After deregulation, airlines were able to operate routes without restrictions, and pricing for tickets was not controlled. Similar to the U.S., a proliferation of failures and bankruptcies occurred. A new breed of air carriers resulted known as Low Cost Carriers (LCCs). Two airlines emerged in the LCC war in Europe, Ryanair (RYAAY), and Easyjet (EZJ). Both airlines adopted the business model of Southwest Airlines in the U.S. of cost reductions.
Based on the book when there are competitive markets such as airlines, a company certainly needs to look at costs and revenue very closely. (Brickley, Smith, & Zimmerman, 2009, p. 180) In this case I believe that the flights from San Francisco t Washington DC should be discontinued. Even though United Airlines is a large company and profitable if they continue these flights in the long run they will lose money. The other option that they would have would be to increase the fares to cover those costs, but since the airline industry is a competitive market people are more likely to go with a lower cost airline. The first thing the airline must do is look at the firm supply.
Group Case Write-Up: American Airlines What is “Value Pricing” and why did AA introduce it? Value based pricing is a business strategy that sets prices primarily on the perceived value of the good or service to the customer, rather than on the actual cost of the good or service, the market price, competitors price, or the historical price. American Airlines’ value pricing has three key points that compromise the new plan, which are the following: 1) 4 four different fare prices for a given flight (first class, regular coach, 7-day advanced purchased discount coach, and 21-Day advanced purchased discount coach); 2) prices are based on mileage; and 3) lower prices would be available to more business and leisure travelers due to the fact that the new fares were set below the levels of the comparable existing fares. American Airlines introduced value pricing for several reasons. The first major reason was the nature of the airline industry.
The consumer buys the portion of ownership over the jet and can then decrease travel time while increasing comfort and broader airport access. Founders of Netjets Inc. implemented blue ocean strategy in this case, finding an "untapped" market void of competition- partial private jet ownership. Consumers find this service more expensive than flying commercially,
WestJet’s competitive priority relates to cost, quality and delivery. Cost – WestJet has been able to reduce its operating costs through standardization. By purchasing only one type of plane WestJet is able lower both maintenance and training costs, resulting in higher profits. These savings and profits allows WestJet to provide lower cost airfares to its customers, thereby having a competitive advantage over its competitors. Quality – WestJet’s culture emphasizes a fun and friendly atmosphere for all travellers and empowers employees with bottom-up management.
Changing to a calendar year end has little useful effect, and it requires that Smithon produce a short-year tax return from Dec to Jan, which is a relatively unnecessary administrative expense. What potential income tax ramifications exist for Mr. Johnson personally if he purchases the stock of Smithon and converts it to an S corporation? A: Mr. Johnson will be personally taxed on all of Smithon's income. This has the advantage of eliminating the double taxation usually associated with a C-Corporation. However, it will increase Johnson's current tax liability.
It does usually allow you to get there in the least amount of time. Almost every major vacation spot has an airport that may be reached via airplane; although sometimes it is not necessarily direct. Most airlines will take you to a hub first and then they will finally send you on to your ultimate destination. Occasionally you may find yourself having several contacts and layovers, but you will eventually get there. For just about any journey over ten hours away I prefer to book flight to that destination.. Travel by train is usually the most costly, unless of course gas expense is just plain uncontrollable.
The firm will be able to retire the loan of $400,000 on June 30, 2009. Sunspot Skis can generate sufficient internal funds from profit, depreciation, and liquidation of inventory and reduction of collection period for account receivable. Sunspot Skis has longer Average collection period of 49.6 days, comparing to the industry average of 32 days.This shows that Sunspot Skis made a lot of sale on credit. The firm can generate fund by reducing its Account Receivable and collection period in the year 2009. Average collection period = ( 365 * AR ) / Credit Sale Expected Sale Year 2009 = 2,900,000 Account Receivable (Year 2009) = 32* 2,900,000 / 365 = 254,246 Account Receivable (Year 2008) = 388,000 Additional internal fund = 388,000 – 254,246 = 133,754 Sunspot Skis also holds too much inventory ( $826,200) that leads to low Inventory utilization ration 3.5, whereas the industry average is 7.
In 2009, these four airlines included, Delta & Northwest, American Airlines, United Airlines, and Continental. These airlines held 60.1% of the market (“Airline Competition”, 2013). Competition between firms in oligopolistic markets causes the elimination of economic profits. When economic profits are zero, inventories are stable, there are no incentives to enter or leave the market and the market is in equilibrium (Brickley, Smith & Zimmerman, 2009). For the airline industry, this means that the average cost of operating are being met.
To reduce emission footprint, the company uses efficient operation strategies to avoid unnecessary waste. Customers WestJet believes that people would rather fly than drive if low fare airplane tickets are available. They also believe that people always have the need to travel to visit friends and relatives. WestJet is targeting these people by giving them the option to fly cheap. Most importantly, lower service for less money does not mean less customer service for WestJet.