy to establish the best niche market strategy for an airline. Teplensky defined (as cited in Parrish, Cassill, & Oxenham, 2006) niche market strategy as, “an emphasis on a particular need, geographic, demographic, or product segment” (p. 95). Therefore, it would be ideal for Delta to seek a more specific niche in air travel and differentiate by precisely satisfying customers’ needs; rather than attempting to generalize broad niches that only partly satisfy customers’ needs as a whole. Company Overview/ Description of Location Delta Air Lines Inc. has their corporate headquarters in Atlanta Georgia. However, Delta Air Lines Inc. has a vast worldwide airline system. Delta serves over 160 million customers annually, and offers 356 destinations in 65 countries.

Additionally, Delta has over 80 years of passenger service, more than 80,000 employees, and 700 aircraft that spread across six continents. Packed with an array of good services, Delta offers more than 13,000 daily flights, SkyMiles rewards (frequent flier plan), the world’s largest airline loyalty partnership, over 50 Sky-Clubs, and an award-winning BusinessElite program (Delta Air Lines Inc. , 2011). Description of Product or Service Focusing primarily on business amenities, Delta has a worldwide collection of services for businessmen and businesswomen.

They have incentive SkyBonuses, extensive Corporate Travel Agreements, and their Universal Air Travel Plans (UATP Card). The SkyBonus services allow small-to-mid-sized businesses better incentive rewards for their business travels. For example, earning more points than typical travelers, which can be easily claimed as: upgrades, flights purchases, and Sky-Club passes. Their Corporate Travel Agreement offers a greater variety of destinations with a four-in-one worldwide airline partnership. Delta even provides a dedicated account manager to handle all business travel arrangements.

The UATP Card allows any businesses the means to closely manage their travel expenses with a centralized payment system. Additionally, the UATP Card has no annual fees, no deposit limits, and no per-card charges (Delta Air Lines Inc. , 2011). Other comprehensive amenities that Delta offers their business travelers are: BusinessElite, Sky Priority seating, first class services, Sky-Clubs, SkyMiles, meetings/networking, private jets, shuttling/chartering, and Wi-Fi. The BusinessElite offers gourmet meals, exquisite wines, full-size pillows, flat bed seating, priority baggage services, and state-of-the-art entertainment.

Everything in BusinessElite is intended to help customers arrive at their destination on time and refreshed. Within the Delta Sky Priority there is no need to stress or wait in lines. As a result, valuable time is saved at check-in, reservation desks, security, boarding, and baggage claim. Under the Delta meeting/network program an event organizer will coordinate group business travel with 10 or more individuals. Additionally, in an effort to make inner city transportation to-and-from the airport easier, Delta provides private shuttling/charter assistance too.

Moreover, in situations that 40 or fewer personnel need to be transported Delta can ease time constraints with their transit system. Even if there is a need for a specialized private business travel arrangement Delta has 27 years of safety and heritage with their private jet services. Delta holds the highest and lonest ARG/US Platinum safety rating of any other operation. Lastly, Delta can keep businessmen and businesswomen connected whether waiting at the terminal or in flight. Power outlets are always conveniently located within arms reach, and Wi-Fi is offered in all flights within the continental US (Delta Air Lines Inc. 2011). It is apparent that Delta has numerous amenities to offer business class travelers; currently it is just a matter of what options travelers choose to use. Description of Competitors In this case Southwest Airlines Co. (a low-cost carrier) is the identified competition. Southwest has 40 years of passenger service experience. Additionally, Southwest has an average of 3,400 daily departure flights and nearly a total of 35,000 employees. Within 2010 Southwest operated 550 Boeing 737 jets, which carried a total of 88 million passengers to 72 different cities within 37 states.

As a result, Southwest is the largest domestic airline in the U. S. (National Transportation, 2010). Southwest offers Priority Lane access, Rapid Rewards (frequent flier plan), some in-flight Wi-Fi capabilities, and economy beverages/snack services. However, the Rapid Rewards is limited to domestic traveling only because Southwest does not offer international flights. Also, the Wi-Fi provided is only on limited numbers of aircraft, and the beverage/snack services do not cover full meals. The high operational extent of Southwest’s capabilities can illustration by their longest flight, which is between T.

F. Green Airport in Rhode Island to McCarran International Airport in Nevada. The grant total for their longest flight is 2,363 miles (Southwest Airlines Co. , 2011). Southwest does not appear to cater to many business class travelers’ special needs. There are some amenities that businessmen and businesswomen can take advantage of with Southwest. For example, EarlyBird Check-In, ground transportation, and Business Select fare benefits. Their EarlyBird Check-In allows for early seat selection, and no penalties when changing flights.

Additionally, Southwest offers ground transportation within immediate areas of airports. The Business Select gives Priority Lane access when boarding, premium drink, priority seating, and gives extra Rapid Reward Points. (Southwest Airlines Co. , 2011). Subsequently, Southwest was founded on low fares, low costs, and dedication to the highest quality of customer service (Southwest Airlines Co. , 2011). As a result of Southwest’s strategy is an example of sacrifices differentiation by focusing on low-fares. Notably, Southwest does employ a actic to somewhat distinguish their self between other low-fare carriers–they pride on providing the highest quality of customer service as possible. Southwest’s plan is to deliver superior customer service with a sense of warmth, friendliness, and individual pride, which will shift more consumers their way (Southwest Airlines Co. , 2011). Nevertheless, Southwest’s tactic is seemingly insignificant, but Delta should consider this when designing their new marketing plan by ensuring they too offer superior customer service. Executive Summary of Marketing Plan

Delta has numerous business class amenities that need to be reviewed to determine their demand. Is it necessary to have every amenity offered at every location Delta serves, or can some be excluded? Could some amenities be combined to increase efficiency? The objective is to get rid of amenities that are not desired and concentration more on efficiency across all Delta divisions. Thus, satisfying business class needs with geographic attentiveness. It is important not to just implement amenities for the sake of implementation.

Delta needs to understand business class consumer needs, and should develop suitable amenities for them. Delta can learn from their current business class consumers by giving surveys before, during, or after flights. It wound be even more efficient to utilize technology (Internet) because it would be cheaper to e-mail surveys instead of hand mailing or handing them out on flights. Additionally, other avenues should be adopted too; more interactive and crafty methods could help in attaining vital survey information (determine amenity demand).

For example, incentive sweepstakes with the option of meeting popular musicians or actors to entice more people into completing surveys. Mullins (2010) stated, “The advent of new digital media—from the Internet to e-mail to text messaging via mobile telephones—has opened a vast array of new opportunities to take integrated marketing communication —IMC for short—to a whole new level” (p 342). Notably, Delta cannot attempt to utilize the same survey gathering methods in every region of the world. Obviously, popular musicians and actors will differ between regions in the world.

Similar to how the demand of business class amenities will likely differ too. Delta’s advertisement campaign will be directed toward business class travelers, and will need to effectively communicate the value of choosing full-serve oppose to low-cost. Additionally, a universal consumer appeal will need to be used (where applicable) as long as effective communication is not sacrificed. Much deliberation should be put forth to prevent negative emotions, and that the correct target market is reached.

Moreover, the used of new technological interactive forms of advertisement would be ideal, which can also double as a medium to gather extra consumer information. For example, concentrating advertisements in big cities and employing smartphone-barcodes that feature interactive games or sweepstakes. Note, to conserve on campaign expenses advertisement efforts should decrease as distance extents outside of city limits–due to likelihood of a smaller business class population. In summary the current situation for Delta is having a vast unfocused business amenity operation without geographic specification.

Additionally, their competition is low-cost airlines like Southwest who does not seek to differentiate their operations by satisfying specific business class consumer demands. Therefore, Delta’s strategy can capitalize on shortfalls of low-cost carriers and differentiation by providing superior business quality travel with efficiency. Resulting from Delta maximizing information gathering and improving efficient operations they will save valuable capital. This will allow Delta to remain moderately cost competitive with low-fare carriers like Southwest.

The last concern is how Delta will successfully reach the proper target market to spread the word –“It pays to fly full-service. ” Description of the Target Market Airline travel is a homogeneous market however every traveler does not desire the same exact benefit (Mullins & Walker, 2010). For example, Southwest primarily focuses on low-fares, but Delta seeks to differentiate by superior product quality and performance. Consequently, consumers that value low-cost air travel will likely choose Southwest–Right? No, a low-cost carrier is not always the best option based on lowest price alone.

A main concern of Delta will be how to influence business class consumers to fly full-service opposed to flying with other discounted low-fare carriers. A strategic advertisement campaign will be used to prove Delta’s worthiness, but reaching the correct target market is important. Within the broad market of air travel some consumers will seek absolute low-cost, others will be unsure (low-cost or full-service), and there will be those that clearly favor full-service. For those consumers that seek absolute low-cost or are unsure, Delta needs to reach out to them.

Delta can justify how they are more suitable through proper geographic-advertisement–by offering regionally specific business class amenities. Additionally, by focusing on the most efficient operation process possible, Delta can help keep pricing lower. As a result, consumers can notice it is reasonable to switch despite prices being moderately higher with Delta. For advertisements to reach the correct target market there are three ways Delta can identify their business class travelers: market segmentation, target marketing, and positioning.

Segmentation decisions are best made in one of three ways: who, where, and how they behave (Mullins & Walker, 2010, p. 181). Businessmen and businesswomen are who the consumers are, cities worldwide are where they are (primarily), and how they behave is relevant the business amenities they use/require when traveling between worldwide. Demographically, business class individuals come in different ethnicities, sizes, ages, and sex. Geographically, they are located worldwide primarily in big cities and decreases outward toward rural areas.

Behaviorally, business class individuals travel frequent; adhere to tight schedules, utilized technology frequently, etc. Preferably, Delta can learn from the past mistakes of others and take advantage of proper global market segmentation. Historically global market segmentation has been incorrect discerning that one country segment is the same as another (Mullins & Walker, 2010, pp. 197-231). All countries do not fall within the same segment, and Delta can capitalize by specifically enhancing business travel in different regions around the orld. For example, the city of Dubai in the United Arab Emirates is a rapidly developing country. Delta can acknowledge a large European business and American business influence in the region. As a result, should geographically cater to specific business class amenities between the regions. By recognizing the United States, Europe, Asia, etc. as different segments and understanding where the segments are influencing each other–businesswise–will give Delta the advantage to better differentiate. Marketing Budget

Delta is currently investing $2 billion through 2013 into facilities, products, services, and technology, which is intended to better enhance customer experiences (Delta Air Lines Inc. , 2011). That along with the capital saved from developing more efficient processes with geographic specification should give leeway in a new marketing budget. Managers must hold vital roles in implementing or eliminating operation and/or amenities, both domestically and internationally. However, uniformity should be kept to insure proper communication between global regions is well organized.

A single system for regulation (implementation or elimination) will facilitate cooperation between every location Delta serves (Mullins & Walker, 2010). Pricing Strategy Airlines are price competitive conscientious, but still need to understand consumer needs, and how to satisfy them in order to make a profit. It is not always best to solely concentrate on lowest pricing. Regarding low-cost and differentiation (Mullins, 2010) stated, “Businesses taking the low-cost approach typically compete primarily by offering the lowest prices in the industry.

Such prices allow little room for the firm to make the investments or cover the costs inherent in maintaining superior product quality, performance, or service over time” (p. 442). Therefore, if Delta seeks to correctly satisfy specific niches (business class travelers) with superior quality, and performance they cannot primarily focus on lowermost competitive pricing solely. Additionally, utilizing a competition-based pricing strategy (relies on pricing habits of competitors) Delta can place their pricing moderately above competitors’ ricing, which can help provided better creditability. In some cases, an airline’s consumer perception of quality is degraded if their pricing offered is the lowest compared to other airlines. For example, consumers may assume the lowest priced airline(s) are less safe, have subpar aircrafts, etc. Lastly, lower pricing adversely affects the profit margin, and budgeting, which would hinder Delta’s ability to provide superior quality, and performance into the future (Anderson, 2011). Investment Savings

Delta has much to consider when evaluating what amenities should be offered to their business class consumers. Delta will need to assess what processes should be removed or included. Additionally, there are many environmental issues that negatively affect airline efficiency and pricing today that Delta will need to take into account as well. For example, struggling economy, increased fuel expenses/depleting fossil fuels, greenhouse gas emissions/global warming, consumer safety, etc.

It is key to understand what business class consumers are willing to pay for, what they do not necessarily desire, and how foreseen/unforeseen environmental issues could adversely affect airline operations. Delta will need to focus on efficiency that will eliminate fraud, waste, and abuse. Thus, saving valuable capital, which can be put towards future efforts to adapt and overcome negative environmental airline issues. For example, increasing R;D (Research and Development) funding.

R;D goals could be to seek alternative fuel (green energy) aircraft engines, or at least streamlining the current fossil fuel engines to conserve expensive jet fuel. Additionally, strategic upper management decision-making (efficient implementation or elimination) will keep Delta moderately price competitive while brining in significant future profits. Summary and Implementation Plan Implementation of a new marketing plan is not unnecessary. Delta has the need for a new marketing plan as technology spreads worldwide and new economies are rapidly growing is distance regions.

Business efforts of regions are helping to influence and advance other regions. Therefore, increasing the need for efficient business class travel, and justifies a new marketing plan. Delta will need to prove it is best to fly full-service business class opposed to flying with other discounted low-fare carriers like Southwest. The implemented marketing plan will be centered on Delta taking an analyzer strategy to defend and differentiation–with efficient and superior business quality travel. Management, across all regions will take a crucial role in regulating the new marketing plan.

As a result, Delta will defend by keeping cost relatively low, which will save capital and bring in profits. Additionally, Delta will be able differentiate with superior business quality travel worldwide. Also due to technological advancement efforts Delta’s R&D will avoid other airlines surpassing them, and countering future adverse environmental airline issues (Croteau, 2001). In conclusions a nine-component marketing plan on flying full-service business class with Delta opposed to flying with other discounted low-fare carrier like Southwest was gives.

Delta is primarily a well-established airline company. In order for Delta to continue progression into the future they will need to seek more specific niches within their current markets. Additionally, Delta operates worldwide, and needs to adjust to geographic deviations between regional markets. Always looking forward Delta will also need to support future adaption to negative environmental issues. Ultimately, Delta can take the analyzer strategy and strategic managerial oversight to lead Delta’s new marketing plan to a triumph.

By defending/differentiate with precision customer satisfaction (business class traveler needs) Delta can gain superior product quality and performance. Thus, proving it pays to fly full-service oppose to low-cost. References Anderson, A. (2011). The Disadvantages of an Everyday Low Pricing Strategy. Retrieved November 22, 2011, from Chron : http://smallbusiness. chron. com/disadvantages-everyday-low-pricing-strategy-23379. html Croteau, A. (2001). An information technology trilogy: business strategy, technological deployment and organizational performance. The