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.
General Environment Analysis The US Airlines Industry was going through a tough time during the period of 2004 - 2006. Major Airlines, such as United and Continental were trying to consolidate in order to survive. US net losses include $6.1 billion restructuring costs in 2006 [Exhibit 2, Source]. With several major airlines filing for bankruptcy, it was even more difficult for the regional airlines, which were primarily dependent on the major players for their existence. A more detailed environmental analysis is provided below: Economic Trends:  Net profit trend - Although the forecasts of the International Air Transport Association (IATA) seemed to be promising for 2007(collective profit of about $2.5 Billion), the situation till December 2006, seemed to be pretty bleak (Threat)  Seasonal Fluctuations - Another problem was the seasonal fluctuations in demand.
After two straight years of financial losses in 1994, CEO Ron Allen rolled out a new strategy called “Leadership 7.5.” Allen targeted to reduce Delta’s cost per each available seat mile from more than 10 cents to 7.5 cents, which would match that of major competitor Southwest Airlines (Bryant, 1997). Along with a new company strategy a change followed with Delta’s human resource strategy. This changing policy devastated employee morale and resulted in a decline of customer service, efforts to unionize, and dissatisfaction among personnel. Delta couldn’t keep the past primary policy about human resources so there were several significant changes in Delta’s organization and corporate culture. There are many programs that Delta has built after passing through the cost-cutting reformation in 1997 for getting back its capabilities on customer relationships like rewards and recognition program above and beyond and more.
1. What challenges and opportunities did Boeing face in the late 1990s? Some challenges that Boeing faced in the late 1990’s were as follows: Terrorist attacks – the impact of 9/11 caused the company to lose a lot of money due to the fact that air travel declined significantly. People weren’t flying as much as flight schedules were cancelled because people were scared to fly. In addition, airplanes re-orders were being rescheduled.
JetBlue Airways: 5 forces and VRIO Porter 5 forces Analysis for JetBlue Airways: Threat of New Entrants: Moderate Deregulated industry. Threat of new entrants higher during downturns in industry (e.g. JetBlue’s entry point). Existing airlines may encroach on an opponent’s major or regional market-share. High cost of entry into industry Potential Competitors: Low - Rivalry among existing firms is intense, which affect the profits to be low.
Not to mention, the startup of some discount airlines such as Southwest has hurt the major airline companies even more. There are numerous strong competitors that offer similar services, with many using the same routes as Southwest. There are approximately 28,000 commercial air flights every day, keeping the airline travel market very saturated. With the high number of flights and number of routes
Maureen Abajah LOG 125 Chapter 7 Case 7-2 U.S. Airways Overview: US Airways is and has been beleaguered with a myriad of issues, from financial issues to consistently below average ratings when it comes to baggage handling and customer service. They have filed bankruptcy several times and merged with other airlines and now have to work on a way to get to a competitive edge in the industry with all issues facing air carriers in general. Case Questions: 1. If you were the CEO of US Airways, what would you do to confront the competition from its low cost competition? 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.
American Airlines was accused of predatory pricing business practices during 1995-1997 when competing against several low cost carriers in the Dallas, Fort Worth area, forcing the other airlines out of the market. Analysis American Airlines altered their pricing structure during the years of 1995-1997 in the Dallas Fort Worth Area when several low-cost airlines attempted to establish themselves in this market. In response to the low cost carriers, American Airlines reduced fares, and in some cases increased their routes to match their competitors in this particular area. When the low cost carriers failed to survive this market, American Airlines resumed flight schedules and pricing used prior to the 1995-1997 time period. Any price reductions were quickly recouped when American Airlines resumed ‘normal operations’.
1.0 Introduction The airline industry has undergone enormous changes over the past decade through liberalisation and deregulation. Due to this, new airlines have been able to enter and grow within the market. Some have been a success and some have failed. The airline industry has had to face and accept the new airline business concept, called low cost or no frills airlines. 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.
Competitive Advantage in the US Airline Industry The GREENair Strategy Executive MBA in Business & IT Class of 2014 Module 4 - Strategy & Organization - Assignment Author: Luís Faria Reviewer: Prof. Dr. Isabell Welpe Competitive Advantage in the US Airline Industry The GREENair Strategy Subject Page Module 4 - Strategy & Organization - Assignment 2/17 Abstract The US airline industry experienced many years of difficult and had consistently failed to earn returns that covered its cost of capital. Several changes such as regulation, deregulation and consolidation have affected the structure of the industry. The new conditions of competition led to changes on the strategy of airlines as they struggle for a competitive advantage. This document describes the current situation of the US airline industry and shape the strategic position of a medium-sized airline in the US market. Table of Content Abstract ..................................................................................................................................... 2 1 Introduction........................................................................................................................ 3 2 The US Airline Industry ................................................................................................... 4 2.1 Industry competitors ................................................................................................ 4 2.1.1 Major legacy carriers (United, American , Delta, US Airways) .................. 4 2.1.2 Low cost carriers (Southwest) ......................................................................... 4 2.2 Competitor analysis ................................................................................................. 5 2.2.1 Rivalry between