...EasyJet: the web's favorite airline The case pertains to the growth and sustenance of EasyJet airlines, a low-cost carrier operating in the European skies. EasyJet’s concentration has so far been on low-cost airline services to the masses, and although it faces competition from other low-cost carriers as well as major carriers, it has been able to successfully sustain its business and turn around an initial loss into profits of £2,318,938 [exhibit 2]. EasyJet’s value proposition has been to offer a cheap, punctual, safe, no-frills method of travel to people who generally paid out of their own pockets. This has been possible thanks to an efficiency-driven operational model, high brand awareness and a sustained focus on satisfaction of customer expectations, often exceeding them. The emphasis has been on “value for money” and affordable quality travel with an added emphasis on customer satisfaction. Being a low-cost carrier, customer expectation were minimal and thus brand new planes with the best of pilots and punctual flights was clearly successful in delighting the customer, as evidenced by the high number of repeat fliers. A lot of emphasis was given to customer satisfaction offering better customer flexibility and punctuality. EasyJet’s competitive advantage has been derived from a policy to cut down on costs and hence frills in every aspect of short distance travel. EasyJet has been modelled after a very successful South-West airlines and it also managed to enjoy first-mover...
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...to expand into India INTRODUCTION – THE COMPANY AN OVERVIEW Easyjet Airline was established in 1995 by Sir Stelios Haji-Ioannou a Greek Cypriot as part of EasyGroup Holdings Ltd. He envisaged it as a low cost airline which could impact on the existing domestic market in the UK which was at the time dominated by large British companies such as British Airways and British Midland. The Company started with two leased airplanes and began operating from London Luton to Glasgow and Edinburgh In 1996 they began operating from Luton to Amsterdam and now in 2014, operate on 633 routes across more than 30 countries and own 217 Airbus aircraft. They employ over 8,000 people including 2,000 pilots and 4,500+ cabin crew and in 2013 they flew over 60 million passengers They now claim that “over 300 million people within a one hour drive of an EasyJet airport” (Easyjet About Us 2013) The obvious move for the airline for further growth may now be outside of Europe and India may be the best market to consider. PESTLE Analysis Political/Legal Up to April 1997 the European Airline Market was regulated strictly and each county controlled their own airline companies. After 1997 and deregulation the European market opened up for carriers and subsequently for example an Irish low cost carrier like Ryan Air was allowed to operate between two other European countries. Since then European routes have increased by140% ( Ingdahl W. “Flying has never been safer” Spiked 19 03 2014) This was followed...
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...JetBlue Airways Air travel is a large and expanding industry. It facilitates economic growth, world trade, international investment, tourism, and is critical to globalization. Over the past ten years, air travel has grown by approximately seven percent per year. However, the airline industry suffered its largest downturn between 2008 and 2009, due to the economic downturn. Airlines carried 767,627,651 passengers in 2009, down from 809,447,811 passengers in 2008. Airlines have been forced to accommodate the economic recession by cutting flights, rescheduling existing routes, and looking for new revenue streams. As the economic recession revives itself, the demand for flights has begun to increase with 787,182,312 passengers flying in 2010; a significant upturn from the previous couple of years. Business travel has grown as companies increase their international presence in terms of their investments, supply and production chains and their customers. The rapid growth of global trade markets in goods and services and international investment have all contributed to growth in business travel. The domestic travel industry in the United States is typically a low cost, low fare environment. Most of the major airlines have undergone cost restructuring. Some airlines have sought the protection of Chapter 11 bankruptcy to restructure and reduce costs and then emerged as strong low-cost competitors. The majority have entered into cross-border alliances to improve profitability...
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...STRATEGIC ANALYSIS OF AIRASIA THE BEST LOW-COST CARRIER AIRLINES IN THE WORLD ASSIGNMENT FOR MICROECONOMICS FACULTY OF ECONOMICS AND BUSINESS NATIONAL UNIVERSITY OF MALAYSIA BY: IWAN BUDHIARTA P-46048 MALAYSIA – 2009 I. INTRODUCTION A low-cost carrier (also known as a no-frills or discount carrier) is an airline that offers low fares but eliminates all “non-essential” services. The typical low-cost carrier business model is based on: * a single passenger class * a single type of airplane (reducing training and servicing costs) * a simple fare scheme (typically fares increase as the plane fills up, which rewards early reservations) * free seating (which encourages passengers to board early) * direct, point to point flights with no transfers * flying to cheaper, less congested secondary airports * short flights and fast turnaround times (allowing maximum utilization of planes) * "Free" in-flight catering and other "complimentary" services are eliminated, and replaced by optional paid-for in-flight food and drink. Simple Product A typical low cost airline product is extremely basic. It focuses on getting passengers from point A to B, cutting out all the “extras”. This means there are no meals, drinks or snacks served free on board. In certain airlines, these may be purchased on request. The aircraft have Narrow seating to permit greater capacity. Low cost airlines offer all-economy flights, with no additional space requirements...
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...backward services If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs. (5) Cathay positions itself as an airline offering quality service, service is absolutely critical. Cathay has been gained the Skytrax Airline of the Year in 2003/2005/2009 and 2014 (6). But we’ve found its go backward in different aspects in recent years. High level on-time performance is a key aspect of quality at the airline. However, according to the On-time performance monthly report (June 2017) Aviation Worldwide Limited (7), both Cathay Dragon and Cathay Pacific ranked at no.134 (on time percentage – 52.1%) and no.125 (on-time percentage – 63.8%) compare to Global airlines (total 376 airlines) and ranked at no.112 and no.81 compare to ASPAC airlines (total 117 airlines). The situation is even worse than some budget airlines. For improve profitability, Cathay is re-configuration the economy class from 9 to 10 seats from 2016. It means that’s reducing the comfort of the passengers (8). On the other hand, the frequency for deep cleaning of the aircraft cabins has been declined from once every 14 days to once every 21-30 days. (9) All these decision, which will align the carrier with the budget airlines, may yet prove unpopular with consumers - High Operating costs According to the Cathay 2017 Annual report, we can see the expenditure on the staff salary take up 20% of the operation cost. (10) The proportion almost...
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...and structure of airline industry. Out of STEP analysis I have identified the following ain issues: Deregulation will stimulate competition, but also market growth Lower prices will cause focus on costs Focus on security measures will increase costs There is no need for added values in connection with prestige Analysing the airline industry by Porter’s “Five Forces” I have stated: Big Player and/or Alliances fight a price war, often using a second brand (Buzz, etc.) Big Players have not identified and reacted on the change in environment Few structural changes to support the need of cost effectiveness und to bring them in line with new customer requirements Because of the very static picture I have supported that analysis by BCG strategic model: BCG's Strategic Enviroments Matrix Many Source of Advantage FRAGMENTED Airline Industry SPECIALIZATION 2nd brand for Budget Segment STALEMATE Budget Airlines VOLUME Few Small Size of Advantage Big Global airlines which come from the „Fragmented Segment“ with a 2nd brand try to enter direct the „volume market“ taking their costs for product differentiation with them, causing not competitive costs Airliners like EasyJet coming from the “stalemate segment” into the “volume segment” are focused with their strategy on the real customer expectation and are therefore cost competitive. To better understand the strategy of EasyJet within...
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...WestJet Airlines WestJet Airlines is a Canadian low-cost carrier that was founded in 1996 by an entrepreneur Clive Beddoe. With an idea to start up a low-fare airline company, Beddoe quickly found a team of like-minded partners and WestJet Airlines was born. The role model for WestJet was Southwest Airlines and Morris Air, both operating in the United States. The main goal of the newfound company was to offer “affordable air travel coupled with good service” (WestJet handout, pg 52). Besides being a very successful low-fare carrier, WestJet has a unique corporate culture that has been built around caring for its passengers. Even though, the image of WestJet Airlines seems perfect for today’s economy, this company faces some issues that will be discussed throughout the paper. The main problem WestJet faces is how to maintain the corporate culture with rapid company growth. The “fun” culture is what WestJet is very proud of and “believed that the culture was the key to their airline’s continued success and they could not afford to mismanage it” (WestJet handout pg 52). In tough economy and market competition, WestJet top management needs to make very important decisions to compete with its competitors while keeping the unique corporate culture. First, the company’s challenges need to be analyzed to decide what the best alternatives are for WestJet future. To begin with the analysis, very important characteristic of the WestJetters is they are so customer oriented and...
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...Low cost airlines Definition of low cost airlines Ryanair is a low cost carrier, well-known in Europe which started in 1991 as a ‘no-frills’ service airline between Ireland and the UK. By 1995, Ryanair spread to more European countries. Nine years later it carried 20 million passengers and 10 years after that, in 2010, the number of passengers doubled to 45 million. This low-fare short-haul airline was no\t the first airline was not the first airline with these characteristics. It was Southwest Airlines, an American airline which was introduced in 1967 and still going strong in 2016. (Quintano, 2015) Low cost airlines can be defined as being practical in a way that different low cost airlines offer different services. Some low cost airlines...
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...Abstract This chapter analyses the freight rate mechanism in the shipping market. Sea transport is a derived demand where shipping demand occurs as a result of seaborne trade. The demand determinants affecting sea transport include government and political factors, the world economy, seaborne commodity trade, average haul, and transport costs. On the other hand, determinants for shipping supply are fleet size and operational efficiency. The shipping supply function shows the quantity of shipping services by sea transport carriers that would be offered at each level of the freight rate, whereas the shipping demand function shows how shippers adjust their demand requirements to changes in freight rates. In the shipping market, the supply and demand curves intersect at the equilibrium price, where both carriers and shippers have reached a mutually acceptable freight rate. Furthermore, the concept of the “shipping cycle” is introduced in this chapter. A shipping cycle starts with a shortage of ships and increases in freight rates, which in turn stimulates excessive ordering of new ships. The delivery of new ships leads to more supply in shipping capacity. The shipping cycle is a competitive process in which supply and demand interact to determine freight rates. 2.1 Demand for Sea Transport The shipping business uses the market mechanism to regulate supply and demand. Demand for freight transport is determined by demand for physical commodities in a given location...
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...companies in the airline business are faced with challenges such as threat of new entrants, high buyers power, high suppliers power, availability of substitutes, and intense competition. Historical operating results are poor. The company has been having continuing losses since 2008. Also, financially it is not healthy. Air Canada leverage ratio is very high, and obligated to significant debt due to pension fund, employees’ benefit, and orders of new crafts. Labor strike is a major risk factor. Recently, the company was faced with several strikes that caused many flights delays or cancelations. Negotiation is taking place between the company and labor unions. Outcome this negotiation might result in higher labor cost preventing the company from enhancing its cost structure. According to S&P, Air Canada credit rating is B-, which is a non-investment grade. Also, Moody’s downgraded the company from B3 to Caa1 due to its debt obligation and high leverage. Company Overview Air Canada is the largest full-service airline in Canada and the 15th in the world. With fleet consisting of 350 aircrafts, it serves more than 180 domestic and international destinations with 1,470 scheduled fights daily carrying over 32 million passengers yearly. Air Canada provides scheduled passenger services in the Canadian market, the Canada-U.S....
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...Global Competitive Strategy Executive Brief: Delta Airlines Executive Summary: After years of instability, decreasing profit margins, and volatile costs, the airline industry is experiencing stabilization and profitability. Though low-cost carriers, such as Southwest and Jetblue, were able to succeed during rough economic times, Delta should not launch a new stand-alone discount airline to directly compete within this market. As shown in Exhibit 1, despite recent changes in the industry - including consolidation, bankruptcy filings, and a forecasted positive economic outlook - intense competition and supplier power remain extremely high for the industry. Based on the following analysis, Delta is in direct competition with other legacy airlines such as United/Continental and American Airlines for the higher end market juxtaposed to its less direct competition with low-cost carriers, e.g. Southwest, which fall into a separate strategic group targeting a different market and consumer. As a result of Delta’s entrenched strategy of providing many routes and amenities for higher ticket prices, the company’s core competencies, resources, and activities do not align with the discount airline market and, therefore, the company should not launch a new low-cost carrier airline. Company and Competitor Analysis: Delta’s core competencies are to provide multiple domestic and international routes to travelers, customer service and luxury, technological innovation, and access...
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...realised that there was a growing need for affordable air travel as the market had become seriously price sensitive. The economy had weakened at the time and travelling expenses had been cut.6 This realisation led to the launch of kulula.com in July 2001 as a separately branded Comair initiative: a South African low-cost, no-frills airline modelled on the successful European low-cost airline, easyJet. Kulula.com offered return flights between Johannesburg and Cape Town for as little as R800, three times a day, and received 2 000 bookings on its first day of operation. The product offering was simple: easy online booking directly with the airline and affordable fares. At the same time, frills were kept to a minimum: tickets could not be changed once they had been purchased7; there was no pre-assigned seating8, frequent flyer programme or business-class; and food and drink were sold on board rather than distributed for free.9 By stripping costs out of kulula.com's operations and business systems, the airline was able to offer up to a 40% discount on a conventional airline ticket. Research had found strong evidence to suggest that independent players did better in the low-cost segment because they were not bogged down by the systems and culture of the full-service airline. So, if kulula.com were to succeed it would had to make the most of the benefits of belonging to the Comair group but also transform its business model. Several local and...
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...improving air travel demand over the next few months beginning at the end of 2009. At the end of 2009, the reported traffic statistics at many major carriers showed improving demand and revenues . Therefore, it is reasonable that the U.S. airline industry could be undergoing the start of fundamental industry demand improvement. In addition, since the industry has already reduced capacity levels, it should be able to raise fares as passenger travel demand improves. Even though oil and jet fuel prices is up sharply from 52-week lows, they are still notably lower than in 2008 , which should ease cash usage throughout the group and allow good entry points into new fuel hedge positions, thereby offering protection if oil spikes again. According to S&P, the top 10 U.S. carriers lost about $5 billion in 2009, after a $4 billion loss in 2008, as the benefit of lower jet fuel costs was eroded by lower airfares and falling passenger levels. Results in 2008 were impacted by record high oil prices. Airlines have cut fares in response to weakening demand, but we think recent cuts to domestic and international supply could help restore some pricing power. For 2010, S&P estimates a net profit of about $2.0 billion for the top 10 U.S. major airlines Continental Airlines, Inc. –SWOT Analysis Continental Airlines is a major U.S. air carrier engaged in the business of transporting passengers, cargo and mail. The company has a strong market presence and a robust hub system. The company would...
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...Southwest Airlines Corporation Introduction Southwest Airlines is America’s largest low-fare carrier, serving the most domestic customers than any other airline due to their unique combination of low fares, friendly customer service, record of safety, lack of fees, and “an extraordinary corporate Culture that extends into the communities (they) serve.” (Southwest, 2013) Incorporated on June 18, 1971 in Texas, Southwest airlines commenced, serving three Texas cities with three Boeing 737 aircrafts under the direction of its’ founders, Rollin King and Herb Kelleher. Their philosophy was simple and consisted of an idea that getting passengers to their destinations when they wanted to get there, on time, at the lowest possible cost, “and make darn sure they have a good time doing it”, customers will show loyalty to the airline and ensure its success. (Southwest, 2013) Proof of the company’s success was confirmed in 1989 when it exceeded one billion dollars in revenue and established itself as the highest ranked in customer satisfaction among all major airlines. Analysis The mission statement of Southwest Airlines boasts a “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” (Southwest, 2013) Additionally, Southwest confirms a loyalty to its employees by creating a stable work environment opportunity for personal growth and the development of practical life skills. Above all, the company possesses...
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...Association (IATA), the global airline industry has doubled its revenue over the last decade, from US$369 billion in 2004 to a projected US$746 billion in 2014 (PwC, 2015). According to the IBISWorld Industry Report (2015), the global airline industry looks set to increase its revenue growth by 1.2% to $783 billion. In the recent 2015 IATA’s Annual Review, we have witnessed good profit in the global airline industry with a strong net profit of US$16.4 billion in 2014. Through the 1980s and 1990s, the emergence of low-cost carriers (LCC) has a big...
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