Transcript: Search Costs reduced Loss of consumer welfare through collusion Restricted choices Recommendation Fewer airline options Lower quality Increased ticket prices Less travel times Overview Subsides for aircraft parking and landing Increase in smaller firms Decreasing mergers By: Erica Eisenberg, Ali O'Connor, Alex Ronsman, Tim Markwell Problems in the Market Airline Industry is an Oligopoly Price discrimination is present Airlines have too much pricing power Pre-Merger= HHI is 1,058 US & American Airlines Merger = HHI is 1,487 Airline Industry Harm
Transcript: Overvaluation of US Airways stock with anticipation of merger Filed for Chapter 11 Bankruptcy in November 2011 despite efforts made in the 80s by creating AMR Corporation to restructure subsidiaries and corresponding assets Early History 1 Year Industry December 5, 2012 Delta: $854M Employee Pension Fund High Indebtedness US Airways: $71 Continued to expand flights and destinations with the revenues created from demands of WWII through their engineering subsidiaries "It does not mean we are merging — it simply means we have agreed to work together to discuss and analyze a potential merger," US Airways CEO Doug Parker in September 2012 -8.2% American Airlines Stock (AAMRQ) History Continued United Continental: $840M Opportunities 1 Year Possible Merger with US Airways Frequent flier miles would merge into the American AAdvantage program Delta: $26.7M Laura Finkler American: $23.9M Threats Consumers Recent News for American Airlines Combined American Airlines and US Airways operation would face significant cost increases that would probably outweigh any "revenue synergies" (or cost cuts in other areas) for the first few years after the merger AMR Corporation was created to be the parent company of American Airlines Inc to control its assets as well as other subsidiaries assets United Continental: $28.5M Us Airways: $10.6M Delta: $36.5M 0.5% US Airways: $9.9M Delta: $28.1M As a Percentage of Revenue 2011 Recommendation Officially created in 1930 by a consolidation of lesser known airlines and became American Airlines Inc. At first was just a mail carrier, but became the first airline to have a passenger flight from Chicago to New York in 1936 Officially started trading in 1939 Operational Network Strategic Alliances Frequent Flyer Program Physical Capital U.S. Major Airlines United Continental (16.6%) Delta (16.3%) U.S. Airways (7.9%) American: $18.9M American Airlines would keep its name and US Airways would fully integrate under the American Airlines policies and advertising Also was one of the first airlines to introduce a 'Family Fare Plan' that allowed families to receive discounts for traveling together Year End 2011 United Continental: $37.4M Net Income 1970s- 1980s American (13.2%) Less competition in the industry For Year 2011 Revenue (As of Q3 2011) Increase access to international destinations through American hubs and increased access to smaller domestic destinations through US Airways hubs Increased global tourism Growing air freight market Merger Implications Partnered with IBM to create SABRE (Semi Automated Business Research Environment) US Airways Stock (LCC) American Airlines Analysis In 1979, moved headquarters to Fort Worth, Texas 2.3% Strengths Weaknesses Consolidations of more airlines continued to increase destinations for American Airline passengers including the Caribbean United Continental: $28.1M American: $18.0M Merge with US Airways 2.4% The amount of jobs lost would be less under a merger than if American Airlines restructures on its own. Difference of about 6,000 jobs Merger Implications Revenue (As of Q3 2012) December 5, 2012 Chapter 11 Bankruptcy: 'Reorganization' chapter of the bankruptcy code because it allows a debtor to reorganize financial obligations while retaining assets, generally through the sale of certain assets to pay down debt and refinance existing debts. US Airways is the top contender in merging with American Airlines, but American has exclusive rights until December 28, 2012 to come up with an appropriate exit strategy Financials in Comparison Increased airfare due to lack of competition through multiple mergers 1940s- 1950s Last Traded at $12.11 US Airways: $13.7M Last traded $0.50 American: $-1.9M Price of oil Increased competition in industry due to consolidation of airlines
Transcript: Significant and growing regional footprint Serve banners to our regional audience in English, French and Arabic Reach any IP address globally Presicely targeting Expats-to-be and passengers outside the region A user spends 50 seconds viewing each page, displaying your advertising message! Dubizzle - Effectively Measured Dubizzle.com users are clearly affluent, well educated, holding professional / Management career roles Transparent - reducing wastage and improving ROI Standard and Special Executions Targeted eDM Allows clients to perfectly extract the target audience Behavioural targeting capabilities Perfect marriage between the user profile and their behaviour on the site The case study! Etihad Campaign Highest performing regional site Delivering the highest number of sales Continued Etihad investment into Dubizzle The airline industry and passenger decisions is all about price sensitivity By using Dubizzle you are approaching the user and potential passengers at a point at which they are looking for a deal Moreover they are online and at point of sale Dubizzle.com has a broad mass market appeal - attracting more than a million unique visitors every month Offering precision targeting capabilities - Extract the perfect target audience, every time Video Interstitial In the short space of 6 years, Dubizzle has become the most popular classifieds and community website in the UAE and MENA Region
Transcript: Airline Industry Hub and Spoke 1918 1903 Major Reuben H. Fleet Did it work? 1978 Post Deregulation AIRMAIL??? 1930's Market Concentration Timeline Monopolistic Traits?? Travel Agencies Control Of Gates Mergers Yes, but also. . Dominance Competition Deregulation Red Sox World Series? Innovations and Changes Hub and Spoke
Transcript: Which has increased their fleet size and employees iAccess manages this function online, thereby centralizing the process and increasing the efficiency of the org Reduces work load for HR Increased activity means an increase in the requirement of DART, ATLAS-FLY and requirement for solutions as iSecurity, iAccess, iStyle, iTrans An online Uniform Mgmt System iStyle India is currently the 9th largest aviation market globally. System will automatically arrange for transport for the crew at the specified time Airline industry in India ATLAS- FLY Vast, Comprehensive booking engine which is still very easy to use for the end user. Integrates with HRS, Accounts,Budget control Saves time for employees, as they can order for new and alter their uniform online Is expected to be 3rd largest by 2020, hence, the increasing number of foreign participants in our markets Is already being used by few of the leading airlines in the world. Follows set hierarchy set by the Admin Some companies have already taken cognizance of this and have entered into a JV User may decide to provide/ curtail access to its employees depending upon the org need. Centralized system with approval needed from appropriate cost centre iAccess A staff travel mgmt system, which has already been implemented for one of the largest airlines in India DART iTrans User can raise a request for transport online from anywhere, including a mobile phone A unique solution tailor made for the Airline industry for Crew transport management Where does Arowana fit into the PIE? Allows to integrate with Centralized booking reservation system, Payment gateways, etc Flexible and adept system which allows the employee to book tickets even on sectors to which the airline may not have a direct flight. Issuance of ID Cards, Car Park Stickers, Access cards, key mgmt,etc Will take less than 60secs to raise the request
Transcript: The Airline Industry Presentation Brittiny Washam Patrick Frates Jessica Farris Ashley Cunningham Todd Sauer Kelsey Millman Impact of Customer Service on the Retention of Passengers in Low Cost Airlines Define customer service and how it varies amongst different cultures Identify Southwest and Ryanair marketing strategies, two airlines at opposite ends of the customer service spectrum, but that both provide highly popular low-cost carrier service. Will attempt to show what keeps passengers returning to both airlines, given the vast gap in service provided. Conclude which airline’s strategy will prove more effective in the longterm What is the Issue? Hospitality: the friendly and generous reception and entertainment of guests, visitors, or strangers. As hospitality students, we are educated on a broad variety of hospitality industries with an emphasis on learning proper guest service techniques. As competition in the airline industry increases, and customer service falls victim to cost-cutting measures, we must examine the state of service within the industry to know how to properly apply the skills we are honing for future leadership positions. What is Customer Service? "Customer Service is a function of how well an organization is able to constantly and consistently exceed the needs of the customer.” “The customer’s assessment of overall service quality is determined by the degree and direction of the gap between their expectations and perceptions of actual performance levels.” (Parasuraman, Zeithaml, & Berry,1985, 1988 ). RyanAir Headquarters in Dublin, Ireland Targets European customers Ages 15-64 looking for cheap air fare. Began in 1985, Modeled after Southwest Business Plan Marketing Plan To Maintain a high market share and become the undisputed market leader within the European low cost airline segment; to attack even the big network carriers like Lufthansa and British Airways and become the largest airline in Europe in terms of transported passengers; and furthermore to sustain and optimize its top cost production What' up with that! Customers pay for water, drinks, and snacks Chairs do not recline Employees pay for their uniform Was sued for charging a customer $34 for the use of a wheelchair, and has now implemented a $.63 “wheelchair levy” No frequent flyer program Outsources making it difficult to create company culture Interested in rapid growth Southwest To see the direction behind the Southwest management strategy we look to the mission statement... The Mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. Southwest and RyanAir Low-Cost Carriers Travel point-to-point Utilize secondary airports Use one aircraft type No business Class Importance of Price Vs. Customer Service Price Most customers think of price before everything else. As the number of airlines decreases and the price of jet fuel increases, airfares will increase. Capacity cuts & rising demand Some markets cost more to fly to than other markets (landing fees, gate fees) Customer Service As airlines look to cut back, customer service is the first area where the airlines look to cut first. Fewer employees in the customer service depts. at airlines means fewer real people there to help with customers. The airlines job is not to please customers, it’s to get them from point A to point B. The airlines will do anything they can to save $. Even if that means giving the worst customer service. SouthWest Airlines “We try to be the absolute best in terms of customer service delivery.” Southwest President & COO Colleen Barrett. She believes if Southwest can take care of their employees, then those satisfied employees will deliver the same sense of friendliness to Southwest customers. Southwest believes it is in the customer service business, they just happen to fly airplanes. Ryanair Analysis http://airconsumer.ost.dot.gov/reports/atcr11.htm Implications RyanAir Customer service • In 2010 RyanAir was voted #1 in customer service in Europe. • Rated 87% of over 34,000 Ryanair flights arrived on time • Less than 1 complaint per 1,000 passengers was received • Less than 1 mislaid bag claim per 5,000 passengers were received Retention 5 step plan 1. Become immersed in a client's business and industry 2. Frequent contact points, beyond engagement 3. Maintain personal relationships 4. Quality control systems that are visible to clients 5. Regular client surveys KingFisher Customer service • Kingfisher has won many awards as a reflection of its customer service • Best bonus promotion • Best customer service • Best member communications best award redemption • Best elite level best website • Program of the year • 'India’s Favourite Airline' in HT MARS Consumer Satisfaction Survey , 2009 Retention • Kingfisher finally came out with a loyalty program where frequent flyer can earn extra miles with each travel • With this loyalty
Transcript: Innovative Virgin Singapore Airlines British Airways: Average: 5/10 £103m Business Class Singapore Airlines British Airways Emirates British Airways: Revenue: £10.8 billion Profit: £433 million Fleet size: 266 WIFI KLM First Class Reviews Options for Virgin: - Invest in more planes - increase revenue - Cut operating costs - Rebrand themselves as a high-end airline that provides a better service than its competitors. -Focus on airline comfort, better quality food, and new technologies... ....push to be the first airline that provides wifi in all of their planes - (only 42 planes in the fleet so could easily strive to be the first to do it) Emirates - Virgin need to find its USP, by branding themselves as a high-end product and improve the quality of service. Virgin On board entertainment 6,500 miles Daring You earn 5000 air miles traveling from London to Delhi Etihad Virgin British Airways '...providing the best possible service at the best possible value at all times.... KLM Best way to freshen up: Own suite, shower and personal mini bar Rewards and spending opportunities: American Airlines Make the flight more enjoyable - Netflix has 44 million members Price Comparison All airlines have TVs, ac power, and flat bed seating. Best comfort: real mattresses, fresh linen and full pillow size Fleet size of each airline - Car Rental (Avis/ Hertz) (500 points per rental) - Tesco Club card - Hotels - Use of Clubhouse lounge (10,000) - Chauffer driven cars (17,500/75 miles) - Eurostar tickets - London to Paris (18,000) Loyalty Schemes Singapore Airlines Loyalty Schemes Make the flight so enjoyable that customers don't want to get off Virgin £366m London to New York (Economy) - earn 7,000 miles American Airlines Singapore Airlines 44,000 miles Free to join Profits for 2013 KLM Overview Emirates Economy Loyalty Schemes Character-defining brands Virgin seriously lagging behind its competitors 222 Source: farecompare.com - Very similar seating arrangements and spacing. - All the airlines have personal TV's on board KLM - Offering a different service to your competitors - Offer services that your competitors cannot - Be innovative - 1st flat bed, 1st all economy TVs... push to be the 1st to have new features - WIFI, Netflix etc. - Keep the edginess that is integral to the brand e.g. providing spa treatments, car chauffeuring etc. - Make the flight fun and enjoyable - Basics - comfort, food, customer service. The website has just under 2000 reviews of Virgin Atlantic which are broken down into five categories: - Value for money - Seat comfort - Staff service - Catering - Entertainment There are two main areas of issue for customers: - People think the staff are 'incompetent' and 'not very friendly' - Likewise with the catering, there is a lackadaisical service of food and drinks to customers. - To add, the 'food is not up to scratch' - Make a deal to use the rights and technology to have free access to Netflix through their TV monitors whilst flying. - People who already have account can log in to find their already personalized library pop up. Avis - free for 2nd driver went you rent with Avis (500 avios per 1-2 days rental) RAC - roadside and recovery (1500 avios) High life shop - fragrances/gadgets Tesco: you can change your Tesco club card points into avios points. Shell: 10 avios obtained when you purchase 20 litres of fuel. Chic Outlet Shopping village: purchase a wide range of goods from wine to clothing - Earn points by staying at partner hotels e.g. Hilton, Marriot What is Virgin's brand? £433m First Class Best new luxuries: Quilted bed topper, pyjamas and slippers offered Emirates 226 Brand Values and positioning Virgin - Businessmen could use it for work emails - Others for checking up on their social media Source: airlinequality.com British Airways -£69m Virgin's Service - Virgin are already a great media brand, providing both TV and broadband packages. - Already have an insight into the WIFI market (Virgin Media) - step ahead of its competitors Emirates Virgin Atlantic reviews - ANY flight on ANY airline from London to New York will take 7 hours - Planes aren't like to get faster any time soon - Need to make the time pass faster - and or make the flight more enjoyable Starts with: - Comfort - Good customer service - Better food quality / portions / choice Singapore Airlines - Use 'Beats' headphones for Business and First class seats - Much better quality than standard headphones - Beats were just bought by Apple for $3 billion - Link with Apple - potential to install IPads for Business and First Class customers American Airlines Fun - Hotels - Car Rental - HSBC - Waterparks - Suitcases - Androids - Headphones - Cameras - USP - first to have WIFI on board all of their planes - Only have 42 planes - a lot more achievable 117 £223m On board entertainment American Airlines Using Branson's personality in the marketing However Virgin (in the Airbus A330) provided the use of wifi. Virgin Revenue £2.4 billion Loss:
Transcript: Inflight Monitor continually checks for notifications relevant to all flights Brookfield and other agencies support Airline Industry Work – but not work standard reserves + allowance for winds and stormy weather + 100kg extra There is a plausibility of copying the IS by another airline but quite undoubtedly it shall not succeed to the same level of efficiency as Ryanair has tailored it’s system to work only for the companies‘ low cost strategy. calculates maximum allowed take+off weight Renata Olsova Pola Piatek Martyna Sawicka Lyudmil Stefanov Anna Szweda strict recruitment selection & training "Tesco of the skies" - aggressive competitive spirit Founded by Tony Ryan and Christy Ryan in 1985 aircraft situational display solutions Information System 72100 mln passangers dispatchers' support with automatic flight planning process Costs repartition: Low Cost vs. Full service Tight cost control - 40% cheaper than it's closest competitor - Aer Lingus 71320 mln passangers combines airport and aircraft-relevant data for integrated landing performance calculation GDS - Global Distribution Systems calculates most effective combination of airways between origin and destination CrewDock - pilots' interface used for managing crew and systematic training modules Information Technology RESOURCES: Changed the face of airline industry in 1990s rise among international airlines alliances high demand for intercontinental flights as well as long haul flights fast growth of low-cost carriers after 1999 low-fares despite dramatic oil-price rises and economic crisis 48800 passangers evolved from state-owned carriers operating on regulated market currently highly competitive, dynamic, free market industry Ryanair Reservation tool used while making a flight reservation. The system provides pricing, availability and reservation functionality for it's users. Ryanair is supplied with GDS technology by the global leader in Airline Support Information Systems - SABRE. electronic briefing packages promptly sent to pilots at every destination the rest is exclusively contracted on self-employment basis to Ryanair Information and knowledge management: Comparison: Cost per passenger (EUR) EU Deregulation 58916 mln passangers As to the end results of the implementation of the IS… Fuel Efficiency Major Airlines in Europe 100% e-tailing of air tickets 33593 passangers COMPARISON plans the most efficient trajectory for each flight based on current weather and airspace situation 50% captains employed directly LIDO - complex Flight Management System including different information modules: Leadership Review, Kravis Leadership Review: Ryanair, Claremont McKenna College, Vol. 11, Spring 2011 Cento, A. The airline industry challenges in the 21st century. Heidelberg: Physica-Verl. http://www.sabrehospitality.com/global-distribution-system.php http://www.virtualryanair.com/lib/skins/cityportal/images/Virtual%20Ryanair%20Crewdock%20V0.5.pdf http://www.flightglobal.com/news/articles/spotlight-shines-on-ryanair-operations-389366/ https://www.lhsystems.com/solutions-services/airline-solutions-services/flight-deck-solutions/lidoflightplanning/lidoflight/lidoflight-modules.html http://www.nationsonline.org/oneworld/major_airlines.htm Thank You!
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