For an airline to simply apply a percentage or portion of the costs of airport fees, baggage handlers, ticket agents and building charges to each flight to cover the costs of sunk or overhead costs would most likely eliminate 60 to 70 percent of the flights they provide. In every industry they have their “cash cows” if you will, that cover these sunk costs. So, providing additional fights to areas that are not as high demand can still be a valuable demand to be met provided they can at least cover the crew and fuel costs. If every airline did as the WSJ suggest in applying a percentage of the overhead or sunk costs of running the airline to each flight, many smaller regions would have very few flights in and out of those areas. Making travel to these areas much more expensive than what is really necessary.
In this essay, I will discuss the circumstances that resulted in the merger, assess the significant positive (or negative) effects of the merger, and examine the organizational structure that has resulted from the merger. American Airlines filed for bankruptcy in November 2011. According to an interview with Richard Quest of CNN, Thomas Horton the new CEO of American Airlines stated that the company was forced into bankruptcy because of the cost disadvantages it faced compared to it’s competitors that had already gone through a bankruptcy. The news came as a shock to many. The company had enough money to sustain the losses that it may incur through
I. KEY ISSUE In 2007, the CEO of JetBlue Airways, David Barger, faced an immediate survival issue as the company struggled to overcome a major operational failure during a difficult time in the airline industry when fuel prices were increasing tremendously and the profitability levels were low. Barger knew he should move quickly to maintain the confidence of customers, employees, and shareholders. He considered the option of reducing either E190 or A320 deliveries in order to maintain low costs as the company was not ready to continue growth in the E190 regional market segment. II.
Ticket Price Comparison of Ryanair & Easyjet in the European Market Ron D’Alli Embry-Riddle Aeronautical University The European Airline industry’s growth dramatically changed after deregulation phased into the European market. Prior to deregulation, bilateral agreements between host countries in Europe existed, and typically each country had a national airline (Airline Operations & Management, 2014). The industry stagnated and costs were very high for air travel. Deregulation in Europe was phased in beginning in 1987, and concluded in 1993 (Airline Operations &Management, 2014). After deregulation, airlines were able to operate routes without restrictions, and pricing for tickets was not controlled.
Presently, gas prices have dropped. However, the airlines continue to pass along the fees to its passengers to increase revenue. Clearly, the fees that began originally in response to fuel prices continue to be part of the revenue generating strategies of airlines. (2) Shortage of Pilots: As baby boomers retire by the thousands, the airline industry is experiencing a shortage of pilots. Before becoming captains, pilots must earn sufficient fly hours.
It comes to a surprise that US Airways Group is capable of doing so well despite the low quality of service they seem to provide. US Airways Group has recently merged with a competitor within the airline industry, American Airlines, and the two companies are expected to do very well as a team. The airline industry is one of a kind, as it does not have very much competition within the industry. As US Airways Group has shown; the little amount of competition makes it easy to do well even with poor service. The airline continues to grow and keep companies like US Airways Group in business mainly due to the rapidly growth of the industry.
Case Analysis Southwest Airlines EXECUTIVE SUMMARY Southwest entered the complicated airline industry in Dallas, Texas in 1971 and ever since has been exceeding everyone’s expectations with unprecedented strategies. Southwest focuses on customer satisfaction: get the customer where they want to go, with low fares and have fun doing it. Their low cost strategies have been accomplished by reducing a large majority of the input costs that most large airline carriers incur causing those large airlines to charge heavily for fares. Southwest’s customers know that they won’t be given the same costly luxuries that other airliners carry but they don’t seem to mind much based on Southwest’s continued year after profitable year. In addition, Southwest has received multiple awards in outstanding customer service compared to all other airliners.
In the First World War, the airplane was a very simple machine; it was made of wood and fabric because they were the easiest materials to work with and the most readily available. They were generally biplanes, a plane with two layers of wing, although some models had three wings or just one but the single wing airplane was more common in the Second World War. This was to keep the airplane as light as possible and because it was the only way known to be constructed at the time. The fighter aircraft had a maximum speed of 160 miles per hour but could only stay in air for a couple of hours before needing to refuel. Due to the small size of the fuel tank, the airplanes could only travel roughly 290 miles full round trip before landing again.
Due to rebound of travel budgets, airlines are now competing for premium customers. Business Class customers are now the main source of income to airlines, and its even difficult for passengers to find business-class seats available. As Eric Shaver, a managing director for a consulting and training firm called Kensei Partners, says, " It has been harder to get up-graded to first class these days because so many frequent fliers are crowding the air." So he had seen evidence of this trend this year. He continues, "On flight back from London last year, there were five rows of empty seats.
Case Project Assignment Westjet is a company that has been recognized for its strong corporate culture. Several issues have been facing the organization in the past few years that may or may not pose a threat to the culture including: • An agreement to pay $15.5 million to settle accusations of corporate spying • Extensive turnover among the top management team, including many of the co-founders • Difficulty finding enough new employees to hire that match the culture well • Negotiating a partnership with Southwest Airlines • Drastic change in the cost structure of jet fuel Your group should research the background of these potential threats and any other necessary information about the company using the various search tools available to you through the UBC library, diagnose them from an Organizational Behaviour perspective, and recommend a plan going forward to preserve the organizational culture as a competitive advantage. You should specifically answer these questions: • What insights do the theories of Organizational Behaviour provide in understanding these threats? • What possible solutions could help maintain their corporate culture in light of these threats? • Which solution do you recommend?