Essay about SilkAir: Demand for Air Travel in Southeast Asia

Airlines Industry is large and growing, it is also the most fiercely competitive sector. It facilitates international trade, world economy growth, tourism and international investment. The airline industry has over time with the use of modern technology been able to take advantage of the short haul, high frequency and gained a competitive advantage over other forms of travel, such as buses and railroad travel. Additionally, the airline industry still holds the market for global travel at a low cost and convenient way to travel. The aviation industry gives a good contribution to the GDP which includes the following: airline services, general aviation, civil airport operations, aircraft manufacturing, and

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

The four cost components of the airline industry – fuel, landing fees, aircraft leasing and taxes - has made operating Lucky Air in a productive manner a constant challenge. Even though the company has a high competitive advantage being linked to Hainan Airlines, it still needed to upgrade its business strategy on a regular basis to ensure maintaining the lead they had over the other airlines. The company like all its counterparts face a myriad of restraints including heavily regulated governmental laws, limitation to price reduction, a low potential for rapid expansion due to government restrictions and heavy taxes.

Airlines use a formula of combining their yield and inventory costs to determine ticket prices. While it is imperative to focus on the idea of being profitable, the focus is to maximize the cost of the flight revenue. One huge factor that encourages an increase in the cost of tickets relates to a customer ordering a ticket close to the departing date, define this as a risk factor because they need to make up for all unsold seats. A high percentage of the revenue is dedicated to overhead costs such as fuel and labor. When a ticket price is higher with one airline than the other, the customer interprets this as being an excessive cost. The demand is greatly affected by the external market

Airline industry is the major engine powering the globalization of businesses and services. Prior to 1970’s, the airline industry was mainly owned and controlled by the governments in different countries. There was no free market competition as travelers have to make do with the services and prices available to them from the few airlines. But with the deregulation of the airline industry that swept across the world after 1970, entry barriers were lowered allowing new start-up of many airline companies, thus engendering competition in the airlines industry. This has led to competitions in various fronts, especially in prices and services provided onboard the flight. This competition has led to formulation of various business modules and the re-strategizing of the already existing and new start-up companies, in order for them to survive the new business environment. The operating environment of the airline industry continues to evolve, thereby presenting a significant challenge for the survival of the industry. Different models and frameworks have been formulated for analyzing the operating environment of various industries. In analyzing the operating environment, it is vital to indentify the different factors that might affect the organization cost, supply and demand. PEST (Political, Economical, Social and Technological) is one of the framework used for analyzing the macro-environment affecting organizations in a

People in the Southeast Asian have low average incomes. The low average incomes should boost the cheap fares demands. In recent years, because of the government decreased the entry barrier of airline industry, more and more carriers entered the airline market. The Southeast Asian has very large populations; these carriers are attracted by the large number of potential travelers. This caused the Southeast Asian budget traveler increase very quickly. Otherwise, the fuel prices increased very quickly, and

In the case study all of the business models that Air Asia uses is matched with a Low cost carrier business model such as if the passenger need the food on board they need to pay an extra payment because no frill to serve, every passenger will sit in the same class. All of the business models will concern about the lowest cost as much as they can create: For instance: Reducing the personal cost by providing the multiple role to employees, not only work as a flight attendance but also work as gate agents. In addition Air Asia keeps operating costs low by uses one type of aircraft which is Airbus A320. The business model that Air Asia uses can be result in the benefits of an organization and thus called “Competitive Strategy of Air Asia”. Some of the business model that made is better than other airline, such the promotions that always attract customers, For instance; The price of the ticket start as 0.99 RM. This strategy is causing over the million of passengers. From all of above It can be referred that the type of competitive strategy which Air Asia use is ‘Cost leadership’ which is a process to serve customers at the lowest cost in order to fulfil the customer needs under the cost control in an organization. In this large of competitive market, Air Asia beginning in the right ways. The market positioning strategies and management of Low-Cost Airlines was clear from the beginning. According to the business model of Air Asia that shown in the case study indicated that the firm structure can result in Competitive advantage, Air Asia cut costs in every operation such as aircraft cost, but the performance still provide in a great ways, So Air Asia gain more profit than rival firms because their operation cost lower than other airlines and because cost reduction is another way to bring in revenue. Air Asia also find out how to maximize profit, such as sale Packages (a case study on Air Asia

The airline industry is in a downturn. In 2001, the International Air Transport Association had a net loss of $17 billion, which is more than the industry has made in its entire history. 3 This has led to a grim short-term outlook for the airline manufacturers, and subsequently Boeing has cut 2002 production in half4 and Airbus by one fourth. 5 This, however, is not necessarily a good measure of the industry’s condition, since both companies have an extensive backlog that can be used to maintain these new targets. Although the total backlog of 2,783 planes is worth an estimated $172 million dollars6 it is also somewhat uncertain due to lax cancellation penalties negotiated by the airlines during the boom years. Furthermore, the rise of low-cost airlines does not directly translate into a larger market for aircraft due to the fact that the success of low end carriers tends to reduce the demand for aircraft by the large carriers.7 It is important to note however, that this is not a permanent depression in the market, but a reflection of the cyclical nature of the industry.

Airlines account for over 40% of the company’s clientele list so the need to increase this number and sustain it is vital. As such, the company has chosen to expand its international operations into the Asian market while continuously improving the European market. The decision to expand in the Asian market is to remain competitive but to also attract new clients

China has a large and young population. It not only created many opportunities for airlines to attract customers but also provided cheap man power. Beside that, airlines industry has concern about social characteristic of enterprise as researching the market. The social factors will divide the community into groups of customers depend on the average life expectancy, health status, eating habit, average income, lifestyle, knowledge, psychology and living conditions. That way China Airlines can offer customers the best quality services. Along with the growth of economy, culture also changes accordingly with morden life. To those who have high or even average income and care more about saving time, aviation transport is the right choice. Meanwhile, in recent year, China is considered safe country and is one of the top acttactive destinations in the world that has made the number of tourists visit China increasing, especially tourists from Asia, Europe and America (China inbound tourism in 2015, 2015). Tourism development led to increased aviation revenue. One more aspect of the social factors is that many people have considerd using air transportation as one of the ways to express and assert themselves which creates favorable condition for airlines industry to approach the subconsicous and the needs of custumers. It is proven by the fact that China Airlines had a good result with a

When people think about airlines, they think of luxury as well as comfort. Though, under the surface, the airlines worldwide, is caught in a higher operating costs, low profit, and decreasing margins due to the few features that will be mentioned in this report. The PESTLE analysis is used to analyze the current state of this industry.

Air freight market is not stable and might be weak because of uncertain international trade increase (Barnard,2015). There was fluctuation in air cargo demand over the last 10 years from 2006 to 2016 which indicates that cargo demand could be changed by some external and internal influences. Some figures were released about worldwide air freight market and presented that air cargo capacity increased 2.2%, comparing to 2014. While this was the 5% growth calculated by The International Air Transport Association (IATA), the growth of cargo volumes in 2015 was much slower than 2014(Barnard, 2015). However, some experts pointed out that global air freight market get a positive growth from 2011, and it is enjoying a relatively steady growth, due to the enhanced trade and economic recovery after the global financial crisis of 2008(Huang,2016). Because of sluggish world trade growth, air cargo suppliers face a lot of challenges including alternative transportation, perspective uncertainty and unexpected policy and here are some potential solutions: improving customers service, efficiency, security and reducing negative environmental impacts.

The September 11 attacks left a major impact that the airline industry is yet to recover from. Extended recession and increasing oil prices are the other major factors affecting the growth of the airline industry. At this scenario, the airlines operating with unoccupied seats make huge losses and sometimes the airliner even goes bankrupt; for instance, the kingfisher airlines in India has gone bankrupt due to failure in managing the unoccupied seats and inefficient management in their ticket pricing strategies. Even the recent disappearances of aircrafts from Malaysian airlines have unfavorably affected the global airline industry leaving airlines operating with vacant seats.

In recent years, affected by natural disasters, emergencies, oil price volatility, the international financial crisis and other factors, especially the oil price, that is the most major factor of the airline cost, and still increasing, made the airline industry’s production decline shaply.

As in US, budget airlines have dominated the market as travelers are price driven; in Europe, more local airports are needed to be opened up to let more budget airlines to fly in; in Asia, there are more opportunities to expand the whole market but the path is not easy, since the market is still dominated by the national flag carriers. Besides, they are also supported by the cargo business. (Scott Lee, 2004)