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Airline Industry

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

Airline Industry

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

Airline Industry

Transcript: Transportation: Commercial Airlines An Introductory And Informative Look At The Past, Present And Future Of Domestic Air Travel Presented By: Brandon Rapp, Julie Dierker, Ryan Bresnahan Domestic Commercial Airline Industry Check in The commercial passenger airline industry is a sub-sector of the airline industry, and is a for profit business of transporting paying customers via airplane along regularly scheduled routes. The airline industry includes all parts of an air transportation system including; equipment, routes, and operating and management personnel. The industry is highly regulated by the government and is therefore slow to change, so major changes in the basic definition of the industry are unlikely to occur over the next ten years. Definition: Definition: Past and Present Past and Present Image Source: Pilotline.com History The first commercial passenger flight took place on January 1, 1914, from St. Petersburg FL to Tampa FL. Post WWII, the influx of returning air service members and their familiarity with aircraft operations led to an accelaration of air travel growth. In 1978, congress passed the Airline Deregulation Act which brought on new carriers, more flights, and lower prices due to increased competition among companies. Take Off Image Source: History.com Last 20 Years After a period of growth following The Airline Deregulation Act of 1978, the 1990's through the early 2000's represented a challenging time for the airline industry. Saturated Market Fluctuating Oil Prices due to the Gulf War Terror Attacks of 9/11 All of these challenges resulted in a number of airlines going bankrupt or being forced into acquisition by the larger airlines. This consolidation of the industry lead to the top four airlines becoming the major players we see today. Turn of the Century Current Due to an economic uptick and falling oil prices, airlines have reported record profits and consecutive year over year growth for the past ten years. The increase in profits have allowed carriers to focus on innovation, allowing them to modernize an industry that had previously lagged behind the status quo. Some improvements brought on by increased profit margins include: Improved aircraft technology Utilizing IoT (Internet Of Things) Airfare pricing models changed with the introduction of basic economy tickets. Current A Look At The Top Four Domestic Airliners Who's Involved? Major Players Market Share: 19.1% (2016) Profits: $2.2 Billion (2016) Revenue: $25.8 Billion (2016) Employees: 53,000 (2016) Fleet Size: 727 (2016) Southwest Airlines Southwest Airlines Image source: Southwest.com Market Share: 18.3% (2016) Profits: $4.7 Billion (2016) Revenue: $39.6 Billion (2016) Employees: 80,000 (2016) Fleet Size: 856 (2016) Delta Airlines Delta Airlines Image Source: Delta.com Market Share: 16.9% (2016) Profits: $7.6 Billion (2016) Revenue: $40.9 Billion (2016) Employees: 113,000 (2016) Fleet Size: 939 (2016) American Airlines American Airlines Image Source: AA.com Market Share: 14.5% (2016) Profits: $7.1 Billion (2016) Revenue: $36.56 Billion (2016) Employees: 83,000 (2016) Fleet Size: 738 (2016) United Airlines United Airlines Image Source: United.com Industry Market Shares For 2016 Industry Market Shares For 2016 In today's economy, the airline industry helps drive $ 1.5 trillion in U.S. economic activity and provides more than 10 million U.S. jobs. Employment Statistics The top four employers in the commercial passenger airline industry include three network airlines and one low-cost airline. Top Four Year Over Year All four of these airlines increased their total employees from 2015 to 2016: Delta Airlines 0.9% American Airlines 2.4% United Airlines 4.3% Southwest Airlines 9.1% The U.S. airline industry lacks diversity and faces issues boosting minority representation. 34 % of the total workforce is female. 96.6 % of pilots are white. Diversity Available seat miles for domestic airlines has increased 3.3%. The need for cabin crew expected to increase by 21%. The biggest issue facing the industry is a potential lack of pilots. Outlook American Connection, 2004 Future Trends Trends Since airline companies have little brand allegiance from their customers, they are constantly searching for ways to retain and grow their customer base. IoT (Internet of Things) Easy To Use Mobile Applications That Streamline The Travelling Experience RFID Tracking For Luggage Technology And The Customer Experience Technology And The Customer Experience Following the incident on United Flight 3411 in which a customer was violently thrown off the plane after boarding, all four leading US airlines have declared they will discontinue the practice of purposely overbooking flights. Policy Policy Image Source: nbcnews.com The way airlines have been able to reduce their average ticket price stems from selling products and services that were once bundled in with ticket price, for an additional charge. Examples include: Checked Luggage In-Flight Meal

AIRLINE INDUSTRY

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

Airline Industry

Transcript: III. Focus on three actors Table of content E Economic A. PESTEL III. Focus on 3 actors A.Easy Jet B. Lufthansa C. Emirates Quality/price inadequacy Low average cost Environmental Bargaining Power of Suppliers Strategy Analysis Customer Satisfaction Social Government - Global Warming - Carbon Taxes - Eco-friendly measures High added Value L Key factors - Internet Development - New technologies Airline Industry - LCC leader - Cost cutting strategy - Low added value Threat of Substitutes E Right Balance QUESTIONS? I. Internal Analysis Legal High average cost Technological Business Model - High prices - High added Value - Niche segment S Lufthansa - Hybrid Low added Value Emirates Focused Differentiation LCC Leaders Airlines need to find the right balance between the viability of their cost structure and the quality of service they provide Threat of new entry STRATEGIC GROUPS ANALYSIS II. Attractiveness - Strikes - Consumption behavior - Automation - Highly competitive market - High demand - Many barriers to entry - Changing external environment - Price/added value equilibrium - Political environment of the destinations - Air transport liberalization - Gulf countries Customer Dissatisfaction Bargaining Power of Customers Political Gulf Companies Other European LCCs T CONCLUSION Airport Fares Airline Industry Rivalry among existing competitors EasyJet - Low price P II. Attractiveness analysis A. PORTER B. Strategic groups C. Outcome - Reasonable Price - Good added Value - Successful if the offer remains consistent I. External Analysis A. PESTEL analysis B. Key drivers for success C. Key drivers for failure Key factors for success - Purchasing power - Oil price - Currency risk - Tourism - Tax Regulation - Lawsuits / Complaints - Health and safety laws - Employment regulation FIVE PORTER FORCES + 1 Unqualified Employees Key Factors for failure Regular companies SUCESS VS. FAILURE

Airline Industry

Transcript: Customers can diminish and narrow the zone of tolerance • Product/Service - largest airline in the Middle East, offering economy, business and first class services around the world • Price – Economy - £503.12; Business Class - £2712.12; First Class - £3712.12 • Place – Based at Dubai International Airport; Flights to 122 cities in 74 countries • Promotion – Example ‘Kids Go Free’ • People – Over 50,000 employees • Operates mixed fleet of 192 Airbus and Boeing wide-body aircraft Effected by level of service -> customers will be frustrated and their satisfaction with the company will be undermined with poor service quality. Whereas, if service performance is higher than the zone of tolerance, customers will be happy and satisfied Airports Available to the Customer: Regulations in Bulgarian Airports Safety Zone of tolerance - Introduction to the Market •Product/Service – Largest service provider of low cost flights to European destinations •Price - Low fares ranging from £1 to roughly £100! •Place – Based at Dublin and London Stansted Airport, Flights to 164 cities in 27 countries •Promotion – few promotions, example free flights for new destinations •People – Over 8,000 employees •Operates over 300 Boeing 737–800 aircraft Regulations in the United Kingdoms The Airline Industry Enhance service experience by arriving and boarding on time, keeping noise levels to a minimum. Diminish service experience by delaying flights, being noisy or disruptive •Introduction to Service Type and Industry •Comparison of United Kingdom social influence •Comparison of Bulgaria safety indicators •Conclusion •References • Product/Service – Long and short haul flights around the world. Fourth largest UK airline by passengers carried. • Price - Wide range of prices. Economy class and a premium economy service. • Place – Based in Manchester and London Gatwick, provides charter flights to holiday resorts in the Mediterranean, Africa, Asia and North America. - High street travel agents across the UK. • Promotion – £5million campaign including: "Kids for a quid", and the Price Parity scheme. • People – The Thomas Cook group employ 31,000 people. • Operates a fleet of 32 Boeing and Airbus aircraft. The regulations of air transport in Bulgaria are relatively poorer than those in the United Kingdom. Reasons for that may be the lower passenger flow and also the fact that Bulgarian airports haven’t suffered from some kind of a terror attack. The United Kingdom however have suffered a lot from these kind of attacks and have created a lot of regulations and safety measures Air Transport in Bulgaria Safety Overview of Service Providers Self Regulation Issues • 3 very different services • Customer Roles are the same -> have the same responsibilities to either enhance or diminish the service experience • The Service Encounter -> 2 phases: joining and intensive phase • The Servicescape -> airport provides the environment for the joining phase but Airline companies can provide additional cues to the aid the service experience; different aircraft design provided Overview Presentation Content General aviation in the United Kingdom •Ryanair •Thomas Cook Airline •Emirates In April 2011 Airport Sofia serviced 282 694 passengers, 13% more than the same period of 2009, when the record was 250 000 passengers. In 2011 passenger traffic at Bulgaria's three major airports - Sofia, Varna and Bourgas - grew up to near 10% on the year to 3.89 million in the first half of 2011, due to rise of customers using international routes and launch of new destinations. Difficulty with access to larger airports is compounded by a decline in the number of aerodromes generally, and existing sites are often threatened with closure and re-development for more profitable uses. References Conclusion •Bitner (1997) ‘Customer contributions and roles in service delivery’, IJSIM pg 193-195 •Chen, F.-Y. and Chang, Y.-H. (2005), "Examining airline service quality from a process perspective", Journal of Air Transport Management, Vol. 11, pp. 79-87 •Civil Aviation Authority Aircraft Register - for G- registered aircraft (February, 2013) •Holidayy Watchdog (September, 2008) http://www.holidaywatchdog.com/459-Sharm_El_Sheikh-Ritz_Carlton_Sharm_El_Sheikh_Hotel-Holiday-Review.html •The Economist, "Snarling all the way to the bank” 23 August 2007 •McKechnie, Donelda S; Grant, Jim; Golawala, Fatema Shabbir. ‘Partitioning service encounters into touchpoints to enhance quality’ International Journal of Quality and Service Sciences 3. 2 (2011): 146-165 •Segmenting the tourism marker, Paul Williams (November, 2008)http://www.insights.org.uk/articleitem.aspx?title=Segmenting%20the%20Tourism%20Market#Classical generic segmentation techniques •Target Market and Marketing Strategies of Emirates Airline (2010), Volume 3 ‘Zone of Tolerance’ - Yap, K.B. and Sweeney, J.C. (2007) Between 1995 and 2004 there were 2,630 accidents involving GA aircraft, of which 139 were fatal, resulting in the loss of 317

Airline Industry

Transcript: Market Development Market Penetration Production Development Diversification Market Product Ansoff Matrix Market Penetration New Introduction Existing Market Development Today we are going to look at three main areas and how they relate to the airline industry. These are - Ansoff Matrix BCG Matrix Bowman's Strategy Clock Airline Industry Diversification The Ansoff Product/Marketing Mix is a marketing strategy that was developed by Igor Ansoff. It is broken down into 4 main areas. Lorcán McKee, Aveen McGivern & Gemma Bruce New Product Development Existing

AIRLINE INDUSTRY

Transcript: CURRENT SITUATION AFTER DEREGULATION Turkish airline industry become oligopoly with the deregulation process. Other than state owned turkish airlines there is now also private airline companies. Market shares has changed Establishment of Turkish Airplane Association in 1925 Turkish airline industry started with 5 aircraft 23 seat capacity in total in 1933 The first domestic flight was to Ankara and the first international flight was to Athens in 1947. Objective of The Study In this study we are going to draw a picture in your mind about Turkish airline industry’s general characteristics. market structure price strategies competition strategies domestic airline companies BEFORE DEREGULATION Turkish airline was a monopoly The major and only company was turkish airlines. Turkish airline is a state owned company Source: CAPA MERVE ÖLMEZ ÖZLEM BAYRI SİNEM KARAKAŞ Brief History of Turkish Airline Industry With the liberalization process after 1983 Pegasus airlines entered the industry as the first private firm in 1990. The dominant power of Turkish airlines that has been supported by government policies caused private sector unable to be effective. With the deregulation of pricing strategies in 2003 the private sector become more effective. Çetin and Eryiğit’s study (?) AIRLINE INDUSTRY

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