Factors That Affect On Airlines

At the present time, the airline industry faces many cost pressures. The industry has made remarkable achievements in improving its efficiency. But cost pressures continue, from record high fuel prices to unjustified increases in charges from monopolistic airports, to further taxes imposed by governments (industryspotlight.org.uk). Higher costs inevitably lead to higher prices for airline passengers. Aviation is vital part of the United Kingdom. It is not only crucial in sponsoring almost 1 million jobs and £50 billion of GDP, providing around £8.7 billion in taxes to the Treasury of the country, but aviation is also fundamental to the success of economic benefits from air transport in the United Kingdom (Roberts-Hughes, 2014). Aviation supports exports, services, manufacturing, foreign direct investment and of course tourism. This sector gives us opportunity for the holidays and visits of family and friend in different parts of a country and also around the world.

1 This essay will assess how globalisation has impacted on the airline industry using British Airways as an example to illustrate this change had on the industry as a whole. This essay will attempt to show how the airline industry and British Airways in particular coped with thesee change and how neoliberalism thinking allowed and supported this fundamental change to happen.

Based on the organisation that you have selected, you are required to describe the organisation’s mission, describe and classify the organisation’s strategy, and identify its‟ value proposition and core competencies. Using Porters Five Forces Framework illustrate these five forces for your organisation, and provide brief comments on how these forces they influence your organisation’s profit potential. Using the Balanced Scorecard as a contemporary performance measurement framework, evaluate the current financial and non-financial measures that your organisation uses. Based on your evaluation, indicate in your opinion, the extent to which the

Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.

The Airline industry today offers services to nearly every place of the globe. The following economic factors that include consumer behaviour, currency rate, purchasing power of consumers, oil price plus the inflation plays key role in deriving the country’s economy. According to (Macmillan & Tampoe 2000), Airline industry itself is a leading economic force in terms of both its effects on associated industries for example aircraft manufacturing, operations and tourism. In this regard, this paper discusses the economic factors that affect the decision, the board of Air Asia needs to consider before acquiring 10 units of Air Bus model A350-1000 to increase its fleet of long haul airplanes.

The last part of industry analysis is about rivalry. In aviation industry, the rivalry is very drastic. This industry develops slowly or even stagnant and it is mature in recent period. There is no new company established in developed areas and also there is no major firm going broken. Most of survivals are big companies. All of them have abundant capital and ample operating experience and hold a relatively fixed percentage of market. In long run, the number of airline companies does not change. In another word, the cake is divided up. However, people define business with a ward, for profit. If airline companies want to share more percentage of market, they must seize other companies’ part.

Buyers are usually customers and customers if powerful have the ability to reduce prices, ask for high quality products and services. In the Indian airline industry, the bargaining power of buyers is high and is increasing as there are lots of airlines to choose from and there are hardly any switching costs. Moreover, there are lots of travel agents and customers can now buy ticket online from even intermediaries. Therefore, they do not really have to stick to one airline and this increases the power of the customers.

American Airlines is one of the major American airlines who serves nearly 50 countries globally and also a member of the one world global alliance. The airline corporate headquarters are in Fort Worth, Texas. Over the years the airline expanded through the union or merger of 85 companies. Robertson Aircraft Corporation and Colonial Air Transport were the core of the foundation of this company. In 1921, Robert Aircraft organized first in Missouri as a general manufacturer and flying service who flew its first mail route on April 15, 1926 between Chicago and St. Louis, Missouri. The first flight flown by pilot Charles A. Lindbergh. A charter, Colonial Air called Bee Line formed in 1923, flew mail between New York City and Boston which began on

The airline industry suffers from oversupply as well as fixed costs which served as the foundation for low fare carriers who offer no frill flights in return for discounted fares. This approach effectively pulled the casual traveler and spread to frequent travelers and some classes of business travel for companies seeking to cut costs. Buyer demand is re-shaping the airline industry as a result of these options.

With 1988 operating income of $801 million on a revenue of $8.55 billion, American Airlines, Inc. (American), principal subsidiary of Dallas/Fort Worth-based AMR Corporation, was the largest airline in the United States. At year-end 1988 American operated 468 aircraft on 2,200 flights daily to 151 destinations in the United States, Bermuda, Canada, Mexico, the Caribbean, France, Great Britain, Japan, Mexico, Puerto Rico, Spain, Switzerland, Venezuela, and West Germany.

Being the world’s largest airlines regarding revenue and fleet size, American Airlines operates extensive networks both the local and international. The company has its headquarters based in Fort Worth, Texas. United Airlines is the biggest airline in the United States by some destinations served. American Airlines becomes the second largest Airline regarding the number of destinations served. It has a vast area of operation, operating from its main hub at Fort Worth to Washington D.C. other hubs of operation are at, Los Angeles, Charlotte, Chicago-O’ Hare, Miami, New York-JFK, York-LaGuardia, Philadelphia, and Phoenix (McNally et al, 2013). The main maintenance base for the American Airlines is at Tulsa International Airport.

Threat of new entrants relates to the extent of ease associated with entering into an industry and competing with current market players (Volberda et al, 2011). In the Low Cost Carriers (LCCs) the threat of new entrants is low due to the substantial entry obstacles linked with entering the airline industry that include massive capital investment, economies of scale, access to supply and distribution channels, and legal requirements. However, a big threat can emerge in the near future as Full Service Carriers (FSCs) have shown interest in joining the LCC

Elasticity is a term that describes how much the demand or supply for a product or service changes in relation to that product’s price. Every product on the market today has an alternate level of elasticity. Products considered necessities by a majority of consumers are typically less affected by price changes, causing them less elastic. In other word, if the product is not considered essential for the consumers they are likely to buy less when the price increased, making that product elastic.

American Airlines operates as an air carrier providing scheduled air transportation services for passengers, cargo, freight, and mail services. It was founded in 1934 and is headquartered in Fort Worth, Texas with hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. The company employs 124,300 employees and serves approximately 140,000 passengers a day with 6700 flights per day to 350 destinations (American Airlines).

Substitutes to air travel pose a significant threat to the profits of the entire airline industry. It is advantageous to be in an industry with few or no substitutes as they diminish profitability for the industry as a whole. There are many alternative ways in which a person can travel long distances. Therefore, the airline industry is threatened by many substitutes. Trains are the primary substitute to air travel in that they provide long distance travel at marginally lower expense to the buyer. Train stations are also generally more accessible to the public than an airport, which adds further appeal to the substitute of traveling by rail. An advantage held by airlines is the fact that air travel is widely known to be a much faster mode of transportation, yet more and more buyers are choosing train travel over air travel strictly slight for the price advantage.