Eurotunnel Vs. The Ferries Case Summary

Even with high entry costs, many new airlines came into the market. Though the cost of running an Airline in Europe was 40% higher than in the US, and as a result few low-cost carriers were as successful as easyJet. Even with such barriers to entry, it was predicted by analysts that the European low-cost market could grow by as much as 300% by 2004.

Of the three forms of transportation, rail has the highest fixed costs, motor carriers the greatest variable costs, and air transport, the greatest variable costs of service and logistics optimization. Starting with rail, the cost structure has the highest fixed cost components, driven by infrastructure and terminal costs. Rail is therefore the most difficult to negotiate a lower transportation cost for, as the fixed costs form an inflexible pricing structure for retail service providers. The quality of rail service varies significantly across nations and regions as well, leading to greater variability in costs when a shipment moves across national and regional boundaries. Given the highly fixed cost structure of rail systems, there is significant room for improvement from an efficiency standpoint. The use of containerization is continually adding to greater efficiencies to this mode of transport (Jennings, Holcomb, 1996).

The sector employs more than 3 million people. Prior to the 1990’s, the air transport industry in Europe had been traditionally highly regulated and dominated by national carriers and state owned airports. Since then a single market for aviation has been created. The single market has seen the removal of all commercial restrictions for airlines flying within Europe. These include restrictions on routes, number of flights and the setting of prices.

Rivalry among industry competitors has caused attention to be focused on tariff levels. Airfare prices were at an all time low in 2009. This suggested a strong competitive rivalry based on price differentiation. This price differentiation will cause a dramatic loss in revenue if these prices continue to drop and this would lead to a reduced competitiveness. In an effort to safeguard revenue and reduce expenditure, Qantas has developed a strategy to deal with a change in the external competitive environment. .

In order to acquire the market share in any segment, the company uses penetration pricing strategy aimed at increasing the number of consumers in an area. Apart from increasing the sales of the company, this strategy helps in increasing demand for the produce hence a positive result in productivity. In addition, the company uses promotional pricing strategy aimed at increasing the market share at the expense of the competitors (Ferrell & Hartline, 2011).

Jerome Simelane, the airline's Commercial GM, “By using what we have learned over the years about international airline best practice‚ we have also created a cost structure which allows us to offer competitive fares without cutting any corners on quality‚ safety and reliability."

Jim O’ Brien made an observation that a portion of Hardee’s customers have a higher profit rate than others. Hardee has a history of using discounts and published tariff taxes to establish their prices. Although discounts are attained through freight volume, this may have to change due to the fact that the employees work volume is higher than the freight volume. Based off this information, Jim expects a new service demands for his consumer to be troublesome to cost and price because it will no longer be based on freight volume; the new demands will include but not be limited to merge- in-transit, event management, continuous shipment tracking RFID capability, and dedicated customer service personnel. With all this new found knowledge Jim and the pricing managers for Hardee Transportation, is attempting to find a new pricing method that will benefit their customers and themselves; they must find a pricing method

Once Antwerp reached capacity, if EROW could sell one more tonne at price which is no less than NASA’s variable costs plus delivery cost plus $700 fixed cost which is variable to EROW, it is still beneficial.

Market structure can be defined as patterns of behaviour by enterprises in an effort to adjust to the markets in which they operate (buy or sell). Pricing strategies and collusive behaviour mergers are a few dimensions of market conduct. It is the industry norm for a legacy carrier to offer service to most popular destinations; Delta reducing routes to a similar schedule as the low-cost airlines is not an option in the multi-billion dollar industry. In order to gain market share from low-cost airlines, Delta must create a value proposition that differentiates itself from its competitors. Many customers will pay a premium if the level of service provided is higher than the low-cost, no-frills

For the purposes of this report I have chosen Flybe as my main focus of discussion in the UK and European airline industry. Flybe is Europe’s largest regional airline with 162 routes, operating from a total of 53 departure points. In this report I will analyse why it has made sense for Flybe to build on their strengths of being a regional operator and how they have managed to find a niche in the crowded airline marketplace. I will also discuss their strategy for future growth and how they have chosen their battleground carefully. I will discuss in detail how Flybe is attempting to fulfil its mission statements of “Low Cost, But not at any cost” and “To give you safe, efficient and friendly service”(Flybe, 2008).

Moving on towards the various pricing strategies, the first pricing strategy is the differential pricing. This is to charge different prices to different target markets, which is usually not considered illegal in the case of services. The prices charged differ according to the types of customers being served for example children and disabled people usually get a discount on ticket prices.

In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?

We have analyzed the existing booking policy of TransAtlantic Airlines and identified potential cost saving.

But these contracts are not timeless and therefore airports could renegotiate their charges with Ryanair. Although Ryanair’s bargaining power will strengthen their position in the negotiations, it is not assured to win as favourable deals again and hence they could lose this important cost advantage. Furthermore Ryanair as well as any other Low-Cost Carrier is highly dependent on fuel costs. Due to the fact that the price for fuel has been fluctuating extraordinarily over the last years and in addition Ryanair’s fleet is older and accordingly less fuel efficient than the one of main competitor easyJet, a further increase of the oil price could cause significant problems for Ryanair’s cost structure. Unpredictable incidents like natural disasters and terror attacks could lead to a decrease in air travel. In addition there is always the possibility that air travel, especially in continental travel, is substituted by trains or cars. Finally an interesting question is whether the Low-Cost Carrier’s business model is transferable to long-haul operations. One problem is definitely the regulatory context on long-haul services, another one that neither food nor entertainment is provided what can be seen as major problem on a long transatlantic flight. Additionally Ryanair for instance would lose their competitive advantage of fast turnaround and high airplane utilisation. Moreover Ryanair

Hence, the threat of substitutes and rivalry among the existing competitors would be the major forces that shaped the part of competitiveness of Perform 2020 Plan. First of all, as Porter (2008) defined that ‘substitute performs the same or similar function as an industry’s product or service by a different means. For instance, one of the substitutes for the European airline industry would be the Eurostar Railway. For example, a passenger who wants to travel to Paris by 23rd –November-2015 the cheapest ticket he/she could purchase will be from the Eurostar (standard class) and it only costs 146 pounds from start. And the starting price for Air France (economy class) will be 261 pounds. Meanwhile, KLM (economy class) starts from 250 pounds. On the other hand, the timing for airlines does not have many advantages as well. Eurostar needs about 2 hours and16 minutes, Air France costs almost 1hour and 25 minutes and KLM needs about the same duration with Air France as if it is directly flight to Paris and if there is a flight transferring the duration could be 3 hours and 50 minutes mostly as their official websites showing. However, Porter (2008) discussed that the substitutes are easy to overlook because they may appear to be different