According to Cathay Pacific Cargo (2012), commence operation of Cathay Pacific Airways Limited is started on 24 September 1946 in Hong Kong. Market structure of Cathay Pacific is oligopoly. Oligopoly is a market structure which only has few sellers provide similar services in a particular country (Mankiw, Goh, Ong, Yen, Cheng, Mustafa & Lee, 2012). Airline services available in Hong Kong are Cathay Pacific, Air Hong Kong, Hong Kong Express Airways, Metrojet, Oasis Hong Kong Airlines, Dragon Airlines, Waterfront Air, Heliservices and Hong Kong Airlines (Cathay Pacific, n.d.).
Surging jet-fuel prices had a significant effect on the carrier’s operating results, as fuel is the group’s biggest single cost. Cristopher Pratt, chairman of Cathay Pacific Airways said Cathay pacific’s core business knock down into the red in the first half of the year because of indefatigably high fuel prices, the global economic fall and weak air cargo demand (Cathay Pacific blames fuel costs, 2012). Managing director of Air Cargo Management Group, Seattle, and the first issue for the air cargo industry is the forever-increasing price of fuel and fuel now symbolizes a greater percentage of total operating costs, Cathay Pacific increases about 39percent (Cathay Pacific 2013 profit, 2014). Operating costs include both fixed cost and variable costs. Fixed costs, such as overhead, remain the same regardless of the number of products produced; variable costs, such as materials, can vary according to how much product is produced (Mankiw et al, 2012).
This reduces the profit that will gain from airline services (Cathay Pacific, 2013). Vice president, global airfreight services for UPS Supply Chain Solutions: “Every air cargo service provider has introduced surcha...
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...ling but they save some of it.
In addition, the Group reported profit of HK$2620 million in year 2013. Nevertheless, due to high price of jet fuel, the shares of profits from non-airline subsidiaries and from associates decrease by 30% from HK$1,126 million to HK$781 million (Cathay Pacific Airways Limited, 2013). Cathay Pacific Airways Limited (2011) stated that the increase of 5% of jet fuel price increases the profit and vice versa. Therefore, it is concluded that the Group’s gross profit is part of their aggregate income and the depreciation on air planes is counted as part of gross income and GDP. Parkin (2008) mentioned that in circular flow of income and expenditure, investment and saving interact with income and consumption expenditure. The economy in the Group will come to equilibrium if rate of injections is equal to rate of withdrawals in circular flow.
Established in 1920, Qantas is the world's 11th largest airline and the 2nd oldest. It was founded in the Queensland outback as the Queensland and Northern territory Aerial Service (QANTAS) Limited, by pioneer aviators Hudson Fysh, Paul McGinness and Fergus McMaster. Qantas was a former government owned business; it did not view profits or efficiency as its prime goal. In 1993 a 25% stake was sold to British Airways. Qantas was privatised in 1995 and has had to adopt management practices to overcome both internal and external influences and had to change its narrow-minded culture. Although Qantas is primarily a passenger airline, air freight is also an integral part of its core business. Other Qantas operations include catering, tourism and E-commerce devoted to transport and air travel.
The U.S. airline industry experienced year-over-year growth in passenger revenues, in 2013, driven by strong demand for air travel.2 Additionally, on average, fuel costs were down in 2013 as compared to 2012.2 The U.S. airline industry is also a very competitive market. Due to government deregulation in 1978 there are few regulatory barriers to new entrants in the market, although there are other barriers to consider. Starting a new airline is very capital intensive. Purchasing a commercial airplane from Boeing can cost anywhere from $76million to over $300million.4 Another barrier to entry is risk in the industry. Airlines tend to experience volatile costs such as fuel prices, which can be difficult to predict in the long run. A regu...
of price versus service in the airline industry as a whole, as well as, the
The airline industry not only transports passengers across the country and world but it also moves cargo from location to location. The largest segment for the airlines is general commercial passengers and business travelers. In 2004, there were 15 major airlines with 12 of those being mainly passenger carriers, the remaining three being cargo carriers. In addition to the large airlines (Delta, United, American, Southwest, Northwest), there are numerous low-cost regional carriers that have tapped into the larger carriers’ customer base. These smaller companies generally fly from smaller airports and serve a smaller amount of destination cities. Calling them a no-frills air carrier would not be far from the truth. Their goal is to move customers f...
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
Qantas International faces both direct and indirect competition, in a highly competitive, global marketplace. Direct competitors to Qantas International are those airlines that market full service international air travel, and the primary direct competitors identified in this market are Emirates and Singapore Airways.
Many elements of Delta Airlines are described in detail, within this paper. There is a breakdown of the external and internal factors, using external and internal analysis. Porter’s Five forces are used to create the external analysis, and the key factors for Delta are power of buyers, and rivalry. Delta’s competitive advantages are identified as customer service, sustainability, brand image, strong strategic alliances, and corporate travel. Delta’s main issues are the low expansion in international markets, continuous changing of incentive program, and glitches within technology. Delta should expand more into the Chinese and African markets in order to gain market share within the airline industry.
In a high competitive world market and with the increasing rational buyers a company can only win by creating and delivering the best customer value than the others competitors do. To succeed, a company needs to use the concepts of value chain.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Gaining a substantial market power in the commercial aviation industry allows for significant impact on technological development, economic growth, employment, and national prestige (Carbaugh & Olienyk 2004). In 2010, more than any manufacturer sector, the value of aerospace industry shipment in the US accounted for more than $171 billion of civil aircraft and a trade surplus of more than $43 billion (Harrison 2011). Like any other industry, large commercial airplane industry gets affected by macro, endogenous, and exogenous factors. Several factors may influence the industry i...
Customer experience directly influences the sustainability of Asiana Airlines. Any business solely depends on customers to thrive. The customer service quality is paramount in Asiana airlines. The airline ensures that the customers are satisfied with service delivery in various ways. For instance, the introduction of Netflix streaming for a passenger aboard is a great step towards the sustainability of the airline. The initiative is important for the passengers because they are kept busy while aboard. According to Reader & Ridout (2013), the airline’s KLM technology will enhance the airline’s sustainability. As traveler centered advancements proceed swiftly, there are constantly
In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases. (Malaysia Airlines ,wikipedia)
Air travel is a huge and tremendously flourishing industry. Globalization can be defined as the integration of national and local economics, culture and societies through a web of communication, transportation and trade. The current era considers globalization as the dominant driver of almost all business due to the influence or the international market. The emerging prosperity of the global aviation industry plays a substantial role in economic growth, tourism, global investment and world trade, which are the impacts of globalization. This essay portrays the negative and positive effects of this globalization on the airline industry.
Product Strategy of the British Airways 1.1 Introduction to product strategy Product is the most important component in an organization. Without a product there is no place, no price, no promotion, and no business. Product is anything that can be offered to a market to satisfy a want or a need. It is the core ingredient of the marketing mix and is everything favorable and unfavorable, tangible and intangible received in the exchange of an idea, service or good (Kotler 11th edition, 2003). British Airways is a business offering service products, flights across destinations, in the transportation industry.
...fares, which in turn affects their profit. The other four marco forces can be exploited to the LCCs advantage. Technology is LCCs best option to expand its business as its low cost and aligns with the LCC model. Deregulation in other markets serves as an opportunity for LCCs to expand into other regions and tap on the latent potential of the market. Most industries have a direct proportional relationship with the economy; however, the LCCs have a inversely proportional relationship with the economy and they can take advantage of the economic downturn to improve its financial position. Last but not least, the demographic factor dictates the market that LCCs should target and if done properly, it will provide a constant stream of revenue. In all, the macro-environmental factors cannot be ignored as they present could present an opportunity or threat to the airline.