Airline industry is one of the fastest modes of transportation for the passengers and also cargo (goods carried) services. Jet fuel price is the price charged for the amount of jet fuel, which is used to operate an airline. Among various cost factors jet fuel is one of the main operating cost factor with 40% of its overall operating costs, which are again responsible for finalizing the airline ticket prices and fares. Prices of jet fuel fluctuate from day to day. 2.1 Supply and demand When the supply and demand are at equilibrium levels, the prices are constant and the airline makes profits.
American Airlines has a few strengths that puts the company above their competitors. Good hubs, loyalty programs, strong brand image, the largest airline fleet, good maintenance and infrastructure standard, are just to name a few. The regions dominant U.S. carrier came along with the company’s innovative mind to buy routes that encourages spreading hubs in the most tourist attracted places. Hubs increase rewards become broader redeeming meaningful awards as you fly across the globe with American. American Airlines AAdvantage program awards miles and Elite Qualifying Dollars for every airline affiliated with the oneworld alliance.
In the American Airline company, excess supply is being attacked by the carriers who charge low fares and continue to gain the market share (Huggins 2011). The company faces fixed cost and oversupply challenges which serve as the basis for cheap fare charging. By use of this model, it has pushed casual travellers to become frequent travellers. This has enabled the airline industry to reshape its buyer demands (Gratton, Taylor & Gratton 2000). The fuel has been the single largest expenditure item in the company.
Ryanair also use the best current low strategies to provide them bigger profit by extensive use of ancillary fees to balance their low ticket prices. It allow Ryanair to make up the revenues lost through lower ticket prices by emphasis on ancillary revenues from the sale of a ticket and include sales of related items such as hotel reservation or car rental as well as charges for food, checked baggage, priority boarding, and other items. The other strength for Ryanair is it use new aircraft model, the Boeing 737-800 that allows minimization of training and maintenance costs. This model aircraft also provide efficient management of spare parts inventory and more flexible scheduling of flight crews. Ryanair has the advantage to negotiate on the price concession for this aircraft model as they purchase a large number of aircraft from Boeing.
Thus, the power of the suppliers is high, since the suppliers have a grip on the market due to the huge demand of their manufactured products. Moreover, suppliers can affect the industry through their capacities to raise prices or reduce the quality of purchased goods and services. Bargaining Power of Buyers The buyers in the airline industry are demanding more and better quality services .The bargaining power of buyers in the industry is high due strong as low switching costs and plethora of options in the market. Now, e-ticketing has improved the chance and flexibility to search for different airlines companies leading to down word cost pulls and upward services push. Furthermore, it eases of switching between different airlines companies.
One of the impacts which is quite obvious is that Air Asia has expanded its services. Not only can people book flight tickets online, now they can also book their hotel and rented car at the same time. This will then impact Air Asia’s dominance over other markets slowly for instance the land transportation market and also the hospitality market thus bringing in more profit. Next is how the online booking system has impacted the reach of Air Asia. Without the online booking system, tickets can only be checked or bought at the counters in the airport or some travel agency but now, it can be done from anywhere in the
Rolls Royce’s new engine designs offered exactly that and proved to be an ‘order qualifier’. The design was an advantage for all airline companies as they could consider entering exclusive deals with Rolls- Royce for their various airline models and could possibly benefit from generous discounts as a result of bulk orders. And this in turn would lead to repeated business for Rolls-Royce giving them a competitive advantage of being the preferred engine manufacturer. (Rolls-Royce: Britain 's lonely high-flier, Jan 8th 2009) Rolls-Royce’s innovative idea of ‘Power by the hour’ is a true example of an order winner. Most airline companies try and avoid responsibilities associated with projecting costs for maintenance and equipment break down.
fierce between 2 LCCs or when a LCC plans to enter a full service airlines sector. This is also true the other way around. Bargaining Power of Buyers can be ranked as moderate with LCC’s coming into the picture since the deregulation of the industry and internet making it easy to book and fly. Customers tend to stick to known companies which have a strong presence in the market. Thus, it is safe to say that there is low-to-moderate bargaining power of buyers in this sector Bargaining Power of Suppliers The three main costs for the airlines are fuel, labour and Airport charges.
The most fundamental of these implications is the fact that increased travel is both a reason for and the result of, the global lifestyle (WTO, 1990). On top of the deregulation of the airline industry, Morley (2005) proposes that the forces driving globalisation are one of the primary reasons for these strategic alliance arrangements forming in the airline industry. As the travel market is becoming more and more volatile, with more consumer demand and competition reaching an all-time high on a global scale - airlines have had to establish away to reach more distances to meet the demands, and still remain dominant in the market – through network alliances. The joint development of these networks permits globalisation and speeds up the rate of expansion and supply of services (Ullrich,
Recommended International Strategies to Improve/Maintain SIA’s Market Position 1. Introduction Despite the airline industry being an undesirable and unattractive industry according to Michael Porter, Singapore Airlines (SIA) have consistently been profitable and have achieved much success with many of their current and even past strategies. The history of SIA, their past and present marketing strategies and their successes will be analysed. Subsequently, this essay will further recommend more strategies for SIA’s future international business. 2.