THE AIRLINE INDUSTRY Who are the main businesses we can talk about?? British Airways: is the leading airline in the United Kingdom, and naturally one of the biggest in the world. Based at Heathrow and Gatwick, London, it manages almost 300 planes and 216 destinations in 94 countries. In addition, BA has holdings in other airlines, such as the Australian, Quantas, and the Spanish Iberia. With its sights set on the international scene, a key to success today, BA recently signed a partnership
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   THE AIRLINE INDUSTRY  Who are the main businesses we can talk about?? British Airways : is the leading airline in the United Kingdom, and naturally one of the biggest in the world. Based at Heathrow and Gatwick, London, it manages almost 300 planes and 216 destinations in 94 countries. In addition, BA has holdings in other airlines, such as the Australian, Quantas,and the Spanish Iberia. With its sights set on the international scene, a key to success today, BA recently signed a partnership with the world giant,  American Airlines, and with other companies of various sizes, such as Cathay Pacific Airways and Finnair. The alliance thus created is called Oneworld. It aims to be a transnational airline. Ryan Air : Ryanair operates the largest low-fare scheduled passenger airline in Europe, serving primarily short-haul, point-to-point routes. The firm has more than 30 base airports and serves more than 100 cities across 26 countries. The company employs more than 6,000 people and operates a fleet of more than 200 Boeing 737 jets. Easy Jet:  The Group's core activity is providing airline service principally in Europe. The Group operates a network in the European short-haul aviation.  The main activities of its subsidiaries include airline operation and aircraft trading and leasing. Its subsidiaries include easyJet Airline Company Limited, easyJet Switzerland S.A., easyJet Aircraft Company Limited, easyJetSterling Limited, easyJet Leasing Limited and easyJet Malta Limited.  Virgin Atlantic:  Virgin Atlantic Airways Ltd. (operating as Virgin Atlantic) is a British airline which is owned by Richard Branson's Virgin Group (51%) and Singapore Airlines (49%). It operates long-haul routes between the United Kingdom and North America, the Caribbean, Africa, the Middle East,  Asia, and Australia from its main bases at London Heathrow and London Gatwick. Virgin has a smaller base at Manchester Airport. The company holds a United Kingdom Civil Aviation Authority Type A Operating License,  which permits it to carry passengers, cargo, and mail on aircraft with 20 or more seats.[1] Virgin Atlantic carried around 5.1 million passengers and made an annual profit of ??46.8 million in 2007 S ECTION  A: R ESEARCH  T  ASK Opportunities: Ryan Air – Benefits because of income elasticity of demand – more demand for low cost alternative. “Cut-price airlines have withstood the recession better than their premium rivals, and Ryanair’s passenger numbers shot up by 14 per cent to 66.5  million in the year to 31 March. The group’s handling costs also fell by 9 per cent as airports fought hard to retain business in the face of cutbacks by non-budget carriers.” Opportunities - Buying fixed assets cheaply: Ryanair is also expected to announce plans to buy more than 50 extra aircraft from struggling competitors, as part of plans to beat the recession by undercutting more expensive rivals. O’ Leary’s reaction to the Credit Crunch has been “ We’ll  just have to keep flying more aircraft, opening up more routes and offering  people more cheap flights,” EasyJet also coped well during the recession and continued to make profit as a result of the increased demand for this low cost alternative. However as is the case with Ryanair and all other airlines, Easyjet also faced declining profit margins as a result of increased fuel costs.  Threats: In contrast British Airway – high cost (positive income elasticity) Faced a fall in demand as people income fell.“Business passenger demand well down - turmoil in financial services sector (Lehman etc) means much reduced business traffic” Long term strategies  All airlines are struggle to maintain profits because of rising fuel price etc. therefore lowering costs are part of many of their strategies – regardless of their income elasticity of demand.British Airways: Clearly cutting cost in order to remain competitive e.g. permanently reducing no. of attendant per flight.Ryanair seeks to stimulate demand for air traffic by offering the lowest fares to points across Europe while maintaining the lowest-cost structure. The firm continually strives to achieve greater cost reductions and operating efficiencies. Management is aggressively expanding its route network while trying to increase ancillary revenue faster than scheduled passenger revenue. Short term plans Promotional offers – Ryan AirUnpaid holidays, pay cuts unpaid work etc. – British Airways – in order to reduce costs.  Factors influencing what to do: Depends on Financial position on entering recessionRyan Air - with EUR 2.5 billion in cash on its balance sheet, only around EUR 350 million of debt coming due during the next three years, Ryanair is financially sound. Therefore can take advantage of opportunities to buy cheap fixed assets (e.g. planes from struggling competitors and to use these to achieve their aim to aggressively expand. EasyJet is financially strong, with cash and money market deposits exceeding £1bn again allowing them to consider expansion even during the downturn.British Airways – British Airways healthy balance sheet has allowed them to cope with the resistance to change from staff during the recession. Impact on stakeholders British Airways – Impact of recession on employees? This is obvious – unpaidholidays, pay cuts etc, in order to reduce costs. Also shareholders have been clearly affected by the drop in share price e.g. less dividends etc. For and against government support  The airline industry in the UK did not get any financial support during the recession!! Virgin boss Branson has urged the new Government to remember the importance of aviation to the UK economy. I think sometimes amid stories of strikes and volcanic ash, it is forgotten that aviation is a great success story  for the UK.”The Government must acknowledge the crucial role aviation will  play in the economic recovery of the UK. SECTION B Mission Statement British Airways: “To be the undisputed leader in world travel for the next millennium”.Ryanair: Ryanair does not publish a formal vision or mission statement, but,the general mission is to simply continue to be the largest Low Cost Leader in the European airline industry and to carry 50 million passengers by 2010.Implementing this vision is a function of many individual tactics, including an absolute dedication to low cost performance in every element of the value  chain, quick gate turnarounds, nonunion operations, performance-based incentive compensation plans, standardization on one type of aircraft, and flying (in most cases) to secondary airports, which provides significant savings for Ryanair”. Virgin Atlantic: “To grow a profitable airline, where people love to fly and people love to work”Easy Jet: To provide our customers with safe, good value, point-to-point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. Toachieve this we will develop our people and establish lasting relationships  with our suppliers. Consider the value of these mission statements to these airlines Political and Legal Environment: Consider the impact of the environmental lobby on the UK airline industry and political response - which means no third runway at Heathrow – has many implications for Virgin and British Airways Business and Social environmentCompetitive environment Difficult to enter this industry – extremely high start up costs. A lot of competition - particular for British Airways with competitors being able to operate at lower costs (see table below). And getting more difficult to compete with its current problems. Virgin Atlantic has seen a 10% increasein passenger traffic in the first half of 2010, (mainly old British Airway customers) with the airline claiming rival British Airways will suffer long-term damage because of the cabin crew dispute.
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