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Key factors that influence the success of business
Key factors that influence the success of business
Key elements of a successful business
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Mission Statement:
Innovative people dedicated to delivering the best flying experience to smart travelers. Every day.
Suggested Mission Statement:
Innovative, vital, impervious, and customer oriented firm striving to service smart travelers. Every day.
Case statement:
Our mission is to maintain our profitability in face of rising competition and fuel cost.
Background:
“AirTran Airways, a subsidiary of AirTran Holdings (NYSE: AAI), is a low-fare airline designed for business travelers, offering Business class, new planes with XM Satellite Radio and EasyFit Overhead Bins, assigned seats, and our accommodating frequent flier program A+ Rewards. AirTran Airways' mix of low fares and an affordable Business Class with excellent customer service and one of the world's youngest all-Boeing fleets has continued to strike a chord with the public.” (www.airtran.com)
Internal Factor Evaluation Matrix
Weight Rating Weighted Score
Strengths
1. Remaining Profitable .18 4 .72
2. High Service Quality .14 4 .56
3. High Plane Utilization .11 4 .44
4. Large Airport Presence .07 3 .21
5. Young Airline Fleet .03 3 .09
Weaknesses
1. High Operating Cost per ASM .18 1 .18
2. Concentrated to East US .10 2 .20
4. Low Ratings in Select AQR Categories .04 2 .08
5. Highly Dependent on Fuel .06 2 .12
Strengths
• AirTran needs to remain profitable, both to survive but more importantly to keep investor interest and confidence.
• High service quality is key for AirTran to keep a recurring customer-base healthy.
• Especially important in AirTran’s low-cost strategy, utilizing planes to their fullest potential is key.
• AirTran has a high airport presence throughout eastern United States.
• AirTran benefits from a young airplane fleet through cost savings, quality and marketing efforts.
Weaknesses
• A major weakness of AirTran is its high operating cost per available seat mile compared to other low-cost providers like Southwest and JetBlue.
• Through increased competition, especially Southwest, AirTran is only available mainly in the eastern United States. Customers needing to travel to the western US probably will choose another airline that could create brand loyalty for another airline.
• Even though AirTran received a high position in airline quality rating (AQR) there are still areas that AirTran lags in, like on-time performance and denied boardings performance.
• Although mainly out of AirTran’s control, their income and costs are highly associated to the cost of fuel.
AirTran is doing fine overall with respect to its internal strengths and weakness. Key areas to improve are its high operating cost per available seat mile (ASM), domestic and internal presences and other minor areas.
External Factor Evaluation Matrix
Weight Rating Weighted Score
Opportunities
1. Decrease Operating Cost per ASM .18 2 .36
2. Increase US Presence .15 3 .45
3. Increase International Presence .11 1 .11
4. Increase Select AQR Ratings .05 2 .10
5. Add Consumer Technologies to Fleet .03 2 .06
Threats
1. Increased Competition .2 3 .6
2. High Fuel Costs .14 3 .42
3. Increasing Labor Costs .06 2 .12
4. Political Policies .04 4 .16
5. Labor Strikes .04 4 .16
1.00 2.54
Explanations
Opportunities
1. A major opportunity for AirTran to drastically increase income would be to decrease their operating cost per available seat mile (ASM).
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).
Having a low amount of cost in their operations is one of the contributing factors in Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest. The airline does not serve meals on board, and there are no luxurious or first class seats offered. Services like these have been seen by the airline as unnecessary for an airline that provides a short-haul trip from city to city. By these, Southwest were able to offer low price tickets to customers, which was good for the company because most people would prefer to fly without those services mentioned if it meant for cheaper ticket price.
Since 1987, when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy Southwest’s business model, and the Culture of Southwest is admired and emulated by corporations and organizations in all walks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING, the first-ever direct link to Customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. Our Share the Spirit community programs make Southwest the hometown airline of every city we serve.
JetBlue's mission is "to bring humanity back to air travel". Its low-cost strategy is second-to-none, not even to Southwest. Utilizing Southwest as a model and benchmark early in Neeleman's career in the industry, he's managed to copy the Southwest model and expand upon it with his ability to find more innovative ways to cut costs along the organization's value-chain, while utilizing technology to increase productivity and further add to operational efficiencies. JetBlue's value chain demonstrates its ability to successfully compete in several key areas relative to the bases of competition within the industry and creates processes that focus on reducing costs, for the specific purpose of continuously creating value for its customers, i.e. fare pricing, customer service, routes served, flight schedules, types of aircraft, safety record and reputation, in-flight entertainment systems and frequent flyer programs.
In order to measure the impact of United's price increase, we would need the price elasticity of the demand. The main problem is that there is no agreement as to whether, generally speaking, air transportation is or is not relatively price elastic. There is ample evidence that the introduction of deeply discounted fares by the low cost carriers can be very price elastic, although, each type of traveler has its own price characteristics.
...leader. Certainly, it has to take into account the implications of completion from both the direct and the indirect competitors. That is why EasyJet centers on the cost management strategy and the differentiation strategy (Hanlon, 2007). Through an analysis of EasyJet Airplane company strategies and performance, it is clear that they are ambitious and strive for the best. They not only survive in an industry that is intensely competitive, as shown through the analysis by Porter's Five Forces, but also succeed in terms of offering their customers the best that they have to offer in terms of value for money. The advantage this airline gains over its oligopolistic competitors stems from flexible ticketing and complete access to all primary routes. However, in keeping airline industry, there is room for improvement and growth as the analysis using Ansoff Matrix reveals.
Operating an air - express transportation industry requires large capital investments, and therefore it can impede the entry of new firms into the industry. For one, Airborne has already its own set of aircrafts and even operate its own airport, and it would be hard for a new firm to compete with this.
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).
Air Canada is Canada's biggest aircraft and the biggest supplier of booked traveler benefits in the Canadian market, the Canada-U.S. Trans outskirt showcase and in the worldwide market to and from Canada. In 2015, Air Canada together with its Air Canada Express provincial accomplices conveyed more than 41 million travelers, offering direct traveler administration to more than 200 goals on six landmasses. Air Canada is an establishing individual from Star
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
Karp, G. (2013, December 27). Southwest airlines has a surprising problem: delays and the worst on-time rates in U.S. The Washington Post. Retrieved February 3, 2014, from http://www.washingtonpost.com/business/economy/southwest-airlines-has-a-surprising-problem-delays-and-the-worst-on-time-rates-in-us/2013/12/27/c5063230-6ea6-11e3-a523-fe73f0ff6b8d_story.html
Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive.
Air India airline is one of the biggest airline in the India. It was established by the famous company TATA and since its incorporation. It has grown very well and has spread all over the world in the different destinations. It has become the reputable brand in the airline industry with having the operations over 152 destinations. It has link up connection in the 35 countries and it has currently having 137 fleets. This company becomes the public limited company in the 1946. The company has international and the local route and its performance is increasing day by day with the pace of the good growth as compare to the other airlines in the industries in the area and the channels in which this airline is working.
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.
This concept was challenged by Southwest Airlines by marketing itself as a cost leader. Their entire growth curve in the industry has been attributed to its cost effective strategies which has made it more efficient and successful than traditional airlines.