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Airline Industry

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by

Danielle Jackson

on 4 December 2014

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Transcript of Airline Industry

Launched SkyMiles frequent flier program in 1995.
Perks such as upgrades, entrance to shorter lines, and waved baggage fees
3 tiered mileage-based award system that cashes in miles for free round-trip coach ticket
Danielle Jackson
Joel Ivy
Jessica Teston
Ashley Brown
Bailee Matheny

Airline Industry
1903: Birth of Flight- Wright Brothers
History
SWOT Analysis
P- Political
E- Economic
S- Sociological
T- Technological
E- Environmental
L- Legal
PESTEL FRAMEWORK

Management Problems in Key Firms


Key Firms
Southwest Airlines
Delta Airlines
JetBlue Airlines
Current Challenges
Security
Safety in the air
Fuel cost
Shortage of pilots
Quality of passenger experience
Profitability
Near collisions with drones
Strengths
The product itself (air travel)
Safety record
Highly trained workers
Have control over international travel
Ability to Segment the Market
Weaknesses
Spoilage
Aircrafts are extremely expensive
Communication
Inability to adjust to a quickly changing environment

Opportunities
Market growth
Updating technology
Link-Ups and Partnerships
Threats
Change in technology
Change in gas prices
Weather
Competition within the industry
Government regulations and Interventions
Economy
War in Iraq
Union strikes
Diseases and plagues
Political
Terrorism fear
Outbreak of disease
Deregulation in 1978
Economic
Fuel prices
GDP (inflation & recession)
Labor demand
Maintenance costs
Sociological
Changing family structures
Increasing number of women in the workforce
Length of stay at destination
Changing view on holidays (culture)
Baby Boomers vs. Millennials
Technological
Video conference
Internet expanding
Environmental
Going green
Climate Change/ Global Warming
Growing world economy
External Problems
JetBlue's CEO Problems
Top 5 Financial Ratios
Quick Ratio
Return on Assets
Debt to Equity Ratio
Net Profit Margin
Earnings Per Share
Current Strategies
Low Cost (Southwest; JetBlue)

High Comfort (Delta)
JetBlue's CEO, David Barger, to step down in February of 2015.
Will be replaced by current President Robin Hayes.
Problems
Since Barger has been CEO (2007), JetBlue's shares have risen a total of 9%.
Southwest's shares have risen a total of 140%.
Problems
For every 1,000 miles flown
Delta made $166
Southwest made $135
JetBlue made $119
for each available seat
Stakeholders
Shareholders - They want higher returns
Customers - They want inexpensive flights
Employees - They want a job
Suppliers - They want business
Solution
I believe JetBlue is pursing the best solution with a new CEO.
Start charging fees like other airliners to increase revenues.
Legal
Government Laws
Regulations preventing monopolies & governing mergers between airlines
Foreign participants
Open skies agreement
Misleading advertising
Anti competitive behavior
Quick Ratio
Return on Assets
Debt to Equity Ratio
Net Profit Margin
Earnings Per Share
Delta Airlines (Political)
Southwest Airlines (Legal)
Delta Airlines
External Problems:

Delta (Political)
Southwest (Legal)

Internal Problems:

JetBlue (CEO)
Southwest (Operations)
Delta (Marketing)
Internal Problems
JetBlue (CEO)

Southwest (Operations)

Delta (Marketing)
Strategic Map of Top Firms
Market Share to Passengers Flown
Internal
Strength
Weakness
External
Opportunity
Threats
SW
OT
What's the Problem with ObamaCare?
Stakeholders
Owners/Shareholders
Vendors/Suppliers
Employees
Government
Customers
Community
Competing Demands
Government vs. Delta Shareholders
for the people vs. for the company
high wages vs. high profits
Delta Employees vs. Delta Shareholders
high prices vs. lower costs
Vendors/Suppliers vs. Delta Employees
+100,000,000 in costs
+8,000 Dependents
Additional covered employees
Subsidized Exchanges
Loopholes
Southwest Airlines
I hope this hasn’t put you off of flying. Statistically speaking, it’s still the safest way to travel.
~ Superman

Headquarter in Dallas, Texas
Founders: Rollin King & Herb Kelleher
4th largest airline in the U.S
46,000 employees
Over 100 million passengers annually
3,600 flights a day
93 destinations in U.S
5 destinations in other countries
Problem
Market Growth Opportunities
Increased destinations
Expand Destinations
Reduced/Shared Costs
Link-Ups/Partnerships with other Airlines
In-flight internet access
more fuel efficient aircrafts
Technological Advances
"Too Fat To Fly"
Discriminate against obese customers
Customers unaware
Customers filing a lawsuit
U.S federal government vs Southwest
$12million FAA fine over jet maintenance
Kept flying 2 of the planes with at least 44 passengers
2nd largest fine in history
Stakeholders & Competing Demands
Employees- want to feel valued
Customers- want superior customer experience, cheap prices, and to feel safe
Shareholders- a return on investment
Communities- develop a positive relationship
Suppliers- want to have have a lasting relationship & referrals
Solution
Delta will NOT be cutting worker hours
Wellness plans
Company sponsored preventive treatment
Delta will absorb most of the costs but continue to campaign to get the health care act repealed.
Delta Should Also....

Add ObamaCare tax to ticket prices.
Solution
SkyMiles
Too fat to fly
Educate employees
Have bigger seats
Make every customer feel comfortable
Problem
Southwest vs U.S
Delta Airlines
SkyMiles Problem
Change from mileage-based to revenue-based
Must meet minimum mileage in addition to cash requirements
No miles earned for partnering firms
Stakeholders/
Competing Demand
Customers/Passengers: want to feel valued and be able to acquire earned awards
Employees/Owners: want jobs and high wages/profits
Shareholders/Investors: want highest return on investment
Pay $12 million
Be proactive
Fire contractors
Don't keep flying the planes
Southwest Airlines
Tardiness
Problem
Scheduling
71.8 percent of its flights arrived on time
Weather
New aircraft
Competing Demands
Customers-expect timely departures and arrivals
Employees-expect to maintain steady job and relaxed work environment
Shareholders-expect a return on investment
Competitors-want to take advantage of the downfall
Solution
Increased connect time
Looser scheduling
"Start Strong"
Monitoring maintenance issues
Price
Routes Serviced

Solution
Solutions
More flexible schedules
"Start Strong" program
Monitoring for maintenance
CEO Gary Kelly
The firm is not pursing the best solution
Delta should revert from revenue-based to mileage-based
Political Issue

ObamaCare
http://www.cbsnews.com/videos/delta-air-lines-unveils-changes-to-awards-program/
Created a Customer size policy
Early 20th Century
Mid 20th Century: Age of Regulation
Late 20th Century - Present
1913: First Commercial Flight - 23 minutes
1925: Air Mail Act
1938: Civil Aeronautics Board (CAB) Established
1958: Federal Aviation Administration Established
1970's: Deregulation!
1978: Airline Deregulation Act /CAB Disbands
2001: 9/11 following recession of the 90's
2006: Finally started to show profits again.
Full transcript