...Hong Kong Budget Airline Industry Analysis By Jaeyeong Ahn 1155032046 Xie Jianting 1155001899 Shi Weiran 1155002072 Tan Jiayi 1009609441 Gao Jingya 1155001997 TABLE OF CONTENTS 1. Introduction 2. Budget Airline Industry 2.1 Definition & Pricing Model 2.2 Common Practices to Lower Overall Costs 2.3 Development of Budget Airline in America, Europe and Asia 3. Hong Kong Market Analysis 3.1 Competitive Landscape 3.2 Major Budget Airlines in Hong Kong 3.3 Market Analysis 3.4 Target Customer Analysis 4. SWOT Analysis of Budget Airlines 4.1 Strengths 4.2 Weaknesses 4. 3 Opportunities 4.4 Threats 5. Analysis of Success Factors in Budget Airline Industry 5.1 AirAsia’s Success in Asia 5.2 Oasis’s Failure in Hong Kong 6. Conclusion 1. Introduction In September 2013, Hong Kong Express Airways announced its plan to transform itself into a budget airline. Meanwhile, Jetstar, an Australian budget airline, has applied for an operating license in Hong Kong under the belief that there are abundant opportunities for growth in the budget airline industry. However, Hong Kong-based airlines Cathay Pacific and Dragonair strongly insist that the market is saturated, and that new entrants into the market will harm the airline industry as a whole. The purpose of this report is to analyze the prospect of budget airline industry in Hong Kong and to determine if...
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...Plane Wreck: The Airline Industry in 2001 - 2004 Between 2001 and 2003, players in the global airline industry lost some $30 billion, more money than the industry had made since its inception. The losses were particularly severe among the big six airlines in the United States (American Airlines, united, Delta, continental, US Airways, and Northwest). In 2002 these major airlines lost $7.4 billion and another $5.3 billion in 2003. Both US Airways and United were forced to see Chapter 11 bankruptcy protections. Although forecasts suggest the six major airlines will break even in 2004, a return to the boom years of 1995-2000, when the airlines posted record profits, seems unlikely anytime soon. The dramatic slump in airline profits began in early 2001 when business travel started to fall off in the wake of the rapidly deflating technology and dot-com bubble of the 1990s. Then, in the aftermath of the terrorist attacks of September 11, demand dropped through the floor. The airlines began cutting prices to try to maintain their passenger loads in the face of declining demand. However, the tactic didn't work. When one airline serving a particular route cut its prices, its competitors, desperate to cover their fixed costs, quickly followed. The result was a downward price spiral. In the fourth quarter of 2001, prices fell by 15 percent as airlines tried to induce people to fly. Despite this effort, passenger traffic fell by 19 percent, and revenue at major airlines fell by over 30...
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...ANALYSIS OF BUDGET AIRLINE- ‘RYANAIR’ Module Name: Management and Strategy (MBA INTERNATIONAL) Module Reader: Claire Devlin Student Name: Varghese Jacob Student Number: 8202730 Date: 16/03/2007 Introduction Air line Industry can be called as one of the biggest industry in the world. In that huge industry European Airline industries part is very high. European Airline industry consists of two sectors mainly Main stream and Budget Airlines. The budget airline sector is becoming a great threat to the main stream airlines in these days. Among the Budget Sector Airlines Ryanair is the most established one. Here the essay is mainly dealing with the reviewing of the management strategy of the budget airline giant RYANAIR. Essay includes not only the management strategies but also the main problems that Ryanair have to face in their entire business period. And also includes the analyses of European Airline Industry in relation to Ryanair. ANALYSIS OF EUROPEAN AIRLINE INDUSTRY European Airline industry can be called as the world’s biggest airline industry. Europe’s main stream airlines industry includes British airways, Lufthansa, Scandinavian Airlines and BMI. Before the establishment of the budget airlines they were the kings of European airline industry. The Budget Airline or the Low frae airline includes Easyjet, Virgin Express, Aer Lingus, bimbay My TravelLite and last but not the least Ryanair. Among these budget airlines...
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...competitive forces model focuses on five forces that shape competition within an industry. These five forces are: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products. The threat of new entrants in the airline industry is low. In this time of economic distress it is tough to find an institution willing to loan the necessary capital it would take to start an airline. Without a loan it is nearly impossible to start up an airline company and therefore there are not many new companies entering the market. Even if a company could surpass these economic barriers it would find it hard to compete with airlines that have established brand recognition. These solid brands in the airline industry are able to offer lower prices and better incentives than an incoming airline and these economies of scale increase entrant barriers. Also, the respectable number of established airlines that have made up the industry have a strong hold on airports hubs. These hubs are crucial to bringing and taking customers to and from airports. An entrant into the airline industry may not have these privileges which would stall their business. A greater threat to the airline industry would be substitutes. Substitutes are a medium threat to the airline industry. Recently oil prices have fallen below $30 a barrel and it is becoming...
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...1: Case Study European Airline Industry Strategic Management Contents |Main Body |4-10 | |1 Introduction |4-5 | |2 Summary of macro-environment analysis |5-7 | |3 Summary of industry environment analysis |7-8 | |4 Other critical factors for the airline industry |8-9 | |5 Future directions/recommendations |9-10 | | | | |Appendices |11-26 | |1 Macro-environment analysis |11-16 | |2 Industry environment analysis |17-26 | Reference List 27 Main Body 1. Introduction The European airline industry is a vigorous industry with changing trends that relate to the overall European economy. Traditionally, the European airline industry was mainly comprised of full-service carriers, such as Lufthansa and British Airways. Nevertheless, this situation changed quite swiftly (Datta & Chakravarty n.d.). Government deregulations freed European airline markets from restrictions...
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...Introduction Budget airline industry has been profitable during last decade, and particularly Ryanair, as the largest European budget airline company has been vital in this area. Its success in past, issuses nowadays and importantly the sustainablility has drawn significant attention and offered a great oppourtunity for research. This case study will analysis the budget airline through its business model, evironment and industry and finally focus on Ryanair’s strategy position in order to explore its sustainability in future. The framework is briefly illustrated by following figure. Figure 1: Brief Framework of this Case Study The budget airline business model The first company in history to suggest the budget airline business model to the world was Southwest Airlines (SWA) in Texas, USA. At the beginning of 1970s, this company have launched first flights between three major cities in Texas i.e. Houston, Dallas and San Antonio at a price of 20 dollars, which was initiative at that time. It marked itself as budget airline and initiates a business model allowing it to offer scheduled flights service at a very low fare. It would focus on short-distance flights of typically 600 km or one hour with high traffic efficiency. Many strategic approaches of budget airline business model’s operations differ from the more traditional of full service airlines model. 6 main factors can be identified, which are illustrated in the table below: Budget airline | Full service...
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...Economic Analysis on Budget Airline—Taking Ryanair as an example . 1. Introduction Ryanair Ltd. is a pioneered Irish low-cost airline, located in Dublin, Ireland. In 2013, Ryanair was both the largest European airline by scheduled passengers carried, and the busiest international airline by passenger numbers, according to its annual report in 2013. From its official website, data shows that Ryanair operates more than 1,600 daily flights from 72 bases, connecting 184 destinations in 30 countries and operating a fleet of more than 300 new Boeing 737-800 aircraft. The latest news about Ryanair could be found on its corporate website (http://corporate.ryanair.com), saying that “Ryanair has recently announced firm orders for a further 280 new Boeing 737 aircraft, as well as options for 100 more Boeing 737 MAX 200s, which will enable Ryanair to lower fares and grow traffic from 90m this year to over 150m p.a. in 2024. Ryanair currently has a team of more than 9,500 highly skilled aviation professionals, and has an industry leading 30-year safety record”. It is a very typical case for economic analysis. The tragic news about the wreckage of Airasia QZ8501 hit the world on 28th Dec 2014, which put the budget airline in the front of the storm again since it is not the first news about airline crash in 2014. Budget airline is elastic in terms of the speed to repose to the demand change and it makes efforts to sell out its all seat using differentiated...
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...Question 1 Analyze the current situation facing MAS and AirAsia using the internal and external strategic environment analysis model. Discuss what aspects and why did their collaboration take place. Answer Background to AirAsia A ‘no-frills’ airline is defined as one “That uses charter and/or scheduled flights to offer bargain-basement fares. Budget airlines usually land at and take-off from secondary airports, do not provide in-flight meals or refreshments, and may not even offer numbered seat allocation. Their ticket prices are fixed and non-refundable in case of a cancellation or no-show”. AirAsia is one of the fastest growing airline companies in the world, with a reputation as a low-cost, ‘no frills’ airline. It was originally a government owned business; yet, due to heavy debt, it was bought by former Time Warner executive Tony Fernandes in 2001, and this is where the real story begins. Their vision, under the slogan "Now Everyone Can Fly", is “To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares”,(ii) and their mission is, under the banner of 'Affordable Airfares', “To attain the lowest cost so that everyone can fly with AirAsia,” without any compromise to Flight Safety Standards, as well as, creating a worldwide recognizable brand with a ‘family’ atmosphere within working conditions for employees. (iii) These statements clearly show AirAsia’s value. Cost advantages...
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... In addition to the conclusion of evaluation; this report will also answer the case studies that being related to Air New Zealand, they are: 1. Discuss how barriers to entry in the airline industry have changed in the past decade. 2. In light of such lowering of barriers, what opportunities are there for there for Air New Zealand to pursue? 3. Air New Zealand must consider different stakeholders in its pursuit of corporate strategies. Identify the key stakeholders and their concerns Introduction Air New Zealand Limited, is the national airline and flag carrier of New Zealand. Since the appointment of Ralph Norris as Managing Director and CEO of Air New Zealand in February 2002, Air New Zealand has been working on its new strategic direction. Structural changes in the marketplace made a new direction indispensable and Air NZ is now turning away from inflexible service offerings to align its route and service standards to customer needs. This report will provide an analysis of the background, current situation&strategies, SWOT, trends and models of Air New Zealand. Background Air New Zealand, originally founded as Tasman Empire Airways Limited (TEAL) in 1940 and changes name to its present name in 1965, is the national carrier of New Zealand and the only airline circumnavigating...
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...full-service airline British Airlines. The marketing plan will address the class of consumers who prefer to use full-service accommodations. The marketing plan will use many of the market strategies, such as advertising through the media, flyers and the company website. The marketing plan will extend for a 12 month period and following will be an evaluation plan to be used on continuous bases. Company Overview-British Airlines The full-service airline offers high level of fixed and operating costs. Full service airlines operate with fixed cost and fixed products and service (Smith, 2002). The airline provides different types of services such as in-flight meal, travel assistant, lounge access, and many others services. The full service airline has faced much competition from the many low cost airlines on the market which are airlines that provide limited service for in-flights they are able to lower their costs of travel. The airline comes with many services including two class segmentations, online or direct travel agent, and others services. The carrier being one of the oldest airlines in the world continues to support the full service model despite the many low cost airlines. British Airways is the elite carrier in the United Kingdom. The headquarters are located in the Waterside area in London Heathrow Airport. British Airways is the largest airline in the UK it is ranked high among the fleet of international flight destinations. The airlines just signed...
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...The aim of this paper is to discuss how low cost carriers will continue to impact the airline industry in 2012 and beyond. We will look at the history of the budget airline industry and their consumer targets. As well as analyse what marketing strategies they use that have allowed them to grow so much. A low cost carrier is an airline category defined primarily by low fares but also by a focus on reducing operating costs by eliminating complexity and charge for product elements which go beyond the basic product: the flight. The first budget airline company Southwest Airlines was launched in 1971 in Dallas Texas and turned profitable in 1973. According to the e-magazine Airline Business (2012) research, Southwest Airlines is the biggest domestic airline in USA and is the biggest budget airline in the world by revenue. Ryanair is the second largest low cost carrier with its launch in 1990 In the UK followed by EasyJet and Virgin. In 2001 Ryanair and Easyjet started to offer connections between two airports outside their home which was only possible due to a political decision allowing airlines to turn from more governmentally controlled transport providers to private companies on a free market. LCC became popular since the 1990s because of the low-fares and no-frills service. Compared to the full cost carriers (FCC), more people chose to fly with low cost carriers because they can fly domestically and to more countries. Furthermore, LCC tend to have scheduled flights and...
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...Critically examine the impact of political, economic & legal factors affecting the airline industry. The airline industry has had its fair share of ups and downs the following are the factors that are affecting the airline industry Economic factors A huge amount is spend in landing fees, time spend in foreign lands and all these fees are paid in US Dollars and it might expensive to some airlines especially if the exchange rate is weak. Fuel prices are also in US Dollars so the stronger the currency of origin against the US Dollar the cheaper it becomes to reduce overall operational costs for the airlines however the sad story is that only a fewer currencies are stronger than the US Dollar. Fuel prices have consistently increased and is likely to continue into the future while price wars between airline companies have become ever more intensive due to increased competitive levels in the industry. Fuel costs as play a significant role in the day to day running of an airline as fuel costs constitutes 30% of total operational cost. This is due to existing rivalries as well as new entrants within the discount airline market segment. In contrast to its rivals SIA has preferred policies of adding extra value through customer service rather than ones of pure discounts on prices. Similarly investment in technology such as the development of an e-ticket system enhanced its strength in terms of cost effective sales and billing systems. These developments have been supported by skilled...
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...analysis of the task environment of an industry or company (Wheelen and Hunger, 2009). The threat of new entry is high because there are no significant barriers of entry in the airline industry. For example, airplanes can be easily leased, defraying the large initial capital investment. Additionally, exit cost in the business is considered to be low as airplanes can be easily sold off or redeployed to other markets (Sundaresan, n.d.). Least to say, business in budget airlines is getting more lucrative with more flyers turning to low fare flights. Thus more airlines are providing low fare flights to meet the demands of flyers. Power of supplier of Jetstar is considered to be low. There are two main inputs to the airline industry; aviation fuel and airplanes. Since aviation fuel is a commodity, which prices are largely determined by the market forces and geo-political forces (Sundaresan, n.d.), it can be said that the suppliers do not have much of a control over the prices put out to Jetstar. With regard to the supply of airplanes, there are currently two manufacturers that dominate the scene in the airline industry; Boeing and Airbus. Since Jetstar has dealings with both Boeing and Airbus, the power of the suppliers over the airline is relatively low as compared to others that have dealings with only one manufacturer (Rahman, Joha, 2010). The power of buyer is significant as seen through the intense price competition amongst airlines. Not to mention,...
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...position of Singapore Airlines Module No : EG3080 Module Title : Business Application in Engineering Submitted by : Chia Kok Kwang Alvin (K1068496) Table of Contents Page 1. Abstract 3 2. Introduction 4 3. Background 5 4. Singapore Airline’s Macro Environment (PESTEL Analysis) 6 5.1 Political Factors 6 5.2 Economic Factors 7 5.3 Socio-cultural Factors 7 5.4 Technological Factors 8 5.5 Environmental Factors 8 5.6 Legal Factors 9 5. Competitive forces and firm strategy (Porter’s 5 Forces Analysis) 10 6.7 Threat of new entrants 10 6.8 Threat of substitutes 10 6.9 Power of buyer 11 6.10 Power of supplier 11 6.11 Competitive rivalry 12 6. Strategic Capabilities (SWOT Analysis) 13 7. Strategic Choices (Porter’s Strategies) 14 8.12.1 Cost leadership 14 8.12.2 Focus 14 8.12.3 Differentiation 14 8.12 Strategic choice of Singapore Airlines 15 8. Challenges ahead of Singapore Airlines 16 9. Conclusion 17 10. References 18 & 19 1. Abstract Singapore Airlines leaves a deeply positive impression in many people’s heart as a leading airline that is dedicated to bring the highest level of products and services. We will look into how Singapore Airlines achieve its excellent...
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...Classic airlines is one of the largest airlines and commands a fleet of more than 375 jets that serve 240 cities with over 2,300 daily flights (University of Phoenix Material, 2009).They continue to be a very profitable company, but with rising overhead costs and the current state of the economy, classic airlines has experience some set back. There are many internal and external pressures that contribute to Classic Airlines current crisis. In order to address this crisis, Classic Airlines must use the basic problem solving method. They must also utilize their internal marketing resources and explore external marketing options to find a profitable solution. Below is a diagram of the problem solving method (BPI Consulting, 2004): The first step is to define the problem. “Step 1 is a critical step in the problem solving process; it determines the overall focus of the project (BPI Consulting, 2004)”. Classic Airlines is a profitable company, however, they have experienced a decline in their market shares. This decrease in shares has resulted in negative press from the media and heavy criticism from market shareholders. These results have greatly affected employee morale, which can influence productivity. Another problem is the rising overhead costs which includes fuel and labor cost. Classic Airlines has implemented a cross-company budget cut for all departments. Classic Airlines has also seen a decrease in the enrollment of their classic rewards program. This means that...
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