Economic segment is how the economy had affected to business in terms, interest rates, taxation, general demand, exchange rate and European and global economic factors. Besides, it also indicates how the company will analyse and make strategies to deal with economic factors. Commonly, decreased in air travel will affect to falling revenue in the airline industries. The economic downturn has reduced the purchasing power of customers with fewer people travelling by air. When there are good in economic growth, consumer’s discretionary income rises and there is often an increased demand for air travel that people like to travel and spend their leisure time with vacation and others.
Several experts believe that budget airline has reformed the entire airline industry and created a momentum for it to grow sustainably. Previously, the airline industry was experiencing a downturn in demand and surging production cost, which led to a profit recession. However, the price was regulated rigorously by the government, causing firms were not permitted to reduce price to stimulate customers demand. Such regulation has forced the fare gone high, and, thereby, customers could only select from similar high fees, discouraging them to fly. Thus, this situation prompted the implementation of relaxation in airline industry through granting more freedom to air-traffic businesses, such as freedom of entry and exit.
Also, some airport hubs cannot consolidate traffic bound for many itineraries. Having this limitation and knowing the fact that some passengers prefer non-stop flights, consideration of both hub-stop and non-stop routing strategies can be more cost-efficient than a pure hub-and-spoke network (Jeng 1987). In other words, non-stop flights are always the most desirable in terms of convenience but on the other hand less desirable in terms of price for price sensitive customers. Moreover, the stops at the hub airports increase the expenses for the airline companies due to the facility charges and landing fees. Therefore, the airlines can generate more revenue by considering these key parameters and applying best network routing
The leadership of such companies would require diverting scarce resources into the culture change program. In 2000, the airline industry was facing a downward trend, but WestJet was looking to expand by either adding more planes or merging with Jetblue, another low-cost airline. Expanding in an economy that was facing a recession would have been self surbotaging. Factually, expanding the business in such conditions
Without mass switching to another airline, buyers have little power at their perusal. Force 5: Supplier Power One of the external powers that Emirates continually deals with is the supplier environment. Supplies are in the form of service expertise and most critically – Jet Fuel. With Saudi Arabia’s decision to regulate fuel costs by limiting the supply of oil, the supplier power in this case is prominent. Rising fuel costs have led to decrease in the revenue of the airline and it also reflects in the marginal increase in the price of their fares every few
MEANS OF COMPETITION If we compare the both companies then it can be done in the multiple ways or in multiple aspects as well. Here we had some main modes of competition on the basis of which the whole comparison can be based. Here in below we had different sort of the comparison which are these, Outsourcing Because many of the world's airlines are wholly or partially government owned, aircraft procurement decisions are often taken according to political criteria in addition to commercial ones. Boeing and Airbus seek to exploit this by subcontracting production of aircraft components or assemblies to manufacturers in countries of strategic importance in order to gain a competitive advantage overall. Boeing has maintained longstanding relationships
Its relatively smaller penetration of unionized labor. Its leading presence at some of the strongest airport hubs in the country, namely Atlanta, JFK and LaGuardia. Its partnerships with international carriers as a way to decrease the capital intensity of running international, directly operating a greater number of international flight frequencies. For example their JV with Air France, KLM, Virgin and then as well as with China Eastern and other Asian carriers, mostly Korean and also Aeroméxico. And their ability to manage CASM-Ex
In the airline industry the transformation process of the main service is the flight itself. Consequently, the passenger during the flight is in transformation process. Another pivotal input for an airline is information which when it collected and estimated it is in transformation process. 2.2.1 Mass Service Process As far as Ryanair is concerned the main objective is to expand passenger volume and capacity. The basic element that characterise the companies that utilise the mass service process is the high labour intensity combined with low level of interaction and customisation (Nickson,2007,p.12).
Geographic Segmentation: Southwest Airline has entered new markets with a recently acquired terminals in New York-la Guardia and Washington DC- Reagan while have an existing markets in DFW Houston. While in existing markets they do focus on customer loyalty and in order to make that happen they do promotions and advertising to maintain the brand loyalty. Thus this will make south west airline different than others through the heart campaign. Demographic Segmentation: Southwest needs to provide a friendlier and flexible service to families while they should focus on single travellers being or arriving on time. AS mentioned earlier, elastic and inelastic demand for business travellers and normal travellers.
Ecological: Terrorist attacks and natural disasters as floods and earthquakes can also have a global impact on consumer’s demand for air travel and put struggling airlines further into the red.Fuel price surge and other economic downturn factor affected the company to some extent. Criteria and Alternatives: Option 1:Should Southwest go for internalisation? Option 2:Should it continue to operate as it is making no changes in the current plans ? Option 3:Should it go ahead and expand in the domestic market? Option 4:Should it maintain its current strategy or adopt a new strategy?