The United Kingdom has one of the most advanced and complex aviation systems in the world. London, the kingdom capital, is the world most internationally connected city given the range of destinations available from airports located within the city. Furthermore, majority of UK citizens (more than 70 percent of the population) live within less than an hour’s journey from an airport that offers flights to numerous destinations across the world. Nonetheless, the UK aviation industry has experienced major changes in the past two decades. Foremost, the industry was liberalized in 1997 that increased competition in the industry leading to the emergence and growth of low-cost airlines. Prices have drastically gone down especially for short-haul flights. The choice and value available to consumers brought about by intense competition among commercial aviation operators has made the current century a golden age for UK passengers and businesses that rely on aviation. The UK has become an increasingly challenging environment for airlines to operate in. industry deregulation, oil crisis, terrorism threat, global financial crisis, euro crisis and numerous industrial actions are some of the challenges that have confronted the industry. Consequently, a number of UK airlines did not survive and others merged with or were acquired by other airlines. The trend of airlines consolidation is evident in the decreased number of commercial airlines registered in the UK from a high of 56 in 1973 to 33 in 2011. The players in the industry have felt the pressures of increasing costs and dwindling market share especially after the entry of low-cost airlines. As a result, mergers and acquisitions have been utilized as the best tools to survive in the rapidly ... ... middle of paper ... ...mall. The UK aviation industry accounted for 5.4% of the economy’s GHG emissions; in the long run, entry of fuel efficient aircrafts and embracement of bio-fuels will lower the emissions level. Airlines that will prove commitment to environmental protection are likely to experience a surge in consumers as more people become more environmental conscious. Fresh environment adds to the overall well-being of the community and the UK aviation industry must play a leading role in cutting down on carbon emissions. The UK aviation industry is projected to overcome the current challenges such as economic instability and immaturity. Once it matures, the industry will be less susceptible to factors such as fares and variations in GDP thus sustained growth. Nonetheless, these factors are also quite unpredictable implying that their effect will be felt though at lower levels.
In 1978, deregulation removed government control over fares and domestic routes. A slew of new entrants entered the market, but within 10 years, all but one airline (America West), had failed and ceased to exist. With long-term growth estimates of 4 percent for air travel, it's attractive for new firms to service the demand. It was as simple as having enough capital to lease a plane and passengers willing to pay for a seat on the plane. In recent news, the story about an 18-yr British...
According to the International Air Transport Association, 2001 was only the second year in the history of civil aviation in which international traffic declined. Overall, it is believed that the IATA membership of airlines collectively lost more than US$12 billion during this time (Dixon, 2002).
As airline industry is a competitive marketplace, the airline companies use new technologies to improve their efficiency and decrease the overhead costs, including ‘advanced aircraft engine technology, IT solutions, and mobile technology’ (Cederholm 2014). The technology changes including technology improvement, new innovation and disruptive technology. The disruptive technology need to meet the characteristics of ‘simplicity, convenience, accessibility and affordability’ (Christensen 1995). The technology changes would bring both opportunities and threats to airline companies. Since Labour cost and fuel costs occupy 50% of most airlines operating cost (Groot 2014). Therefore, if new technologies could be disruptive in the two aspects, there will be important changes to current airline
...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.
Before we discuss government intervention and its affect on an industry’s competition we must first seek to understand the five forces framework. The theory, discussed in 1979 by Micheal Porter seeks to evaluate the attractiveness of an industry. Throughout this essay I will explore the theory and then relate government action and its well-documented affects on the airline industry.
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).
With high competition, it caused flight prices to decline by 35 percent since the Airline Deregulation Act.[5] The Airline Deregulation Act of 1978 has increased competition in the industry and made it easier for newcomers to enter the market. As a result, many airline carriers have competed with flight prices and have experienced an increase in bankruptcies and mergers. [2] “…the airline industry succeeded in (1) increasing productivity, (2) reducing average fare, and (3) increasing the frequency of airline service to most cities.” [2, Page 135] Although the Airline Deregulation Act has had positive impacts on the industry, it has also caused substantial threat to the industry, such as higher operation costs and price wars.
British Airways (BA) is the main and largest carrier airline of the United Kingdom. It’s headquarter is located in Waterside. The British Airways Group was established in 1972. It included British Overseas Airways Corporation (BOAC) and British European Airways (BEA). In 1974 British Airways was formed after the dissolution of BOAC and BEA (British Airways, 2015).
Lufthansa, one of the world’s biggest airliners, has divisions handing maintenance, catering and air cargo. Since the World War II the airline industry has never earned its cost of capital over the business cycle (Hitt, 2010). Most of the airline companies have either filed for bankruptcy or are being bailed out by their government. Lufthansa had also gone through these tough times, but had resurfaced to become one of the worlds most profitable airline company. The company adapted a transnational strategy, seeking to achieve both global efficiency and local responsiveness. Lufthansa’s monopoly in Germany came to a halt with the creating of the European Union. All the EU member countries become one regional and therefore the European competition became, an increasingly a local competition. Lufthansa created its regional Hubs, to cater for its domestic market. But the availability of substitutes such as bullet trains and the Euro tunnel, made is necessary for Lufthansa to create short traveling time, customizations and quality standards in the region to achieve a competitive advantage. But outside the EU there are no substitute to air travels as such all the flag carriers are competing in the market, the international airline industry is a highly competitive environment. A new force has also emerged in the world of air travel, in the form of three Gulf airlines with jumbo ambitions. Within a decade Dubai’s Emirates, Qatar Airways and Eithad from Abu Dhabi have between them carried the capacity of two hundred million passengers (Micheal, 2010). The company had to go global and therefore adopted the international corporate-level strategy, where Lufthansa will ope...
The airline industry is a costly business to partake in especially due to the cost of fuel and technology needed to operate the airplane. With EasyJet internationalizing into Africa, it had the notion of facing new competitors, however, with the finances (see appendix) it possesses and the famous identity of its brand, made the threat of being a new entry within the Nigerian market low. However, a big threat would be if local Nigerian airlines were to reduce its prices then EasyJet might be at risk because the local airlines have the necessary equipment and knowledge to operate in its region.
Tom, Y. (2009). The perennial crisis of the airline industry: Deregulation and innovation. (Order No. 3351230, The Claremont Graduate University). ProQuest Dissertations and Theses, , 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364. (304861508).
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.
To reduce emission, the owners of the Heathrow should come up with a system of policy of penalties for polluting vehicles as well as make an introduction of charges to promote using of lower emissions aircraft. They can also improve by employing using of covered vehicles for transportation and wheel washing with damping down to minimize the dust emissions.
BA’s approach towards corporate social responsibility on social is that it has decided to enable up to 500 applicants in a year to realize their dreams through the London 2012 Great Britain program. It is also taking initiatives in helping vulnerable children around the world. On environmental, BA is planning to reduce CO2 emission by 50% by 2050. It is also trying to reduce the noise per flight by 15% by 2015. BA has plans to recycle its waste up to 50 percent by 2010 and aims to send zero waste to landfill by 2010 across Heathrow and Gatwick. Waste management – increase their overall level of recycling to 60% by 2015 (britishairways.com, 2009).
Airline industry is affected by no. of factors such as fuel price fluctuations, high fixed costs, strong influence of external environment and excessive use of marginal costing by carriers. Recessions in the industry tend to last longer, while recovery periods are generally shorter. Over the past nine years, it is observed that industry has made losses for five years and during the profitable years margins were on a lower end. The airlines industry is acutely sensitive to external events such as wars, economic instability, government policies and environmental regulations.