The Case of Eagle Air Eagle Air is a UK-based airline that used to specialise in long haul flights to a wide range of destinations across the world. Originally a publicly-owned state enterprise, Eagle Air (EA) was privatised and floated on the stock market eight years ago. This event drew a lot of attention from large companies and individuals alike who rushed to buy shares. Other important changes also happened in the wake of EAT’s privatisation and floatation, including a revision of the terms and conditions of employment for all staff. The salaries of pilots and cabin crew were substantially increased – where they benefitted from a hefty 30% rise in pay and could respectively earn up to £180, 000 and £60 000 per annum. As for ground crew and other support and frontline staff, their terms and conditions were unrivalled across the industry as they were paid 25% more than their counterparts in other airlines alongside a reduction in working hours. An Alarming Financial Situation However, this rosy picture has been exacerbated by changes in the tourism industry brought on by the recent pandemic, which inevitably has had adverse effects on all airline operators, with a sharp fall in demand for travel. Last financial year during the height of the pandemic, the airline reported a £200 million loss. The loss for the last three months of the current year was over £90 million and the figures for the rest of the year look like being just as bad, with losses running at over £120, 000 a day. Several other factors also served to bring about this alarming situation. These include continued uncertainty with respect to the travel situation and continuing low passenger numbers, an escalation in fuel prices, a substantial rise in airport tax, and a general increase in the prices of commodities related to passenger travel (such as food and beverages, toiletries and other passenger comfort items) – resulting in a persistent fall in revenues and profit margins. The situation is compounded by increasing competition with other airlines offering less generous terms and conditions of employment, and the pressure to invest in ‘green technologies’ to reduce carbon emissions and become more eco-friendly, whilst sustaining service modernisation. A Twofold Strategy to Deliver Competitive Advantage In response to the financial crisis facing the company, top management called for an urgent board meeting to carry out a fundamental review of the current situation and develop a new business model that can deliver unique value and long-lasting competitive advantage. After careful deliberation, top management voted in favour of a twofold strategy: (i) a merger with Air Fast which operates short haul flights within the UK and across Europe and (ii) joining the Proxima Alliance, a huge global partnership that brings together some of the most reputed airlines in the world. 1. An analysis of the change context taking into account both the internal and external drivers for change including PEST and SWOT Analysis.
The Case of Eagle Air
Eagle Air is a UK-based airline that used to specialise in long haul flights to a wide range of destinations across the world. Originally a publicly-owned state enterprise, Eagle Air (EA) was privatised and floated on the stock market eight years ago. This event drew a lot of attention from large companies and individuals alike who rushed to buy shares. Other important changes also happened in the wake of EAT’s privatisation and floatation, including a revision of the terms and conditions of employment for all staff. The salaries of pilots and cabin crew were substantially increased – where they benefitted from a hefty 30% rise in pay and could respectively earn up to £180, 000 and £60 000 per annum. As for ground crew and other support and frontline staff, their terms and conditions were unrivalled across the industry as they were paid 25% more than their counterparts in other airlines alongside a reduction in working hours.
An Alarming Financial Situation
However, this rosy picture has been exacerbated by changes in the tourism industry brought on by the recent pandemic, which inevitably has had adverse effects on all airline operators, with a sharp fall in demand for travel. Last financial year during the height of the pandemic, the airline reported a £200 million loss. The loss for the last three months of the current year was over £90 million and the figures for the rest of the year look like being just as bad, with losses running at over £120, 000 a day. Several other factors also served to bring about this alarming situation.
These include continued uncertainty with respect to the travel situation and continuing low passenger numbers, an escalation in fuel prices, a substantial rise in airport tax, and a general increase in the prices of commodities related to passenger travel (such as food and beverages, toiletries and other passenger comfort items) – resulting in a persistent fall in revenues and profit margins. The situation is compounded by increasing competition with other airlines offering less generous terms and conditions of employment, and the pressure to invest in ‘green technologies’ to reduce carbon emissions and become more eco-friendly, whilst sustaining service modernisation.
A Twofold Strategy to Deliver Competitive Advantage
In response to the financial crisis facing the company, top management called for an urgent board meeting to carry out a fundamental review of the current situation and develop a new business model that can deliver unique value and long-lasting competitive advantage. After careful deliberation, top management voted in favour of a twofold strategy: (i) a merger with Air Fast which operates short haul flights within the UK and across Europe and (ii) joining the Proxima Alliance, a huge global partnership that brings together some of the most reputed airlines in the world.
1. An analysis of the change context taking into account both the internal and external drivers for change including PEST and SWOT Analysis.
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