Low Cost Carriers (LCC) into the market causing already established airlines to encounter a new type of competition. Traditional legacy airlines must evaluate the dynamics that will allow them to compete and remain profitable in the industry. Synopsis of Case As of 2009 the U.S. Airline industry had been servicing customers for 100 years. However, many of those years have been financially turbulent with a large number airlines filing for bankruptcy protection and merging with other airlines for sustainability.
Moreover, the grueling battle between prolific companies to compete for customer attraction and in the end, loyalty, resulted to further segmentation of the airline industry. Apart from the established full-service airlines (i.e., Southwest Airlines), three other market positions budded. They are: budget airlines, limited-service airlines, and premium-service airlines. ENVIRNOMENTAL ANALYSIS Ecological factor consist of recycling, the level of pollution and attitudes to the environment. For the airline industry, pollution tends to be very important.
These incidents affect directly for the company’s overall performance. With the fast growth, Southwest Airline management couldn’t take the right actions to keep up with the growth. They expect workers to do more work than they usually do, which put them at risk of injury. Management should have hired more new workers as the company growing so the current
Crafting and Executing Strategy John M. Baryogar Strayer University BUS 599 Dr. Russell Handlon October 30, 2011 Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy The airline industry is facing one of its most difficult times in history. A worldwide recession along with the terrorist attacks of September 11, 2001 have led to a decrease in passenger traffic, reduction in revenue and rising fuel prices. Additionally, airline companies face the increase competition from new entrants. The shortage of pilots has also caused problems for the airline companies. In 2008 when the economy started to take a downward turn, businesses began to cut back on employee travel, consumers were being more conscious about their spending.
Such technological advancement placed a lot of financial burden on the operations of Jet Blue. The airline industry continues to feel the effect from the U.S economic slowdown and rise of crude oil/jet fuel prices, which have risen to record numbers with no predictable end in sight. The slow economic growth has compelled both business and individual travelers to cut back on travel expenditure thereby compelling airlines such as Jet Blue to initiate energy conservation measures, targeting specific markets and exploring the possibility of partnership with other airlines. Linked to the volatility of jet fuel prices is the increased in competition posed by new entrants to the airline industry. New entrants such as Virgin America are bracing the competition by offering lower fares to customers.
The competition has taken advantage of the situation and has managed to grab the market share of Boeing over in few years. The considerable market share of Boeing, 70%, has now dropped to half and EADS’ position has considerably risen in the market. Now, Boeing wants to focus all its resources in gaining back its past glory in commercial airline sector. Both of them looked at the future in almost opposite way. EADS considered the future as the era of “big, large and expensive” airplanes and whereas, Boeing considered that in future we will need cost-effective considerably smaller planes.
Relevant Factual Information about the Problem or Decision the Organization Faced The airline industry faced problems such as competition, new entrants, price discrimination practices and transitional adjustments. Competition grew significantly, as rates became increasingly competitive. Practices that stemmed from deregulation have prevented the industry from maintaining profitability. Explanation of Relevant Concepts, Theories and Applications Derived from Course Materials The airline industry faced issues of transitional adjustments after over 50 years of government regulation. During this regulatory time, unions gained much strength and became very powerful.
Ryanair is a European based airline company that has based their company on cheaper flying rates than the competitors. They try to focus on cost-cutting and do this by not having many long trip flights. Just like every company in today’s society, Ryanair has its share of ethical issues that it needs to face. In the early 1990’s Ryanair found itself struggling to stay afloat. They had run through five different chief executives as well as having losses of €20 million.
Allegheny subcontracted its less profitable routes to smaller, more efficient carriers, each of those, in turn, fed into Allegheny’s route system that was expanding rapidly through a series of acquisitions. By mid 1970s, the company had become a major regional airline based out of Pittsburgh, Pennsylvania. Allegheny suffered, however, from a serious perception problem from its passengers. Because it faced no competition, it had little incentive to improve. This all changed with the US Airline Deregulation in late 70’s.
Trends in this industry are numerous. This discussion will include the price of jet fuel, on-time performance, security, and cheaper substitutes. Oil price volatility is the leading player in airline strategy (jetblue.com). Fuel is probably the most significant element in an airline’s base cost (jetblue.com). The new fuel price average for the year 2012 is around 129.7 dollars per barrel (jetblue.com).