There are several options available for customers to choose in this industry because the standard product and service are in this industry, so customers are more care about the price. And also the Internet makes customers research cheaper flight much easier than before and switching cost is low. The threat from substitute is high. Numerous options for customers can instead airlines, such as trains, buses, boats, and personal vehicles. Customers usually desire a cheaper way to travel if there are many options for them.
Additionally, due to the limited competition as well as its ability to keep prices low, easyJet was able to successfully offer stable prices to its customers while ensuring sustainable levels of profitability. Sellers While the goal of easyJet was to offer cheaper air travelling options, it charged higher fares for routes that were frequently travelled. For example, the yield management system which was set up had higher fares if the particular flight was highly demanded, but at the same time still managed to remain competitive in comparison to conventional carriers. Substitutes In terms of alternatives to easyJet, the company faced competition from companies that offered a similar service of cheaper air travel. Each of them had their own strategy in place to keep their prices low and survive in the budge airline industry.
Larsen wants to spend his time trying to increase profits for Wengart Aircraft. His yearly bonus is totally based on the profits. Since he spending his energy in other places instead of investing his time in implementing TQM but Larsen thinks he is not needed to lead the team. Larsen should spend more time making sure the company’s customers are happy with the quality and the profits will come. 2.
Based on the summary table provided in the text book – the first thing that jumps out is how disproportionate the labor volume/number of employees is to the number of aircraft that the company has. The company has to make some tough decisions in streamlining the labor force to reduce the cost of labor and make itself more competitive with its peers in an industry where competition is stiff at the least. In addition to this the idea that they will be using more regional jets e.g. Mesa Air in medium markets may help alleviate operating costs that are also currently very high. US Airways may also want to look into the option of merging/working with one of the more successful low cost carriers as a strategic partnership 2.
United Airlines On the surface the Wall Street Journal (WSJ) report sounds very impressive. As if the homework done and the facts and figures provided show they know more about the airline and their business than possibly the airline itself knows. I think the WSJ may have a few good points about the cost of the flights from San Francisco to Washington, D.C. But they can not possibly know everything that goes into how and why and airline provides flights to certain segment of customers. 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.
The five forces are competitive rivalry, threat of substitute products, and threat of new entrants, bargaining power of suppliers and bargaining power of buyers. 2.1 Threat of new entrants The threat of new entrants presents the possibility of new firm entering the industry, which increases the competition while reducing the airline revenue. There are a few factors influencing the threat of new entrants such as government regulations, product differentiation, capital requirements and lastly switching costs. There was a low barrier of entry in the airline industry when Airline Deregulation Act eliminated government control over fares and routes. This allows those new entrants who enter the airline industry to slash price to capture market share which increase in competition.
customer satisfaction, improved on-time rating, lower fees, standardized pricing and, most importantly, safety. Chris Edwards states, “Any service that can be supported by consumer fees can be privatized. A big advantage of privatized airports, air traffic control, highways, and other activities is that private companies can freely tap debt and equity markets for capital expansion to meet rising demand. By contrast, modernization of government infrastructure is subject to the politics and uncertainties of government budgeting processes. As a consequence, government infrastructure is often old, congested, and poorly maintained” (Edwards, 2009).
The low cost airlines have developed their value chains so effective in low cost operation that they are hard to imitate, especially for traditional airlines. In these conditions, traditional airlines have had to rethink their strategies and question the old business model. Easyjet has undoubtedly proved to be one of the success stories of the low cost no frills airline market. The following report undertakes an analysis of Easyjet and identifies issues in which a strategy has been recommended for the future of the companys success. Tools and models such as the PESTEL analysis, Porters Five Force analysis, SWOT analysis, Business model, and Value chain model have been adopted to help analyse and undertstand Easyjet as a whole and develop a strategy recommendation for the business.
So he created an airline that had luxury for passengers at a low price with friendly employees who would treat customers like family. Strategic Analysis: JetBlue has many strengths but I think the main one is that they are based out of New York City which is the largest city in the U.S. This gives them access to a large number customer base which they can attract to use their product. They also provide luxury that the other airlines do not offer like leather seating with longer leg room, live TV and music at every seat for free at the same low price as their competitors. JetBlue has newer fleets of aircrafts compared to others airline companies.
WHY CAN’T WE MAKE MONEY IN AVIATION? Abstract The book “Why We Can’t Make Money in Aviation”, the author Adam Pilarski points out a large business problem, why are Airlines, always for the most part going into negative profitability constantly? The industry of Aviation, which is heavily subsidized, should be one that is able to keep itself afloat. If airline companies would charge a fair price, then they would turn a profit instead of cutthroat the other carrier just to get the customers business. If they would all band together, since there is only 3 major carriers now in the U.S., they could monopolize the industry and set their prices to be competitive and cost effective.