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.
The first thing the airline must do is look at the firm supply. If they are to continue the flights from those two hubs then they must determine if at some point in the long run the firm must be profitable or should exit the market. (Brickley et al., 2009, p. 181) Since I would assume that the costs of that route would be quite high it would appear that it would be extremely difficult for them to make a profit especially since there are lower cost airlines that customers could do business with. A competitive firm should produce
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.
This is very beneficial for Delta; the airline industry is always being pressure to show more profits and results. Delta achieved this by extending the life of its equipment and changing its residual values. It resulted in a savings of $127 million in depreciation expense for year-end December 2007. A downside to decreasing depreciation is taxes. With decreased depreciation and increased net income, Delta’s income taxes increase.
To maximize aircraft utilization, we look for opportunities to operate our fleet in off-peak times when the aircraft would otherwise be idle, to serve markets that may not be as time sensitive or may be better served by evening flights. Through our network and competitive fares, we aim to stimulate demand from guests who would not otherwise travel or from guests who would select another airline. We estimate that when we enter a new market the net effect to that market is an overall increase in traffic. This means we are often able to create new demand. As our Boeing 737 fleet continues to expand and we begin introducing our new Bombardier Q400, we expect that we will be able to establish additional profitable routes in Canada, the U.S. and internationally.
Question One: The airline industry can be broken down into three primary segments: major airlines, regional airlines, and low-fare airlines. JetBlue Airline is a domestic airline in the United States using a combination of low cost and differentiation as its strategy. In order to know the key forces in the general and industry environment that affects its choice of strategy. Based on Porter’s Five Forces Model, the key forces directly influences are: The threat of new entrance is low. In JetBlue case, the current economy situation creates high market entry barriers, which consists extremely high fixed cost and numerous capital requirement.
IPO is the first sale of shares to the public by a private company like JetBlue. Whether going public is very important because JetBlue can obtain large amount of capital to fund its growth and expansion (i.e. purchase new aircrafts) and to offset the portfolio losses by the venture-capital investors, and JetBlue can also be able to get potential future benefits (e.g. quickly raising large funds from the public and obtain favourable terms from debtors) from listing by changing the debt to equity ratio. Meanwhile, going public can also increase the publicity of JetBlue and attract more potential customers, which may result in a greater market share of JetBlue in the airline industry.
Southwest clearly defines its existing purposes, which is to provide the lowest fares for business and leisure travelers traveling between states. Instead of competing with large-scale airlines to fly international routes, Southwest focuses on “point-to-point” interstate short trips, and more on maximizing the profitability than focusing on market share. This strong vision outweighs the allurement of international flight market, keeping Southwest airline concentrated on its own niche to gain profit. B. Cost-consciousness Since low fares have become its selling point, decreasing the cost becomes very important. Southwest Airlines tries to save money by simplifying its operating process.
These methods have increased because it helps the business to reduce their expenses and watch their budget more carefully. This links in again with following trends of technological advances. Business travellers will look for budget airline alternatives, and may fly economy instead of business. Because of this, there are more flight and accomondation providers in competition to give their customers the lowest price possible so as they get value for their money. Businesses such as EasyJet and Ryanair have benefit from this.
Southwest Airlines and Ikea are both considered cost-based focusers; “Ikea’s focus is based on the needs of a customer group, and Southwest is based on offering a particular service variety.” Southwest differentiates from its competitors by offering “short-haul, low cost, point-to-point service between midsize cities and secondary airports in large cities.” Southwest isn’t considered a full-service airline so they do not offer meals, assigned seats, interline baggage checking, or premium classes of service. With fast turnarounds at the gate, they’re also able to keep planes flying for longer hours than their rivals and provide frequent departures with fewer aircrafts. These various activities allow Southwest to compete fairly well with full-service airlines because a full-service airline, such as Continental airlines, could never be as convenient or as low cost. Ikea also focuses on customers who are searching for furniture at a low cost. Ikea does sacrifice service for cost, but this has been an advantage for them.