Backgroud of Malaysia Airlines Essay

Malaysia Airlines System Berhad is also known as MAS in short. MAS is founded in 1947 as Malayan Airways, but it has change its name as Malaysian Airline System in 1 October 1972 .MAS is the flag carrier which is own by government of Malaysia. MAS headquarters is situated at Sultan Abdul Aziz Shah Airport in Subang, Selangor. MAS operates flights at its first base in Kuala Lumpur International Airport, and secondary base in Kota Kinabalu.

Malaysian Airlines System Berhad is the holding company for Malaysia¶s national airlines carrier, one of the fastest growing airlines in Asia.

Malaysia Airlines has two airline subsidiaries, which is Firefly MASwings. Firefly operates scheduled flights from its two home bases Penang International Airport and Subang International Airport. The airlines focuses on tertiary cities although has recently launched services to Borneo from KualaLumpur International Airport. MASwings focuses or inter-Borneo flights. Malaysia Airlines has a freighter fleet operated by MASKargo, which managers freighter flights and aircraft cargo-hold capacity for all Malaysia Airlines passenger flights.

MAS are using this type of craft Airbus A330-200 and A330-300. Boeing 737-400, 800 and400/400. Malaysia Airlines operates a fleet of aircraft with two cabin configurations. Malaysia Airlines B777-200ER fleet has a two configuration which is Golden Club Class and Economy Class. Its B747-400 fleet has a three-cabin configuration, also including First Class. Malaysia Airlines premium cabins and Economy Class have been giving numerous awards for excellence in product and service delivery.

From a small air service, Malaysia airlines have grown to become award-winning airline with more than 1000 aircraft, servicing more than 110 destinations across six continents. Malaysia Airlines also practiced the online booking and buying to make their reservation or purchasing way easier for passenger. With this online purchasing, the passengers need to fulfill their details like the destination they want to go and the departure place they want. The payment will settling via the online banking. Internet user can book their air ticket, hotel, and train ticket and rent car via Malaysia Airlines Website.

Financial Comparison of Ryanair and British Airways Essay

Ryanair is considered as the pioneer of the low-cost business model, while British Airways is constantly ranked amongst the world’s best legacy carriers. Both of these airlines are dominant companies in their segment with high passenger numbers and vast network coverage. Therefore the following question rises – how these airlines are different in terms of finance and which business model is more fruitful in the middle of an economic downturn? In order to find the answer a thorough financial investigation has been conducted relying on the data outlined in the airlines’ annual reports.

In the first section of the report the emphasis is put on the current financial situation of the airlines, while outlining the existing sources of finance. These sources are investigated thoroughly in the second part. The final section evaluates the possible or available sources to finance future investments.

Review of Ryanair’s and British Airway’s current financial situation Ryanair in the fiscal year of 2012 has generated a total of €4,390.

2m operating revenue mainly through scheduled revenues. The company has increased its operating revenues since 2010 by €1,2bn primarily due to fare increases. In 2012 the total operating expense was €3,707m. This is also the peak in the last three years, mostly attributable to fuel and oil costs, which have almost doubled since 2010. Hence the net profit for the 2012 fiscal year was €560.4m, the highest in the history of the company. British Airways in the fiscal year ended 2011 December 31 accounted a profit of £672m after paying the taxes. This can be considered as a significant improvement after 2010’s profit of £170m. These figures do not provide enough in-depth information on the airlines’ real situation. In order to identify the sources of finance and the real position of BA and Ryanair further investigation with the use of ratios is required.

Liquidity

Current ratio is a liquidity measure that compares the liquid or current assets of the airline with its current liabilities. (Atrill, McLaney 2002)

For the fiscal year of 2012 Ryanair’s CR was 2.1355, which represents high liquidity. Generally the higher ratio is considered to be the better. According to Morrell the industry general ratio is 1.00. This suggests that Ryanair is capable of financing its short term commitments towards banks and suppliers However, it must be noticed that the airline has significantly high cash reserves, namely €2.7bn. Such rate suggests for the banks and suppliers that the company is low risk for investment and has high liquidity, but also proposes that the cash is being accumulated to finance future aircraft orders or other investments. The fact that the cash reserves has grown with €1.2bn in the last two years also underpins these assumptions.(Morrell 2007)

British Airways has a low current ratio of 0.7531. It points out the problem that BA cannot finance its current assets from its current liabilities. Thus, it can be assumed that the short term debts are financed through the more expensive long term loans. The company’s cash reserves are £1.7bn, which is considerably lower in comparison to Ryanair’s reserves. This can result in higher interest rates as the airline is not considered as a safe investment for lenders. According to Moody’s credit rating company BA’s credit ratings were B1 and BB in 2011. Also being a legacy airline BA works with more third party suppliers like travel agents and these issues can mean that the pay-outs are delayed. It is important to note that Ryanair and the low-cost business model do not use travel agents.

Performance and earning

The operating margin gives an indication of management efficiency in controlling costs and increasing revenues as it represents the operating profit as the percentage of total revenues.

Comparing to last year’s results, both airline’s ratios have remained flat, namely 14% for Ryanair and 5.2% for BA. It means that on every pound or euro BA makes £0.05 profit, while Ryanair €0.14. However, the low-cost model seems to be more profitable, but it must be taken into account that they are also operating in a lower cost structure. Also, BA has managed to generate a positive operational margin as in 2008 and 2009 its values were negative. Return on Equity (RoE) is the net profit after interest and tax expressed as percentage of shareholder’s funds.

BA has achieved a 26.2% RoE in 2011, while the same value for Ryanair was 16.9%. It means that BA is making more profit from the shareholders money. The shareholder’s money is only the one-third of BA’s asset, while Ryanair is half founded by the investors.

Solvency

Gearing ratio is a measurement of the contribution of long-term lenders to the long term capital structure of a business.

Ryanair’s gearing ratio was 53.98% in 2012, which is considerably high for a low-cost airline. In other words it means that the company is financed half from borrowing and half from own capital. The lower the gearing ratio of the airline the greater the firm’s capacity to borrow more money at a lower interest rate, due to the lower risk to banks and lenders. Oppositely, BA has an even higher gearing ratio of 65.5%. Around one third of British Airways’ capital is funded by the shareholders, while the remaining is sourced from long-term loans and debts.

The following table summarises the previously outlined performance and liquidity ratios of the airlines. BA(£) Airline Ryanair(€) 9,987 Total revenue 4,390.2m 672m Profit after tax 560.4m 0,7531 Current Ratio 2,135 63,80% Gearing Ratio 53,98% 570m Cash Reserve 2708m 26.2% ROE 16.9% 5.2% Operating Margin 14%

Fleet commitments
Ryanair

Replacing the aircrafts is not only increases the airline’s prestige but can mean a significant reduction in operating costs as the new generation of aircrafts are much more fuel efficient or can carry more passengers than the predecessors. As the core of the LCC business model Ryanair only flies Boeing 737-800s thus reducing the maintenance costs significantly. The carrier has one live contract from 2005 with the American aircraft manufacturer that covers the procurement of 197 brand new 737800s for which the unit cost is $51m. (Ryanair 2012)  Ryanair’s long-term debt for aircraft commitments, including current maturities was €3,625.2m at March 31, 2012. The airline has funded a significant portion of its acquisition of new aircraft and equipment through borrowings under facilities provided by international financial institutions on the basis of guarantees issued by Ex-Im Bank.

At the end of fiscal year 2012 the carrier had a fleet of 294 Boeing aircraft of which 199 were funded by Ex-Im Bank guaranteed financing. Other sources to cover aircraft costs are Japanese Operating Leases with call options (30 aircrafts) and commercial debt financing (6 aircrafts). According to the bookings, 235 aircraft are owned by Ryanair, which are financed through long-term bank loans. Operational leases funded 59 aircrafts at March 31, which means that Ryanair operate these aircrafts, but does not own them.

The aircrafts are leased to provide flexibility within the aircraft delivery programme. 55 aircrafts is being financed through fix-rate debts, while for the remaining 4 aircraft Ryanair is paying variable rental payments. Out of the 25 aircraft, which has been delivered in the 2012 financial year, 11 were funded through sale-and-leaseback financing and the remainder through Ex-Im Bank guaranteed financing. To convert a portion of the floating-rate debts into the fixed rate debts, Ryanair has used interest rate swaps and cross currency rate swaps. As a result €1,314.7m of the aircraft loans are remained at floating rates. The remaining €2,310.5m is in fixed-rate euro-denominated debts with the maturities of 7 to 12 years. On all of the above mentioned borrowings the weighted average interest rate was 2.9%.

The effective rate is the rough estimate for the weighted average cost of capital. It is calculated by dividing the interest paid for the year with the long term borrowings. For Ryanair it is 3.01%, which is really close to their given figures. Accordingly their cost of long term borrowings is 109.2m, which can be considered as low. The low rate also represents trust from the lenders and investors. But, on the other hand it must be noted that at March 31, 2012 aircrafts with a net book value of €4.8bn were mortgaged to lenders as security for loans. This may be the explanation for the low interest rates. In general, Ryanair has been able to generate sufficient funds from operations to meet its nonaircraft acquisition-related working capital requirements.

Between 2008 and 2012 March Ryanair had sold and re-delivered a total of 39 aircrafts and also the company plans to dispose 8 additional before March 2014. Ryanair may choose to dispose of aircraft through sale and or non-renewal of the operating leases as they expiree between 2012 and 2013. In the next year the company has a total obligations of €1,143.3m out of which the third, around €571.8m is “purchase obligations”, i.e. buying the remaining 15 aircrafts. Each of the aircraft loans have similar terms – maturity of 12 years from drawdown date and being secured by a first priority mortgage. The overall aircraft debts (€3,625.2m) represent around 80% of all long-term liabilities, hence if the airline is capable of paying these commitments Ryanair should be able to preserve its current financial status in the upcoming years.

As it can be seen the low cost carrier Ryanair has built up a well-functioning system to finance all its aircrafts, including the 15 Boeing 737s that will be delivered in the future. Furthermore by currency swapping and low interest rates the company is in total control of its costs.

British Airways

The transparency of BA’s financial situation is significantly lower comparing it to Ryanair’s. This can be explained in two ways, either they prefer not to reveal their financial strategy and sources as it can provide valuable information for the competitors or the company does not have the adequate financial background to finance its long term commitments. British Airways has a completely different fleet to cover both its short- and long-haul routes. The fleet is owned by the company or held in finance and operational leases. The 245 aircrafts take up two thirds (£5.7bn) of the company’s total non-current assets. Also, 95% of the overall revenue is generated through the fleet.

The aircrafts comprise different sized jets from various manufacturers making the operational and maintenance costs higher. In the annual report of year ended in December 31, 2011 BA outlined its current fleet and future aircraft deliveries and options. These include 50 firm orders and 84 options. The new fleet is made up from A320s, A380s, Boeing 777-300s and 787s, which are expected to enter service between 2012 and 2017. Furthermore, in Note 13 the airline states that the cost of these aircrafts is going to be £4.1bn. But, no other information is provided about the sources that will cover these expenditures, thus it can be assumed that the future cash flows contain relevant information on these funds, but they have not been published yet. (British Airways 2012)

The non-current liabilities of loans, finance- and operational leases add up to £4.904, which is 30% more than Ryanair’s €3.8bn total long-term commitments. According to BA the bank and other loans at the end of 2011 equalled £1,324m, comprised of fixed- and floating rate loans. £693m is in floating-rate debts, while the remaining £823m is in fixed rate loans and bonds. The average interest rate for the fixed rate debts is around 6.5%, which is significantly higher than Ryanair’s 2.9%. The floating rate loans are generally determined to be 0,5%+LIBOR. The lenders consider the airline as a higher risk firm that is why the interest rates are higher. Generally, the loans are repayable between 2014 and 2018, with one exception none of the loans need to be repaid until 2014 and on. Such conditions allow BA to use the debt to generate cash in the next 2-4 years.

BA uses finance leases and hire contracts to acquire aircraft. These leases have both renewal options and purchase options. The total finance lease contracts worth £2.227bn and similarly like Ryanair, it consist of different currencies namely US dollar, Euro, Japanese yen and Sterling. The non-current side of these contracts are £1.12b, but around half of this is due obligatory in five or more years. Four of the new 777-300s are being leased through GE Commercial Aviation Services (GECAS). The finance lease agreements are mainly in place to fund the existing fleet. Therefore additional leases are required, if the new fleet is wished to be funded through such construction.

The operating leases for BA’s aircraft range from five years and some leases contain options for renewal. However, this type of contract accounts for only £316m of which is £253 is not payable within one year. Comparing to 2010 BA has halved its operational leases from £635m, it can be assumed that company took the lease contract for an aircraft or more, which was expected to be delivered in 2011, but it has been delayed so the company terminated the contractual agreement until the new aircrafts are delivered. Accordingly, it can be assumed that operational lease commitments are going to rise in the next two financial years.

Unlike Ryanair, British Airways does not provide any kind of information about the structure of the leases. The following assumption can be made though; BA offered worse interest terms with the loan contracts than Ryanair because of its weaker liquidity and performance. British Airway’s effective rate shows the same trend as its 4.301%. The company paid £161m in 2011 as cost for long term borrowings.

Financing in the short run

As it has been outlined above, Ryanair has a current ratio of 2.1, which provides a solid base for the assumption that the airline is financing its short-term liabilities from its current assets and operational profit. In fact Ryanair could repay all its short term liabilities from its €2.7bn cash reserve and would still be left with €0.9bn cash. Moreover, Ryanair’s current liabilities are half of BA’s short run commitments. In less than 1 year Ryanair will need to finance 1,1bn for obligations, like current maturities of long term debts and purchase obligations. But then again, Ryanair has the capacity to pay these.

BA is more interesting in the short run as the airline’s current ratio is 0.75. Logically the question arises – if the short-term liabilities cannot be covered from the operating revenue then how is it financed? Possibly the long-term loans are used in such case which is leading to future liquidity issues. The main problem is the “trade and other payables” entry which accounts for £3,117m within current liabilities. But, from this total amount the real credit is £1,457m, which is the money BA owes to creditors like suppliers and travel agents. The remaining are mostly prepaid flights that the airline will accomplish in the new financial year. Having the suppliers wait for their money is a way to improve cash flow.

The cash operating cycle for the company has been calculated by dividing the trade payables with operation expenses (less employee costs and depreciation). The average pay out period for British Airways is 80.1 days, which can be considered as high and nevertheless it also shores up the liquidity problems of the airline. On the other hand, Ryanair makes these to the creditors payments within 22.1 days. Note 28 describes BA’s liquidity risk in more detail. The results suggest that within the next 12 months British Airways is going to need around £2.203bn to finance all its commitments for that period. Where the money is coming from? This question remains unanswered, but it can be presumed that BA is going to need new sources to fund this £2.203bn short-term liability combined with the £4.1bn commitments for the new fleets.

Shareholders’ equity and dividend policy

Ryanair has significant retained earnings, namely €2.4bn, even though there was a €500m dividend pay-out in 2010 October and also a similar sized one is planned in 2012 November. Seeing the results and pay-outs it can be assumed that the shareholders are happy with the dividend policy and this can serve as a basis for future capital injections, if necessary. On the other hand BA’s directors declare that no dividend to be paid for the years of 2011, 2010 and 2009. Such dividend strategy can be explained by the airline’s current liquidity problems.

Depreciation

Both companies included their depreciation strategies in the annual reports. Ryanair states accounts the Boeings for 23 years, while British Airways calculate with 18-25 years of lifetime for their aircrafts. From these numbers it can be assumed to lower the depreciation costs the amortisation rates are underestimated by both airlines thus saving millions in the accounts. British Airways 50 2012-2017 £4.104bn 4.301% £161m £3.683bn £4.904bn Data not disclosed 80.1 days 31 March 2012 Airline Fleet commitments (no. of aircrafts) Delivery date Capital commitments for new aircrafts Effective rate Long term cost of borrowing/year Total current liabilities Total non-current liabilities Total non-current liabilities for fleet Average pay out period Financial year ended Ryanair 193 2007-2014 ~$10bn 3.01% €109.2m €1.815bn €3.879bn €3,625bn 22.1 days 31 December 2011

Future financing

Ryanair

Through the analysis of the financial statements it has been revealed that Ryanair has a stable financial structure that is capable to fund the various liabilities in the short- and long-run. The remaining aircraft deliveries are funded through operational revenues and cash reserves. But, it must be kept in mind that the latest fleet contract is from 2005 and all aircrafts will be delivered by 2014. The next couple of months are going to be important in terms of long term strategy for Ryanair. The accumulated cash reserves point that the airline is preparing for some sort of investment. It can be the acquisition of Aer Lingus or the procurement of new aircrafts. The acquisition of the Irish carrier is currently delayed by the EU, but Ryanair is putting all the effort to buy become major shareholder in the firm, which would enable them to appear on the long-haul market through Aer Lingus.

It also has been outlined in the annual report that Boeing has granted to give significantly lower prices for Ryanair in return of bulk orders, promotional and other activities. In other words, they are inspiring the airline to go invest into a new fleet in the middle of an economic downturn. In such case the shareholders might be willing to finance the new requirements as they are kept “happy” and also the airline has been maintaining a steady growth rate both in profits and network coverage. Banks are also aware of the securitized aircrafts also of the vast amount of cash reserves. This background could enable Ryanair to obtain loans with lower interest rate. Ryanair is aware of the favourable contract conditions with Ex-Im Bank as the carrier has stated that they expect any future commitments or guarantees issued by Ex-Im Bank to contain similar conditions.

Any inability to obtain financing for the new aircraft on advantageous term might have an adverse effect on the business, operations and financial conditions. However, easyJet founder Stelios Haji-Ioannou calls for a slower fleet expansion plans in the next years as he believes that the annual growth is not equal with the number of aircrafts on order. Ryanair should also consider this perspective of growth as they ground 80 of their aircraft for the winter period. A great bulk of aircrafts without sufficient demand could destabilise the airline’s financial position and could make Ryanair to reassess its financial sources. (Rothwell 2012)

British Airways

Additionally to the current-liability problems (see above), the other main financial issue for BA is to pay for the new fleet. Like mentioned above the company has firm orders for 50 aircrafts for £4.1bn and options for additional 84. The following question needs to be answered pretty soon – who is going to lend money for British Airways? How much is it going to cost the airline?  The British flag carrier could try to increase its funds from shareholders money, but it can be assumed that due to the lack of the profitable dividend policy shareholders are not ready to invest more money into the airline.

Also, BA belongs to International Airlines Group (IAG) which also incorporates the Spanish carrier Iberia. The problem is Iberia is making losses, thus even if British Airways makes profit this or next year IAG is going to use that money to reduce the losses at Iberia. In other words, the Spanish carrier is pulling British Airways back at the moment. Shareholders may consider additional funds risky, therefore BA need to show that it can preserve its leading position as a legacy airline.  Cash can be generated by selling off assets or reducing costs. In December 2011 BA had only £39m available-for-sale financial asset. The airline has different amount of equities in various companies – these could be sold as well to gain cash in the short run. By selling aircrafts, which are not necessary needed, the airline could generate income.

It would not be unreasonable if BA focused more on the long-haul routes and would reduce the number of aircrafts (114) flying within Europe as the company may not be making sufficient operational profit on some of these routes due to the low cost carriers. The third option for the company to finance its future commitments is to obtain loans from banks, financial institutes or sovereign wealth funds. The latter is a possible solution as Chinese or Gulf wealth funds could be willing to inject capital into the airline, but the question is at what interest rate? The lenders know that BA is struggling with the payment of the shortterm liabilities and they are using the long-term loans, the “more expensive” money to fund the operational commitments, hence the interest rate for the credit can expected to be high.

This would solve the liquidity question in the upcoming years, but such financial funding would also mean difficulties in the period after 5 years. However, if the carrier can continue its recovery from the downturn then there is a good chance for a financially stable British Airways that can pay all its liabilities. Financial and operational leases may work, but they would only relate to the aircrafts. Also, it can be assumed from the drop in the operational lease that BA has these contracts ready and sorted out, they are not just not live as the new aircrafts have not been delivered yet.

Conclusion

The report has investigated two different business model’s financial structure. Results show the quantity’s victory over quality. Ryanair can maintain its market leading position and increase profits from year to year. This is attributable to the steady and well-functioning financial and operational system, which enables growth, investments and also controls liabilities and aircraft commitments. The search for new financial sources is only necessary, if Ryanair decides on a fleet expansion plan and the airline cannot agree with Ex-Im Bank about future fleet procurement.

On the other hand, British Airways seem to struggle with its existing funds hence new financial sources are required to survive the upcoming years. The decision on these funds is hard as in BA’s current situation none of them can be called advantageous. But, to choose the best solution financial advice is recommended for the carrier. Despite all the differences, the two airlines have one thing in common – the next twelve months are going to have a great effect on both carriers’ long term operations.

Reference list

ATRILL, P. and MCLANEY, E., eds, 2002. Accounting and Finance for Non-Specialists Fourth edn. Pearson Education Limited. BRITISH AIRWAYS, 2012. Annual Report and Accounts Year ended 31 December 2011. British Airways. MORRELL, P.S., ed, 2007. Airline Finance Fourth edn. Ashgate.

Fly Dubai Essay

Introduction:

Dubai is considered one of the most important trading hubs in the Middle East region. Its rapid growth in its major infrastructure elements had attracted many multinational companies across the world to open their regional offices in the city. This had its positive effects on Dubai economical growth as it became a golden gate for regional Middle East businessmen to trade with other international companies. As a result of this, the need for a low cost airline that provides its services for business men within the region had increased.

The city experience with the airline industry is not new as it is the home city of Fly Emirates, which is considered one of the best airlines in the region. This industry had its great effect on Dubai economical growth in the past 20 years and will have its strong impact in shaping the emirate future. In March 2008, the second low cost airline was lunched under the name of Flydubai and started its operations in Dubai International Airport Terminal 2 in June 2009.

(For more information on Flydubai and its operations, please refer to Appendix 1).

We have defined our relevant market for Flydubai as a low cost carrier (LCC) within the product form level. Being positioned as a low cost national airline carrier, it’s facing a high competition from other national airlines which force the relevant market to be within the product form. (For more information on the relevant market please refer to appendix 2).

This paper will focus on presenting an environmental scan of the airline industry within the Middle East region during the time frame of 3 years (2009-2012). In order to do so, we will identify the significant trends and their consequent implications on Flydubai relevant market. This report will include an in depth review of the macro, micro analysis and its implications of Flydubai relevant market in the next three years.

Body:

In identifying the major key trends in the macro environment of Flydubai, we have addressed several issues that include the political, social and economical trends.

Flydubai was established by His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Prime Minister and Vice-President, and Ruler of Dubai orders in march 2008 and started its operation in its first flight to Lebanon on June 1st 2009.Being fully owned by Dubai government and enjoy the full facilities offered in terminal 2 at Dubai International Airport, the company is having a competitive advantage compared to its rivals in the market as it enjoy the full government support and airport services.

Furthermore, the current government trend in the labor force is towards emiratization and protecting labors rights. Being a part of the Fly Emirates Group, the organization will face no problem in emiratization as it will follow Fly Emirates emiratization strategy. The major challenge that Flydubai will face is being able to offer high paid jobs and reduce its operational costs as it is considered a low cost airline company.

Living in the current financial crises era, Flydubai was established in one of the most difficult time the country economy had faced in the last 25 years. “Falling oil prices, cooling real estate and construction markets, together with a slowdown in the tourism sector, especially in Dubai, means the UAE is expected to post low or possibly negative GDP growth in 2009”, according to analysts (Arabian Business, 2009). This information may be considered negative to many airline companies but it may be positive to a low cost airline like Flydubai as people are now focusing more in reducing their expenses as the incomes are reduced. This means their tendency of consumers focusing more on prices is increasing.

Furthermore, consumer behavior is changing towards low cost airlines especially in the Middle East region as consumers are persuaded by low prices and a better service offered by low cost airlines. According to a study done by Arabian Business website, it was found that 83 percent of the respondents would switch their preferred airline carrier, for a cheaper price, while 17.6 percent believed they would consider alternatives and trade off between the discount and lost air miles. It can thus be inferred that pricing plays a significant role in consumer behaviour and the decision making process especially in the current economic downturn era (Glass, 2008).

According to Dubai department of Tourism and commerce marketing “3.85 million tourists had visited the emirate in the first half of 2009, a five percent increase on the same period of 2008”. This figure strongly shows the current tourism industry market and how attractive it became even though of the current economical downturn. Other figures expect that the number of tourists will fall compared to 2008 figures but most figures have stated that there will be a positive growth in 2010. This figure shows that Flydubai will see a future growth rates in the coming 3 years as terrorism sector restore its high figures after overcoming the current downturn.

As observed by Andrew Cowen, CEO of SAMA Airlines, the market is shifting from the traditional major airlines business travel towards low cost carriers for trips within the GCC. Business travelers are changing their perception of low cost carriers, supported by the current economic downturn and the increase number of foreign businesses within GCC countries entering the UAE. This shows a trend of an increasing demand for low cost carriers in the next three years (High time for low cost carriers, 2008).

(For in depth information on the analysis of the macro environment of the airline industry please refer to Appendix 3)

In identifying the major key trends in the micro environment the following aspects that includes, Customers, Employees, media, shareholders, competitors and suppliers.

Customers who are price conscious are concerned with low cost airlines. Flydubai has focused on pricing strategy and flexibility because these two factors play a big role in determining the customer’s decision process on which airlines they choose to travel with. Moreover, the number of tourist from around the world including the region will grow more than 40% in the next 3 years in Dubai (www.realtyna.com). This shows that there will be increased number of customers who will use Flydubai airlines within the next three years due its successful use of pricing strategy and flexibility.

The Employees of Flydubai have good experiences and they were carefully selected from twelve different nationalities. According to Kenneth Gile, chief operating officer of Flydubai said: “We are extremely pleased with the talent of the pilots we have on board. On average, they each have more than 4,000 hours serving as captain in similar aircraft and a total experience of more than 8,000 flying hours – this is impressive by any standard” (Sambidge, 2009).

Flydubai is fully owned by the government of Dubai and its considered as a part of its mother company the Emirates Group.

The main strategy that Flydubai is willing to use for their marketing strategy is through word of mouth (buzz). This is because Flydubai is a low cost airline; they tend to set low budgets for their advertisements to keep their prices low.

The direct competitors of Flydubai are Air Arabia and Al Jazeerah airlines because these two airlines are also low cost airlines in the same country as Flydubai. However, the major competitor of Flydubai is Air Arabia because, first of all, they are the first to claim about low cost airlines in the Middle East region. Moreover, they hold the highest market share in the relevant market as identified before. Our market share comparing to those two carries are low because Flydubai just recently launched to the market.

But, within the next three years we expect rapid growth in the market share because Dubai is a destination for tourists. The major indirect competitor is Fly Emirates which stands as the leader in airline industry in the relevant market and it will keep its performance in the next three years. The second indirect competitor is Etihad Airlines which is growing fast because of the unlimited support from Abu Dhabi government. In addition, those airline carriers make low price offers for the same destination that we have flight lines to.

The supplier of Flydubai is Boeing. Flydubai announced an order of 50 next generation 737 aircraft from Boeing. Sheikh Ahmed bin Saeed al Maktoum said: “The Boeing Next-Generation 737 is ideally suited to our mission to bring some two billion regional inhabitants affordable, efficient and flexible travel options to and from Dubai.”(For more information on the micro environment analysis, please refer to Appendix 4). Implications:

Primary demand:

Low cost airlines are focusing on customers who are price conscious. The number of customers using the LCC airlines is increasing and it will continue growing in the next three years (www.gulf-daily-news.com). This is because, first of all, the percentage of tourists will increase by 40% within the next three years which shows that the market share of LCC will increase as well. Secondly, because of the economic condition, many people tend to save money and spend it on low cost airlines to travel more to the desired destinations. Users of Low cost airlines contain all different ages and nationalities. Moreover, cost is one of the main factors that affect customer’s ability to buy. The costs of these carriers are low and will continue to remain low in the next three years. This will increase customer’s ability and willingness to buy.

Selective demand

We can define the consumer decision making process as an extensive problem solving level, where they are introduced to a complete new brand with low brand knowledge. So, Flydubai should infusive more on their brand identity through the media and other communication types in order to enrich consumer’s knowledge. Once Flydubai had increased the level of consumer knowledge, we expect huge increase in market share in the next three years because the decision making process is going to shift from extensive problem solving to routine which is low information search about the company. Therefore, we expect major change within the next three year upon the factors we mentioned above.

Segmentation:

As for segmentation we expect to see a rise in the population of the UAE in the following 3 years. According to the electronic portal of Gulf News the population of UAE is approaching six million as of now and it is expected to escalate even further by the end of this year. An increase in construction in the coming years requires more labor to be imported from foreign countries, thus increasing the number of potential customers (low income and middle-class lifestyles) who might want to use our services.

Moreover, economic boom can also be a factor for businessmen to travel to and from Dubai more frequently. In addition, the number of students travelling to the UAE for education is expected to increase in the near future; this implies that they will most probably select Flydubai as their primary mode of transport to travel to and from the UAE, since the economic condition shows very little signs of improvement in the near future.

More tourists are expected to arrive in the UAE within the near future out of which a section of them are extremely price sensitive travelers.

Another scenario would be that the current economic downturn continues to effect economies world-wide within the coming three years increasing the number of price-sensitive customers in the eight markets we operate in.

To keep up with the projected demand, Flydubai is planning to increase its fleet size from 5 (currently) to 54 aircrafts in the coming years. An increase in fleet size would allow Flydubai not only to accommodate a large number of clients but also expand its reach in terms of destinations.

Conversely, the announcement of the new GCC rail network which is the new transportation class in our relevant market is expected to have a slight negative effect on Flydubai’s operations in terms of loosing clients that fall in our target segmentation. The GCC rail network and Flydubai have one common destination which is Qatar. Once the GCC rail network begins its operations there is a high possibility of losing out on our current and potential clients. (For more information on segmentation please refer to appendix 5).

Competitor analysis

Our major competitive in our relative market is Air Arabia and then Al Jazeera Airlines. Air Arabia is holding major market share because they are the first to claim about launching first low cost airlines in Middle East region. However, Flydubai can compete with those two direct competitors when we focus on our competitive advantage which is price leadership. Also, location is another important factor due the number of travelers that are using Dubai Airport comparing to Sharjah Airport. In addition, being part of the Emirates Group will add more value to Flydubai brand equity which will make it easier to make customers shift toward our company within the next three years. (For more information on competitor analysis, please refer to Appendix 6)

Conclusion:

In conclusion after analyzing the environmental micro and macro trend for Flydubai, we observed that there are two major changes in our relevant market. First, the increase of the tourism level in Dubai as we expect the current economic downturn era to change its direction towards positive figures in the next three years. Also, the companies’ holders and businessmen attitude towards low cost airlines is changing by using it as these airlines are providing business men services aboard such a business class and wireless internet connection.

The number of competitors within the low cost airline industry is going to increase in the coming years as new airlines such as Bahrain Airlines starts its operation this year. Secondly, full service airlines are expanding their market towards low cost airline by introducing low price tickets that attract price sensitive consumers. We expect that within the next ten years a new class level will enter the market in the GCC region which is trains transportation. Also, a new form level will emerge in the relevant market which is a combination between full services and low cost carriers. Finally, within the next three years we expect those changes in the relevant market to be reshaped affecting the primary and selective demand.

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Philippine Airlines Essay

Philippine Airlines, Inc. (abbreviated as PAL and also known historically as Philippine Air Lines) operating as Philippine Airlines, is a flag carrier of the Philippines. Headquartered at the Philippine National Bank Financial Center in Pasay City,[2][3] the airline was founded in 1941 and is the first and oldest commercial airline in Asia operating under its original name. 4] Out of its hubs at Ninoy Aquino International Airport of Manila and Mactan-Cebu International Airport of Cebu City, Philippine Airlines serves twenty destinations in the Philippines and 26 destinations in Southeast Asia, South Asia, East Asia, Oceania and North America.

[5] Formerly one of the largest Asian airlines, PAL was severely affected by the 1997 Asian Financial Crisis.

In one of the Philippines’ biggest corporate failures, PAL was forced to downsize its international operations by completely cutting flights to Europe and Middle East, cutting virtually all domestic flights except routes operated from Manila, reducing the size of its fleet, and laying off thousands of employees. The airline was placed under receivership in 1998, and gradually restored operations to many destinations.

PAL exited receivership in 2007.

Philippine Aerial Taxi Company On November 14, 1935 Philippine Congress approved the franchise of Philippine Aerial Taxi Company, Incorporated (PATCO) to provide mail, cargo and passenger service particularly in the island of Luzon. The company then had scheduled Manila-Baguio and Manila-Paracale flights. [6] The company became dormant for six years on its scheduled passenger operation under its assigned routes. [4] Philippine Air Lines On February 26, 1941 Philippine Air Lines, Inc. y a group of businessmen led by Andres Soriano – hailed as one of the Philippines’ leading industrialists at the time,[7] who served as general manager, and former Senator Ramon Fernandez, who served as chairman and president.

Philippine Air Lines, Inc. acquired the franchise of Philippine Aerial Taxi Company, Incorporated, thus the birth of Philippine Airlines. The airline’s first flight took place on March 15, 1941 with a single Beech craft Model 18 NPC-54 on daily services between Manila (from Nielson Field) and Baguio. [7] On July 22 the airline cquired the franchise of the Philippine Aerial Taxi Company. Government investment in September paved the way for its nationalization. Entry of San Miguel Corporation (2012-present) On April 4, 2012, San Miguel Corporation bought a 49-percent stake in Philippine Airlines for $500 million as part of a strategy to move away from its beer and food businesses. San Miguel, one of the Philippines’ biggest conglomerates, said it planned to help modernise PAL’s aging fleet and rejuvenate Asia’s oldest commercial airline, which has lost its status as the nation’s top carrier in recent years.

San Miguel president Ramon Ang said the $500-million investment had bought his company a 49-percent stake in PAL and its low-cost offshoot, Airphil Express (AirPhil). “The new investment will allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and AirPhil’s fleet modernization,” said a joint statement from PAL chairman Lucio Tan and San Miguel. Ang also stated that they are planning to join a global airline alliance. Billionaire Tan, the country’s second-wealthiest man, is PAL’s controlling shareholder. 34] DestinationsPhilippine Airlines operates two hubs in Manila and Cebu. Virtually all PAL routes are operated from its hubs, with the majority of routes operating from Manila.

Domestically, PAL flies to major Philippine cities from Manila and Cebu. It flies between Manila, and Cebu to a lesser extent, and cities in Asia-Pacific, the western United States, Canada and Australia. Many destinations served by PAL, especially destinations in the United States, Canada, Australia, Japan and Hong Kong, are areas with large overseas Filipino populations. citation needed] PAL currently operates three non-hub routes, Bangkok-Delhi, Singapore-Jakarta and Sydney-Melbourne. In the past, PAL operated a number of domestic and international non-hub routes (most notably Iloilo-General Santos, Vancouver-New York, Vancouver-Las Vegas and Zurich-Paris), as well as non-stop services to destinations in Europe and extensive domestic operations; those services were discontinued in light of the Asian financial crisis.

Some of its previous domestic operations, namely, service from Manila to Naga, Tuguegarao, and more recently, Ozamiz have been taken over by Airphil Express, while services to others were stopped altogether. In addition, services to Legazpi City, Puerto Princesa, Butuan, Cagayan de Oro, Cotabato City, Dipolog, Zamboanga City, Dumaguete and Tacloban, while retaining the “PR” flight codes, have been operated by Airphil Express on behalf of PAL since 28 October 2012.

Service to the Middle East continued after the Asian financial crisis; however, that was also eventually discontinued due to high fuel prices and an oversupply of seats, as well as intense competition from Middle Eastern carriers. PAL discontinued service toRiyadh, its last Middle Eastern destination, on 2 March 2006, and re-introduced flights again in 2010 but discontinued once again in April 2011. PAL maintains code-share agreements with carriers based in that region, specifically with Emirates to Dubai, Etihad to Abu Dhabi, Gulf Air to Bahrain, and Qatar Airways to Doha.

After exiting from receivership, PAL has expressed interest in increasing its frequencies to Canada such as an expansion to Toronto and Montreal, introducing flights to Dhaka, Guangzhou and Mumbai, and expanding its presence in the United States by commencing service to Saipan, Seattle, Dallas, San Diego, and Houston, as well as restoring service to Chicago and New York,[51] and restoring service to India and Europe,[52][53] as well as the Middle East. [54] The downgrading of the Philippines’ aviation status by the Federal Aviation Administration however, has prevented PAL from expanding its coverage in the United States.

PAL commenced Manila to Toronto service effective November 30, 2012 with a stop-over in Vancouver(YVR) on the Toronto-to-Manila leg. On 15 October 2010, Philippine Airlines announced that its Manila–Brisbane services will be suspended indefinitely as of October 31, with Melbourne-bound services reduced from 5 flights a week to 3. The company cited marketing considerations for the suspension of Brisbane services. [55] However, more recently, the airline has since recommenced a daily frequency to Australia: Sydney is served four days a week and Melbourne three using a B777-300ER plane.

The former triangular routing that served both Australian cities on one flight was discontinued in favour of direct flights. The carrier re-introduced flights to New Delhi after decades of absence in the Indian subcontinent; there were initially three direct flights while three other flights stopped at Bangkok’s Suvarnabhumi Airport. [56]However, as of 18 March 2012, Philippine Airlines discontinued it direct flight to New Delhi and retained the thrice-weekly New Delhi via Bangkok flights.

On 28 April 2012, Philippine Airlines re-established its direct air links between Manila and Bali, Indonesia’s prime holiday destination, via twice-weekly flights departing Manila every Wednesday and Saturday. It is the airline’s second destination in Indonesia, following Jakarta, the country’s capital, where the flag carrier flies five times a week direct from Manila and four times a week via Singapore. [57] On 23 July 2012, PAL announced that it will launch non-stop flights to Toronto on November 30, 2012. [58] The Philippines’ flag carrier is also planning to launch direct flights from Manila to New York and some key cities in Europe.

However, PAL is being prevented since the FAA made PH under category 2, which prevents PAL to expand its U. S. network, and blacklisting PH aviation by EU, which stops Philippine Airlines in restoring its previous European routes. [59] Philippine Airlines (PAL) has filed with the Civil Aeronautics Board (CAB) permit to start flight to Moscow’s Domodedovo Airport in Russia Capital starting September 2013, using the high-gross variant of Airbus A330-300 aircraft 4 times weekly. Moscow flight leaves Manila on Tuesdays, Thursdays, Fridays, and Sundays, with Turkey flight leaving Monday, Wednesday, and Saturday.

It is the second destination in Europe to be flown by PAL after announcing flights to Turkey beginning August 5. Both destinations are outside the European Union. PAL is also slated to fly daily services on the Manila-Kuwait route by April 2013 usingAirbus A330-300, while daily flights to Darwin, extending 3 mornings a week to Brisbane and 4 mornings a week to Perth commence on 1 June 2013 using Airbus A320s. [60] Philippine Airlines soon to launch flights to Sao Paulo, Brazil with stopovers on Los Angeles. [61]

A codeshare agreement, sometimes simply codeshare, is an aviation business arrangement where two or more airlines share the same flight. A seat can be purchased on one airline but is actually operated by a cooperating airline under a different flight number or code. The term “code” refers to the identifier used in flight schedule, generally the two-character IATA airline designator code and flight number. Thus, XX123, flight 123 operated by the airline XX, might also be sold by airline YY as YY456 and by ZZ as ZZ9876.

It allows greater access to cities through a given airline’s network without aving to offer extra flights, and makes connections simpler by allowing single bookings across multiple planes. Most major airlines today have code sharing partnerships with other airlines and code sharing is a key feature of the major airline alliances. Under a code sharing agreement, the airline that actually operates the flight (the one providing the plane, the crew and the ground handling services) is called the operating carrier. The company or companies that sell tickets for that flight but do not actually operate it are called marketing carriers.

The American Airlines SABRE Reservation System Essay

The aim of this essay is to provide an analysis of the SABRE reservation system produced by American Airlines, demonstrating how Business Information Systems (BIS) can be used to gain a strategic advantage. This will be achieved by describing the overall approach adopted by American Airlines and how SABRE provided them with a competitive advantage. The factors that led American Airlines losing their competitive advantage will also be discussed.

One of the key factors in providing customers with an optimal service is ensuring convenience, flow of information, saving time, and the efficient use of available customer service resources.

On the other hand, in times of strict competition it is highly necessary for businesses to be able to provide such services at the lowest cost and in the most convenient manner possible (Linoff and Barry, 2011).

In order to help businesses with customer management, there are now customer management software programs which enable individuals and businesses to organise all their information and retain useful information quickly and efficiently.

Such programs help perform functions such as revenue management, making optimal pricing decisions, managing customer loyalty programs, customer profiling, and bookings and reservations, amongst many other options (Linoff and Barry, 2011).

One such system, introduced by American Airlines in the 1960’s, is the SABRE reservation system. SABRE, which is an acronym for ‘Semi-Automated Business Research Environment,’ was the first information system of its kind and was the result of a joint venture between IBM and American Airlines. Initially, it was used as an electronic reservations system and replaced the old manual procedure of hand-written reservations. This enabled American Airlines to quickly and efficiently manage its reservations through a computer-based application (Duliba et al., 2001). The initial instalment of the system cost approximately $40 million (£25 million) and was nearly as advanced as the system held by the US government. This was a major advancement for American Airlines as one of the key areas of its business process was now automated, making other functions simpler.

In the following years, new applications were added to SABRE, which laid the framework for efficient procedures in revenue management, optimal pricing decisions, scheduling of flights, cargo and inventory management, crew rotation, and various other flight operations. More recently, e-commerce applications and a selection of hotels, car rental agencies, travel agencies, and other travel and entertainment businesses have been added to the system to enable access to wider areas of related industries with a simple click of a mouse (Varian, 2010).

As it became one of the largest data-processing facilities the in airline industry, the system was installed in various travel agencies around the US and Canada in the 1970’s and began to automate the travel industry. Over one million fares were recorded in the system, making operations at a travel agency more efficient and enabling American Airlines to easily inform travel agents about changes in fares and the available options. Applications such as BargainFinderSM, easySabre, Sabre Airline Solutions, Sabre Sonic, Sabre eVoya, and others were added to the system making it one of the biggest and most widespread business applications available (Central American Common Market, CACM, 2009). SABRE gave American Airlines a competitive edge and delivered many great benefits to the company.

All processes became more efficient, information was dispersed widely, and American Airlines quickly gained sales and recognition amongst its customers. Customers were provided with the opportunity to consider a number of options available to them via one system, which they would previously have been unable to obtain. Customers now had the possibility of accessing exclusive offers, booking tickets to various destinations while comparing fares, and managing hotel, car, and other bookings via one system. In the same manner, American Airlines was able to find optimal prices for selling each seat, quickly manage their flight schedules and employee rotation, and distribute information to travel agents quickly, thus enabling them to sell American Airlines tickets on a larger scale (Burgelman et al., 2008).

Since this system was unavailable to other airline companies, American Airlines gained a prominent advantage in cost leadership, innovation, and product differentiation. Cost leadership means that American Airlines was able to save excessive costs and provide the same services to its customers as other airlines at a lower price, or provide greater value for the price offered. Since the SABRE Reservations System provided American Airlines with ample convenience and information dispersion, it enabled the company to save approximately 30% of its costs on staff (Burgelman et al., 2008). This was because less staff were now needed to perform specific functions, as the system enabled the easy performance of the same functions at a more efficient pace.

The application of Sabre Airline Solutions allowed for new methods of revenue management and the maximisation of airline income, while also providing services such as yield management and crew rotation. This enabled the airlines to reduce costs and provide efficient services at a lower cost than competitors. It also provided customers with options such as the BargainFinder, which helped them find bargain prices in fares and included an application which gave American Airlines the possibility to set fare prices while comparing their own prices to competitors. Hence, with all of the information available, it was easy for American Airlines to obtain an advantage in cost leadership by reducing its own costs and providing customers with more valued service (Melville and Ross, 2010).

Innovation was one of the main competitive strengths that American Airlines capitalised on as it was the pioneer user of the SABRE system. This new innovative technology gave them the chance to begin practices that no other company could offer or had offered in the past. Giving customers a personalised service and the possibilityof accessing their bookings, reservations, and all travel arrangements in one place while saving costs was a highly innovative feature of the SABRE reservation system (Melville and Ross, 2010).

The concept of innovation refers to creating something new or making changes to existing products, and American Airlines was able to capitalise on their innovative product by adding new features such as the previously mentioned BargainFinder, Sabre Airline Solutions, and easySabre. These options and new features added to the innovational aspect of American Airlines as they were always providing their customers and themselves with new options and new services. Hence, American Airlines was able to offer new services and features regularly (Stair and Reynolds, 2012). Through the use of the SABRE system, product differentiation was also achieved as American Airlines was able to offer its customers products that differed from other airlines.

Offers were made exclusively to certain customers and the various available applications were customised and differentiated to serve the needs of specific customer segments. Applications enabled customers who wanted cheap bargains to find economical prices, book vacations with hotel and car accommodation, and find and purchase certain items all in one place. Moreover, the customer relationship management tool easySabre enabled a personalised service for each customer, offering them choices and information according to their personal needs. Hence, American Airlines gained a competitive advantage in product differentiation (Stair and Reynolds, 2012).

Competitive advantage refers to the special edge or the benefit that a company may have in relation to its competitors. With SABRE, American Airlines had an edge over its competitors because it was the first company that possessed an extensive and technologically advanced information system. The system offered benefits such as reduced costs and communication channels that no other company had. In addition, organisational functions and revenue management facilities enabled the company to be more efficient and effectively target its customers by offering a personalised service. Hence, American Airlines was the most connected company amongst all of its competitors and was able to offer and utilise services from an information system that was not available to other companies (Bocji et al., 2009).

With the use of SABRE, and having all information regarding competitors at their disposal, American Airlines had the advantage of creating barriers to entry and cost leadership which made it difficult for other companies to compete in the airline industry. The existing firms also faced increased competition from American Airlines, which made their survival extremely difficult (Power and Shards, 2009).

With the above in mind, it has been demonstrated that American Airlines used their reservation system to gain competitive advantage in a number of ways: reducing costs relative to their competitors; differentiating products to offer personalised services; creating and enhancing new features and options to the system; introducing high switching costs for customers so that they would become used to using the Sabre system; laying expensive barriers to entry for competitors; and, making alliances with IBM in creating the system ( Sabre Airline Solutions, 2012).

In the 1980’s, SABRE emerged as a separate company whose shares were sold on the stock exchange and became separate identity from American Airlines, possibly marking the end of American Airlines’ competitive advantage and leading to the rise of problematic issues between the two organisations. It became clear that the competitive advantage of American Airlines was not permanent as the market position of the company began to deteriorate with time. Issues occurred when other companies gained access to the system and it became connected to a number of travel agents and airlines. However, once incentives such as the cancellation of commissions for travel agents were removed by American Airlines, many travel agents and websites began to hide the fares offered by American Airlines and chose not to display them.

As a consequence, many travel agents today may find themselves pushed out of business as they are unable to sell American Airline fares because of the prevailing dispute between Sabre and American Airlines (Sabre Airline Solutions, 2012). While the SABRE system has expanded to give access to other airlines and is used to connect travel agents everywhere and disperse information worldwide, American Airlines has lost its main competitive advantage and is unable to use the system as an exclusively innovative technology. However, if American Airlines refuses to sell its tickets via the system because of the loss of trust between the two companies, it will harm the business of travel agencies all over the world, risking the popularity of SABRE (Sabre Holdings, 2012).

American Airlines may plan to retaliate against the loss of trust between the two organisations by adopting another information system. This may cause Sabre a great loss, while American Airlines may also incur new switching costs for adopting a new system and enabling travel agents to access the same software as them. However, Sabre may seek to resolve the issues between American Airlines and itself before their contract ends in August; thus, American Airlines may be able to retain their use of the system they originally launched (Curtis and Cobham, 2009; Reinartz et al., 2004).

This essay has demonstrated that the importance and utility of information systems may last a long time, until the systems become obsolete and do not fulfil their purpose. However, it is difficult to sustain the competitive advantage of a system in the contemporary business environment as other companies may gain easy access to the system and the technology may become widespread faster than expected (Curtis and Cobham, 2009). Therefore, while American Airlines initially gained advantage from the initial implementation of the system in the 1960’s, they were unable to sustain this competitive advantage in an era of technological advancement.

While Sabre connected other companies to the system and travel agents used it to find the cheapest fares comparative to all airline providers, other companies also began to gain benefits from the system (Payne and Frow, 2005). As Sabre began to sell its stocks publicly and became a separate company, it began to seek its own interests and charge booking fees to airline providers that listed their fares on their system. As American Airlines wanted to prevent such unnecessary costs, issues arose between the Sabre system and the airline service provider (Boody et al., 2009)

In conclusion, competitive advantages do not last permanently and in the current business environment advantages gained from technology often have a short life cycle. Companies usually must continue to innovate in other areas to sustain such advantages or enhance their position by using better and more advanced technology than what they are currently using. Since American Airlines lost control of the SABRE reservation system, they were unable to sustain their competitive advantage and keep barriers to entry erect for other firms. Nevertheless, they still have a strong position in the Sabre-American Airlines dispute and may be able to regain their former position.

References

Linoff, G. & Barry, M. (2011) Data Mining Techniques: For Marketing, Sales, and Customer Relationship Management. Indianappolis: Wiley Publishing Co. Duliba, K.A., Kauffman, R.J. & Lucas, H.C. (2001) Appropriating Value from Computerized Reservation System Ownership in the Airline Industry. Organization Science, 12(6) pp.702-728. Varian, H. (2010) Computer-mediated Transactions. American Economic Review, 6(2) pp.1-28. CACM (2009) Logic of lemmings in Compiler Innovation. Communications of the ACM, 52(5), pp.7-9. Burgelman R.A., Clayton, M.C. & Wheelwright, S.C. (2008) Strategic Management of Technology and Innovation. United States: McGraw Hill Publishers. Melville, M. & Ross, S. (2010) Information Systems Innovation for Environmental Sustainability. MIS Quarterly, 34(1) pp.1-21. Stair, R. & Reynolds, G. (2012) Fundamentals of Information Systems. New York: Cengage Learning. Bocji, P., Chaffey, A. & Hickie, A. (2009) Business Information Systems: Technology, Development, and Management. Harlow, England: Prentice Hall. Power, D. & Shards, R. (2009) Decision Support Systems. Springer
Handbook of Automation, 1, pp.1538-1549 Sabre Airline Solutions. (2012) Customer Sales and Service. [Online] Available at:http://www.sabreairlinesolutions.com/home/products_services/customer_sales_service [cited 20 July 2012]. Sabre Holdings. (2012) Sabre History. [Online] Available at: http://www.sabre.com/home/about/sabre_history/ [cited 20 July 2012]. Curits, G. & Cobham, D. (2009) Business Information Systems: Analysis, Design, and Practice. Harlow, England: Pearson Education. Boddy, D., Boonstra, A. & Kennedy, G. (2009) Managing Information Systems: An Organizational Perspective. Harlow, England: Pearson Education. Reinartz, W.J., Kraft, M. & Hoyer, W.D. (2004) The Customer Relationship Management Process: Its Measurement and Impact on Performance. Journal of Marketing Research, 41, pp.293-305. Payne, A. & Frow, P. (2005) A Strategic Framework for Customer Relationship Management. Journal of Marketing, 69(4) pp.167-176.

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Swot Singapore Airlines Essay

Strength

• Singapore international airline culture is a corporate culture, their corporate culture encourage the labours to improve cabin services. The employee unions are clearly stabled in their work. They classified their employees unions according their employment. Company culture leads the SIA to get the competitive advantage. According to businessweek.com Michael Tan, SIA’s Senior Executive Vice-President (Commercial)’s statement their company culture is competing in the marketing lead front. • The Singapore airline’s image and reputation are shown high impact on the people in Singapore and the passengers who are from worldwide locations love to fly on the SIA.

This is strength of the company. Their services toward their regular customers are encouraged the people to switch it back to SIA.

• Structure of the SIA is strong enough. They are having subsidiaries’ this wills to give more profits and they formed subsidiaries in Singapore out of Singapore. They are providing not only passengers transporting services but also they are providing cargo services, around eight countries.

SIA has fully owned no frill airline services. These structures are holding the SIA’s market share in high level. • Employees are the asset of their strategic. They are recruited from the global labor markets. The pilots also recruited from the global markets. Around 30000 specialized in their fields. SIA is getting high effective and efficient work from their employees. • They have established hubs and subsidiaries in many countries it is strength of managing their resources effective and efficiency. It will increase the profit of SIA.

• SIA has the strong experience of more than fifty years from the beginning of the MSA. Experience is also strength of SIA. Because it is widely known its services in time based. It will have good experience management and managers. Experience came up with new ideas to satisfy their customers. • Online ticket booking reduce the operational cost. For instant it will reduce the cost forming agency offices and marketers cost. It will widely cover the people. Customers no needs to search for SIA office just click and book the ticket.

• SIA has a big operational capacity it is strength of the company. It has hub in Singapore and widely giving its services to many countries and get more income. It will get fuels in from its subsidiaries’ which are located in other countries. Because petrol cost in Singapore is high. It will reduce the operational cost. • SIA market share report in 2002 December is 18.47 per cent. Recent report is around 25 per cent. The growth of the market share is strength. • No language dependent in Asian region customer services. So people who are in Asian region like travel on SIA, because of their good customer services. It builds the SIAs market share in Asian region. • SIA won many awards.

Weakness

• Less moral among different staff, their company culture they classified staff unions according to their employments. Different union have different moral. For an instant according to the business article, a staff was slapped by another staff in front of many passengers. It will lead to labor union strike. • Their air port location is a weakness because. It is high security and a busy airport. High tax and high penalty for delay takeoff. It leads the operational cost high. • Online marketing system has a problem did not give the clear instruction of the locations. Majority of people search the location according to the country not city. For instant I am going to visit to Malaysia this is my first journey to Malaysia and first time I am going to book online on SIA. I’ll search Malaysia first. But the booking they only placed Kulau lumpur. So this online booking only support to the regular customers it doesn’t support new flyer.

Analyzing external factors
Opportunities

• Singapore people are thinking SIA is their asset, they are commenting on SIAs weakness and they are giving their own ideas to improve customer services. For an instant, according to business news, a Singaporean passenger flies on SIA she found a problem Singapore girl (cabin crews) they have language dependent on communication. She comment to the management, due to her argument management came up with a solution, when they recruit the girl they clearly select the girl they have no language dependence in Asia region. • SIA makes partnership with many world top hotels, credit card companies and Telecommunications Company. For instant KrisFlyer members who are also Samsung credit cardholders, Car rental companies. What is the advantage is they are going to give combined services to the customers. There are two opportunities customer will get advantages and these companies will get regular customers. SIA will get same profit and giving quality services to its regular customers.

• Singapore government policy is an opportunity to SIA. High tax for AirAsia bus which are carrying passengers from Johor air port. This is an opportunity for SIA, because AirAsia planned to reduce it operational cost through landing in johor. It will reduce the high tax to land on Singapore airport. If they reduce their operational cost they can reduce the travelers cost. This will pull down the SIAs Asian region market share. • So the government policy increases the operational cost of the AirAsia. This is an opportunity the SIAs market share keep growing in Asian region.

• The two major leading commercial aircraft manufacturers known as namely Airbus and Boeing are power full suppliers to the SIA. What are the opportunities’ SIA a will get from it. The customers of the SIA will satisfy with the flights. SIA will get the high quality, high technology flights to lounge in the service in first. • World widely they are getting political supports educated people support because “SIA practice good corporate citizenship actively through the support of arts, sports and educational initiatives, both locally and overseas. They also committed to helping the privileged, sponsoring program for the needy, involving handicapped and protesting environment”. It is opportunity to SIA. • Free media publicity, Singapore international air won many awards. It urges the journalist to write about SIA.

Threats

• Its main competitors are Cathay Pacific Hong Kong airline, Japan airline, and Malaysian airline, their new inventions and new policy and their promotions towards Asian people reduce the growth of SIAs market share. Even though the no – frill airlines are catching their customers from SIA. For an instant AirAsia and the Johor airport, AirAsia planned to land on Johor and it decide to transport their passenger by bus from Johor to Singapore. It will reduce the operational cost and they can catch more customers from Asian region and Australia.

• Singapore International Airline has many subsidiaries world wide. They are invested widely. For instant think of Sri Lanka, their economy is going down and down because of the war. This will affect the invested companies in Sri Lanka. The instability of the economy will lead lack of storage advantages. For instant oil storage, the oil price is not in stable, it is going up and down, cannot store oil/ fuel, and high questions from the suppliers. • Introducing new technology will lead operational cost and staff training cost. • Government taxation, they are paying high tax and high penalties for delay are very costly it makes the return small and flying price pre mile will increase. • The international economy non stability is a thread to SIA. War in Iraq hit the oil price. The economy falling will show non stable pricing for flying per mile. It will lead the people unhappy with the company.

Tony Fernandes Essay

Nowadays, AirAsia is the best of the Asian airline companies in its market segment and became profitable almost immediately after Tony Fernandes took it over in spite of the air-travel downturn following the 11 September 2001 terrorist attacks. These results can be only explained by the fact that Tony Fernandes is a great leader. First of all, his skills and personal qualities are those of a good leader.

He was entirely committed to his business (sometimes with a little humor) and was very accessible to the media; he wore AirAsia’s office red rap cap and official T-shirt to almost every official function, he gave his phone mobile phone number to all the media representative he talked to, and was himself advertisement for his company.

Tony Fernandes has also had a good vision of the future because he was very realistic and he exploited the market’s opportunities well.

Although the context was not very favorable to enter the market, and especially in this field because of the 11th September, Fernandas chose to take the risk because he strongly believed in his project, which is a characteristic of a good leader. Another point that can prove this is that he was the first on the market segment of low-costs, no-frills and entered the market at the most profitable moment: nobody on the market segment in Asia and attractiveness for customers. So Tony Fernandes was courageous in this unfavorable context and he took his decisions in a very independent way.

These strengths are crucial to be a leader. He did not take risks only by taking over AirAsia, but also in its drastic changes. Since the creation, he continually brought a lot of innovative concepts, such as online booking and check-in, travel insurance, holiday products, booking services for hostels, car rental, credit card or medical care. He also deeply changed the business model of the airline company is choosing a low-cost and no-frills strategy and moved down the value chain. Thanks to him, AirAsia was also a pioneer in the defense of environment, by fighting against carbon emissions and paper waste.

Tony Fernandes was also a good leader because he succeeded in convincing people to rally on his project, since the beginning. The acquisition of AirAsia by Fernandes was welcomed by the Malaysia government. AirAsia became the official airline sponsor of the world-famous Manchester United football club and the AT&T Williams Formula One team. ernandes. AirAsia was also implicated at the request of authorities but also on its own in tourism, rescue to cyclone-hit Myanmar in2008 and Sichuan earthquake recovery in China.

The number of rewards received by AirAsia is endless and this is a way to recognize the good job done by Tony Fernandes. He was also a great leader because his management and leadership styles led quickly to huge profits, whereas the situation was not very favorable. The productivity of the staff was superior to the quality in other airline companies in the market segment of low-cost (0. 33cost/ASK compared to 1. 18 for the others): it shows that people were encouraged, motivated and committed to the company policy.

Fernandes’ choices in investments such as new fuel-efficient Airbus A320 and new aircraft decreased the costs of fuel and maintenance. The cost of marketing was also lower because he was a recognized leader on the market and needed less money for marketing and sales because of the effectiveness of the distribution channel, which is another indicator of his good leadership towards employees. Purchasing aircraft also cost less than other companies because he knew how to convince suppliers and gain attractiveness.

People in the company were wholly loyal to Fernandes, which also proves he was appreciated and respected as a leader. As a result, Tony Fernandes was not only a leader, but also a great leader thanks to several aspects: his skills and personal qualities, his good and right vision, his independence, his innovative capability, his sense of convincing and making partnerships with trust, and the performance of the employees due to his good leadership leading to very good and quick results. Being a great leader means to have qualities and skills as well as results: Tony Fernandes showed he had both of them.

With AirAsia, he received accolades from international press and industry observers such as ‘Airline Business Strategy Award 2005 and Low Cost Leadership’ by Airline Business and ‘Asia Pacific Aviation Executive’ by the Centre for Asia Pacific Aviation (CAPA) for the year 2004 and 2005. In July 2005, he was conferred the Darjah Datuk Paduka Tuanku Ja’afar (DPTJ) which carries the title Dato’ by the Negeri Sembilan’s DYMM Yang DiPertuan Besar Tuanku Ja’afar Tuanku Abdul, for his services rendered to the betterment of the nation and community.

In 2006 and 2007, he bagged ‘The Brand Laureate’ Brand Personality for his exemplary performance, dedication and contribution towards the aviation industry in Malaysia. In 2007, he was bestowed the Darjah Sultan Ahmad Shah Pahang (DSAP) which carries the title Dato’ by the Pahang’s DYMM Sultan Haji Ahmad Shah ibni Almarhum Sultan Sir Abu Bakar Riayatuddin Al- Muadzam Shah for his services rendered to the betterment of the nation and community. In 2008, he was again honoured by the Sultan with the Darjah Kebesaran Sultan Ahmad Shah Pahang Yang Amat Di Mulia which carries the title Dato’ Sri.

The ‘CAPA Legend Award 2009 (Aviation Hall of Fame)’ recognised his influential actions for directly shaping the way the aviation industry has evolved. The ‘Orient Aviation Person of the Year 2009’ awarded by Orient Aviation and the ‘Airline CEO of the Year 2009’ awarded by Jane’s Transport Finance was for his success in leading and growing AirAsia into the world’s best low-cost airline and Asia’s largest. He received an Honorary Doctorate of Business Innovation from Universiti Teknologi Malaysia (UTM) in March 2010 for his role in changing the face of aviation and benefitting travellers and economies locally and in the region.

He was honoured with the title of ‘Officier of the Legion d’ Honneur’ by the government of France in April 2010, for outstanding contributions to the French aviation industry. It is the highest rank of honour that the government of France can award to a non-French citizen. Already Mr Fernandes was thinking about applying the low-cost approach to long-haul—he even went to see GE Capital, to ask if he could lease a Boeing 747. But on the advice of Conor McCarthy, a hard-nosed former head of operations at Ryanair, he agreed to start with a short-haul business.

To that end, he approached Malaysia’s then prime minister, Mahathir Mohamad, in June 2001 to see whether he would get official backing for his plan to challenge Malaysia Airlines’s local monopoly. The canny Mr Mahathir said that he would grant his blessing, but on condition that Mr Fernandes took over an existing airline: AirAsia, a struggling subsidiary of a government-owned conglomerate. AirAsia had a couple of elderly Boeing 737s, 40m ringgit ($11m) of debt and not much else. Mr Mahathir told Mr Fernandes he could have it for one ringgit.

The deal was signed just three days before the world’s airline industry was convulsed by the events of September 11th. By putting in the money from his Time Warner shares, remortgaging his home and bringing in a handful of outside investors, including Mr McCarthy, Mr Fernandes scraped together just enough working capital to run the business, but only if it could be made profitable from the first day. There was no shortage of sceptics. Not only did it seem to be a terrible time to be starting out, but it was also widely assumed that the low-cost model would not work in Asia, where customers expect high levels of service.

Mr Fernandes, however, reckoned that Asia would be spared the worst of the downturn and that he could take advantage of good deals on aircraft that other airlines no longer wanted. He was also convinced that the offer of ticket prices 50% below those of his rivals would speak for itself. So it proved. In its first full year of operation, AirAsia carried just over a million passengers. This year, with its associate airlines in Thailand and Indonesia, it expects to fly 22m passengers (or “guests”, as Mr Fernandes calls them). The number of destinations it serves has risen from six to 110.

With a nearly all-Airbus fleet of 80 aircraft and 175 more A320s on order, AirAsia has become one of the European planemaker’s best customers. AirAsia X, in which Mr Fernandes’s old boss, Mr Branson, has a 20% stake, wants 25 of the new A350s to add to the handful of A330s and the (London-bound) A340 it already operates. As well as the new London route, it flies to Australia, China and India. Unlike other long-haul budget operators that have crashed and burned, AirAsia X has the advantage of economies of scale with its short-haul sister airline, which also acts as a regional feeder network.

AirAsia has been profitable for all but the second half of 2008, when Mr Fernandes decided to unwind fuel hedges before most other airlines took the plunge. After taking an initial hit, AirAsia is now getting the full benefit of oil at $40 a barrel while some rivals are still paying $100. That decision is typical of Mr Fernandes’s willingness to break ranks. When other airlines slashed advertising during the SARS scare in 2003, AirAsia tripled its spending. Mr Fernandes says that he came to the industry with no preconceptions, but found it rigidly compartmentalised and dysfunctional.

He wanted AirAsia to reflect his own unstuffy, open and cheerful personality. He is rarely seen without his baseball cap, open-neck shirt and jeans, and he is proud that the firm’s lack of hierarchy (very unusual in Asia) means anyone can rise to do anyone else’s job. AirAsia employs pilots who started out as baggage handlers and stewards; for his part, Mr Fernandes also practises what he preaches. Every month he spends a day as a baggage-handler; every two months, a day as cabin crew; every three months, a day as a check-in clerk.

He has even established a “culture department” to “pass the message and hold parties”. Tony Fernandez has various type of leadership. We can see that from the background and the way he manage Air Asia, we can describe him as transformational and authentic leader. Transformational leadership is defined as a leadership approach that causes change in individuals and social systems. It is also refers to leader who inspire followers in many ways such as enhances the motivation, morale and performance of his followers through a variety of mechanisms.

It can be seen when leader is always connecting the follower’s sense of identity and self to the mission and the collective identity of the organization, being a role model for followers that inspires them, challenging followers to take greater ownership for their work, and understanding the strengths and weaknesses of followers. As the result, the leader can align followers with tasks that optimize their performance and at the same time it creates valuable and positive change in the followers with the end goal of developing followers into leaders.

Meanwhile, authentic leadership can be define as an individuals who are deeply aware of how they think and behave and are perceived by others as being aware of their own and others‘ values/moral perspective, knowledge, and strength; aware of the context in which they operate; and who are confident, hopeful, optimistic, resilient, and high on moral character. Authentic leader also transparent and fair, balanced decision maker. They demonstrate a passion for their purpose, practice their values consistently and lead with their hearts and their heads.

Tony Fernandez is said as transformational and authentic leadership because we can see that he done many things for his organization, staff, and also others people. He inspires his followers with his idea, action, attitudes and also the way he treats and communicates with person surrounding him. In Air Asia itself, he implements the concept of equal opportunity between his followers. This concept is for the purpose of giving motivation to his followers so that they can work in positive environment.

One of the equal opportunity is when Air Asia offers the opportunity to every qualifying permanent staff, from bag handlers to flight attendants, to become pilots after thorough training at its flight academy. Air Asia is the first airline that hires female pilot crew. Besides that, trainees are not bound by any rules to devote all their time to the airline like Chanaporn Rosjan, Thai pilot cadet in fact participated in a local beauty pageant and went on to win becoming Miss Thailand 2005.

Fernandes also has created a culture of teamwork, equality and constant communication like what he did at AirAsia‘s headquarters where it is staunchly open-plan. This aims to ensure staff of all levels are continually in contact with each other, enhancing the opportunities for innovative thinking and creative ideas. Beside of the concept of equal opportunity, there are a lot of factor that can describe Fernandez as transformational leadership and authentic leader. As a very good leader, Fernandez build a unique culture starts at the recruitment stage to create a successful team.

He also lays the credit for those successes squarely with his staff base, offers plenty in return in term of competitive salary packaging so that Air Asia can keeps it staff sticking with the company, happy, productive staff and staying ahead of business competitors. Transformational leader always has goal to develop his follower into leaders, so with that goal, Fernandez helps his staff in personal and professional growth. All staff of all designation and level is given training and development opportunities and pay close attention to high potential talent in the airline.

Contribution During the period he manages the company there are many contribution that he contribute. First, he introduce low fare no frills. This means that no frequent flyer miles or airport lounges in exchange for lower fares. Guests have the choice of paying for in-flight meals, snacks and drinks. Other than that, AirAsia also had point to point network that all short-haul AirAsia flights which is four-hour flight radius or less and medium- to longhaul AirAsia X flights are nonstop, doing away with the need for human resources, physical infrastructure and facilities at transit locations.

Moreover, Air Asia is very successful in using innovative technology. For example, they allow their guests to pay for their bookings by credit card over the phone. In 2010, AirAsia unveiled its latest IT booking innovation in the form of New Skies, which allows customers to better manage their online bookings. AirAsia also fully utilize the social media such as Facebook, Twitter and blogs to increase the customer relationship. AirAsia is ultimately a people’s airline. This show that management is truly cares about people’s needs.

For example, the airline runs an on-going Donate Your Loose Change campaign to help needy heart patients receive treatment at the National Heart Institute in Kuala Lumpur. AirAsia share the values of the communities in which they live, operate and with whom they do business. They practice the traditions and values that guide people daily lives. Beside that, they engage people through multiple interactive platforms every day, addressing their concern and resolving complains.

For example, in the workplace, staff are hired and promoted based on their ability and capabilities. Conclusion As a conclusion, Tony Fernandes is a great leader. His skills and personal qualities are those of a good leader. He was entirely committed to his business with a little humor)and was very accessible to the media; he wore AirAsia’s office red rap cap and official T-shirt to almost every official function, he gave his phone mobile phone number to all the media representative he talked to, and was himself advertisement for his company.

Tony Fernandes was not only a leader, but also a great leader thanks to several aspects: his skills and personal qualities, his good and right vision, his independence, his innovative capability, his sense of convincing and making partnerships with trust, and the performance of the employees due to his good leadership leading to very good and quick results.

Being a great leader means to have qualities and skills as well as results: Tony Fernandes showed he had both of them. Other than that, Tony Fernandez is said as transformational and authentic leadership as we can see that he done many things for his organization, staff, and also others people. He inspires his followers with his idea, action, attitudes and also the way he treats and communicates with person surrounding him.

In Air Asia itself, he implements the concept of equal opportunity between his followers. Fernandes also has created a culture of teamwork, equality and constant communication like what he did at AirAsia‘s headquarters where it is staunchly open-plan. This aims to ensure staff of all levels are continually in contact with each other, enhancing the opportunities for innovative thinking and creative ideas.

Jrd Tata Essay

Life is full of people who inspire , influence and leave some impression on, you – in sense good or bad, they change the way you look at things and that is whom, you consider your role model to be, however , it was crystal clear in my mind that the person would be no other but, JRD TATA. Having grown up reading his motivational stories, tales of success, inspirational examples and hearing references of his revolutionary thinking and conquest in varied fields, little doubt was left that it could be someone else.

That’s precisely when i stumbled upon , The Last Blue Mountain written and crafted so well by R.M. LALA that the entire saga of JRD TATA had me beguiled and captured for a couple of days. What fascinated me, was not how he was so successful but how, he was generations ahead in his thinking and miles ahead of his any competitor. Exactly at the moment there was a stirring feeling of, how little we know of the man who has gone on to become a synonym for richness, Achievements and out of box thinking.

The mind was clear, it had to be Jehangir Ratanji Dadabhoy Tata and no one else. Born in Paris, an Indian by nationality and “karma” JRD TATA went on to be the face of Industrialization in India. A man known for his ethics and principals took over in an era where the rules were more British friendly. Little is it known that JRD TATA was born to a French mother and that his first language was French. JRD TATA is credited to be the founder of TCS, Tata Motors, Titan Industries, Tata Communications, Tata tea, and Voltas but little is it known that he was the first Indian to be a licensed pilot as well. He went on to found India’s first commercial airline, Tata Airlines in 1932, which became Air India in 1946, now India’s national airline. JRD Tata was appointed as Chairman of Air India and a director on the Board of Indian Airlines – a position he retained for 25 years.

Such were his success that he was bestowed with the title of Honorary Air Commodore of India. Bharat Ratna JRD Tata had a life which were full of achievements and recognition, yet people who have had the pleasure of interacting with him, were in love with not the industrialist inside him but for the person he was. As Sudha Murthy recalls – “ I always looked up to JRD. I saw him as a role model for his simplicity, his generosity, his kindness and the care he took of his employees. Those blue eyes always reminded me of the sky; they had the same vastness and magnificence.” (Sudha Murthy is a widely published writer and chairperson of the Infosys Foundation involved in a number of social development initiatives.

Infosys chairman Narayana Murthy is her husband.) So i chose JRD Tata not only because he has stood up and shone in the field of business or went on to capture varied field and have the capability to see beyond the normal horizons and peek into what lay generations ahead but also because people remembered him to be a good human always. He is known for his kindness, simplicity and the care he took of people around. He goes on to teach everyone a lesson of humbleness and significance of “karma” in ones life. He personifies – simple living, high thinking and teaches us how to maintain a balanced personality. There is one quote of his, which reflects a great volume of him – “BE NICE TO PEOPLE ON YOUR WAY UP,

FOR YOU NEVER KNOW,
WHOM YOU WILL MEET, ON YOUR WAY DOWN”

JRD Tata never let success deviate him from a path of being a human. The acknowledgment that one day what has been built with hard work, sweat and time may cease to exist, made him altogether more grounded and related to reality and people.

The views which i would want to adopt in my life are the humbleness and kindness. For he makes me realize that it’s not a person’s bank account which makes people like him, it is the behaviour which he has. It’s about being a human. Yes, it will always be about hard work and dedication to succeed. To be able to take risks and trust your decisions but it will also be about the fact that after every failure you would have the courage to try again. Its about doing your work with sincerity and the rewards and acknowledgments shall follow without even looking for them.

Its about learning the elementary of life – that loss is a reality and loving what you do is the best thing you can ask for. I have imbibed the fact, that if you wish to leave a mark behind, you have to be honest and truthful to your work but at the end of it all, being a good human is more essential than creating a good product for consumption.

In the end nothing describes him better than his own words – “I never had any interest in making money. None of my decisions were influenced by whether it would bring me money or wealth, all I was concerned about was, sleep at night.” -JRD TATA.

Swot Analysis – Fly Emirates Essay

This paper will analyse the strategic position of Emirates Airline throughthe use of SWOT analysis. Based on the given case, the strategic position of the Emirates Airline specifically their airline and aviation position has been challenged because of thechanging situations of the airline market. Rival industries of the company has been able toannounced the establishment of the their business approach in the global market whichoffers diversified airline industries to cater to the needs of the passengers, cargo andshipment services. The announcement of this company affects the strategic position of theentire Emirates Airline.

In order to make sure that the company will not be left behind,Emirates Airline has been able to involve themselves into the expansion to technological developments.Through the use of SWOT analysis, the strategic position of Emirates Airline in 2006will be analyzed.

Strengths As a competitive and globally recognised airline industry, Emirates Airlinehas been able to have strategic position in the global market. In fact, when Emirates Airlinestreamlined their business, it already had the advantage of size.

With several consecutive years of multibillion profits, the company has outshined its major rival companies to become a modelfirm.

Also, Emirates Airline’s decision to focus on diversified market and by considering andentering the cargo shipping and their customer service was a courageous one, but it has led to itscurrent position as one of the top global brands. The firm has likewise been characterized bymany analysts to have an ability to adapt to changing market conditions in order to maximize profit. Listening to and identifying with consumers has allowed Emirates Airline to construct acorporate culture that bears little resemblance to the Emirates Airline of the past.The ability to continuously renew and improve their service in the airline and aviationwhile effectively managing the needs of their target audience is the key to maintaining EmiratesAirline’s leader status and the key for succeeding in having strategic position.

Weaknesses . Not all of diversification and approach have been successful and this can be considered as one of the flaws or weaknesses of the company. Analysts have accused thecompany of focusing too much on their high-end acquisitions and diversification in spite of therisky effects of such decisions.

Opportunities The basis for long-term competitiveness is the ability to developcontinuously new generations of more advanced airline and aviation services. Therefore one of the company’s opportunities is to tap into more markets as a result of the innovations beingintroduced in the aviation. Localized capabilities enabling or even enhancing such co-operationwill always make a difference when it comes to first-mover advantages.The opportunity to penetrate new growth markets where internet adoption still has roomto go, Leveraging Emirates Airline’s infrastructure business to get first choice and stronger position against rivals is also an opportunity. They also have the opportunity to get ahead of their rival companies, and this should be the case, since the said market is a potential sizeablesource of income. The trend of considering the internet market also shows cases newopportunities for the company.

Threats Rival companies are major threats to the business. Emirates Airline, in contrast,started out in other lines of business and entered and airline capabilities of the company. Thefirm’s inability to keep up with innovations, or recognize its demand, creates a threat for them, arisk that they could be displaced by other industry leaders. The legal and political environmentin the countries where they operate in could potentially affect the business negatively. Their apparent complacence could be used by their rival companies to their advantage, and takeEmirates Airline by surprise, with the latter realizing too late that they are not the industryleader anymore.

Swot Singapore Airline Essay

This report will study the Business policy and system of SIA and will cover 6 different scopes, namely the background information SIA, the evaluation of External and Internal Environments that is affecting SIA, Long term and Short term Objectives of SIA should consider, Strategic choices SIA may select and implement and the justification Firstly, background information of SIA would be provided, in order to allow greater understanding of the organization on a whole. This section would include aspects such as the company’s history and core values.

Secondly, the Evaluation of External and Internal Environments would be identified. These changes would then be discussed in. A detailed analysis would be conducted, suggesting SIA on what Long & short term objectives to be met, which would be direct end results of their established changes.

Thereafter, recommendations would be provided, in attempts to correct any existing or identified issues, such that SIA would be able to boast higher profit margin and substantial growth within the next few years.

The History of the Singapore Airline (SIA)

The history of SIA is traced starting from 1 May 1947 where the Malayan Airways Limited (MAL) is under the twin-engine Airspeed consul scheduled service. The main route were from Kallang Airport to 3 states of Malaysia, namely Kuala Lumpur, Ipoh and Penang. As Malayan Airways grows steadily within 5 years, they were introduced to a larger aircraft DC-3 which provides a faster and more comfortable flight. This change opens up their services to destinations like Indonesia, Vietnam, Myanmar and other international locations. In order fulfill its mission and vision, they were bent on enhancing the service provided. The in-flight refreshments were improved progressively from plain iced water to choice of hot or cold beverages and from snacks ranging from sandwiches to biscuits. On the 16 September 1963 the Federation of Malaysia was born, the airline was then made known as Malaysia Airway Limited and Malaysia-Singapore Airline in 1966. Two years later in 1968, the airline hits S$100 million annual revenue and the Sarong Kebaya which is designed by a French was introduced.

The airline grew rapidly and purchases better aircraft like B737-100s. During the 1970s to the 1980s, the first transcontinental flight took off for London and the company was split into two entities due to disagreement. Devotion to the growth of the newly setup Singapore airlines was the main objective. Meanwhile SIA expanded its subsidiary company, Singapore Airport Terminal Service (SATS). This is to provide a more efficient ground service at Paya Lebar Airport. As Singapore Changi Airport starts its operation in 1977, its corporate headquarter Changi Airfreight Centre was operated two years later. In 1989, Singapore Airlines became the first airline operating the B747-400 on commercial flight across the pacific. February 1989 SIA’ subsidiary, Tradewinds which is known as SilkAir became the second airline in Singapore. In the 1990s, SIA start its operation with SQ23 in Terminal 2 at Changi Airport. In 1998 SIA set up a new standard in air travel by introducing a suite of products and services worth S$500 million across 3 different classes. This offers client enhanced service standards on both air and ground. KrisFlyer launched the following year. a program which allows its client to earn mileage credits according to its service class.

In 2004 February, the airline successfully set a record for the world’s longest non-stop commercial flight from Singapore to Los Angeles. Months later the record was bettered with its launch of the non-stop flight from Singapore to New York. To keep their mission and vision going, the airline added its new generation cabin with the widest full flat seats for First and Business class. Economy class seats paired with the award-winning in-flight entertainment system. The airline also start its operation at the new Terminal 3. Beside all these prospectus side of the airline, it was not always smooth sailing.

SIA faced incidents such as the hijacked of airbus A310-300 which was en route to Singapore in 26 March 1991, fortunately there was no fatalities amongst the passengers and crew. 9 years later in 2000, Flight 006 crashed at Taiwan TaoYuan International Airport after taking off on a closed runway, hitting construction equipment; taking away 83 people and 71 injured which marked the first fatal crash. In 2003, the airline faced another incident where Flight 287 suffered a tail strike during takeoff causing serious damage to the tail section during the departure at Auckland New Zealand for Singapore but touched down safely with no fatalities reported. In 2009, the operating performance decreased. Passenger and cargo carriage was lower compared to previous year. With decreasing capacity, Singapore Airline decided to scale back flights and suspended flights to counties.

The Singapore airlines, which have 14,071 employees is one of Singapore’s largest private sector employer. Acknowledged by Los Angeles Times as “one of the world’s best-managed and fastest growing airline”

SIA Mission statement:

“Global Company dedicated to providing air transportation services of the highest quality and to maximizing returns for the benefit of its shareholders and employees” The Singapore airlines focus on their current services by providing good quality services. Their signature is The Singapore Girl; No differentiation in treating customers in various classes.

Using SWOT analysis, we are able to identify the advantages and disadvantages of the organization’s direction and to promote the ideal recommendation to the growth of the company.

STRENGTH

1.1 EXPANSION & STRATEGIES

SIA has strong foundation in its company structure. Being a Singapore based Airline Company, they engaged its businesses through three reportable segments; the airline operation, airport terminal and food operations, and engineering services. Since its inception, SIA had been a strong proponent of deregulation and free competition within the international airline industry. In order to maximize productivity and utilization of all resources, by 1999 SIA had operations in 110 cities across 42 countries.

Other facts of SIA’s strategy included the growth of a modern aircraft fleet, the development of Chang Airport as an air traffic hub, and the promotion of Singapore as a tourism destination. A key factor in SIA’s growth was Singapore’s development as a hub for Southeast Asian businesses. SIA experienced growth of 20% to 30% in the 1970s, 10% to 20% in the 1980s, and around 8% per annum in the 1990s. These structures are holding the SIA’s market share in high level.

1.2 UNIQUE CULTURE

SIA chose not to be a member of the International Air Travel Association (IATA) so as to form a distinctive service identity. The airline made a habit of leading the way, and along the way developed a reputation for being a trendsetter in the aviation industry. In the 1970’s, they were the first to offer economy class passengers with free headsets, complimentary drinks and a choice of meals.

1.3 INTERNATIONAL BRANDING

SIA is reputed internationally for its emphasis on delivery of excellent service quality. To develop its service culture, SIA benchmark its customer service not only against other airlines, but also against those in other industries which major in consumer retailing services. Its unique and successful service differentiation strategy, the high profile Singapore Girl icon, has turned out to be difficult-to-match over the past decades and still no signs of letting up. These measures have helped SIA receive a long list of awards from various publications and surveys.

1.4 ADVERTISING

SIA has invested substantially in its brand. On average, SIA spent S$35 million per year on advertising during its first two decades. The airline would run a few commercials on yearly basis, routinely stressed the fact that its fleet was the youngest in the world and using their trademark Singapore Girl concept; well-known international service icon. Genuine SIA flight attendances were used in the commercial to promote the Singapore Girl’s carefully defined set of gracefulness, compassion and affection personality traits as being the representative of SIA’s world-class service.

1.5 ACCOUNTABILITY

The Singapore Airline’s image and reputation are shown high impact to deliver the highest quality of customer service that was economical, safe and reliable. Their services towards customers are encouraging the passengers to continue choose SIA as their preferred air transportation company. It was nominated Top 33 in World’s Most Admired Companies, FORTUNE’s Survey 2009 and awarded in World’s Airline Awards quoted as below:

[Singapore Airlines won two key awards, taking the Best Airline First Class and Best First Class Airline Catering titles. “Singapore Airlines always puts up a strong performance in the World Airline Awards” said Plaisted, “and in winning these categories, Singapore Airlines has had to meet the expectations of some of the most demanding customers in this premium market”.]

1.6 HUMAN RESOURCE

The human resource management practices recruitment from the global labor that developed, motivated and retained employees who contributed to the company’s objectives. SIA has established training hubs to train staffs in the core functional areas of flight operations, cabin crew, information technology, commercial training, security, airport services, engineering and SIA’s Management Development Centre. Through these measurements, SIA is getting high effective and efficient performance from their employees and this will increase profit for the company.

WEAKNESS

2.1 MARKET RIVALRY

The Singapore Airlines is characterized by strong rivalry and supplier power. However, with the trend of upcoming budget airline targeting SIA’s largest market share which is within the Southeast Asia. SIA has to come up with new marketing strategy such as setting up their very own budget airline to compete with those that falls under the same category.

2.2 GLOBAL FINANCIAL CRISIS

Singapore Airlines was facing one of the greatest depressions in its history. Although the global financial crisis was well contained, it has affected the international airline industry; SIA will have to reframe the four major components of the airline’s cost structure: Labour, fuel, maintenance and aircraft purchase.

2.3 COMPETITION IN THE AIR

The airlines had a strong incentive to carry additional passengers, and competed fiercely with each other by lowering the quality and predictability of their operating earnings. Airlines also undertook high levels of debt to finance the purchase of new airplanes, which will increase their financial risk.

2.4 SHARE REDUCTION

SIA has a drop in share percentage of Singapore market, although there was a bounded by 16 percent, it was still underperformed compared to other Southeast Asia airline company. The Singapore Airlines has to look into the cause of decrease in Singapore market share.

The following is the summary and evaluation of the Internal Factor Evaluation (IFE) Matrix for SIA:-

Weight: 0.0 not important to 1.0 very important. The sum of all weights assigned to the factors must equal 1.0. Rating: 4 = Major Strength; 3 = Minor Strength; 2 = Minor Weakness; 1 = Major Weakness

2.3 Threats

There are a number of threats detected, namely the Presence of competitors, the Risk of Financial Crisis and the continued Weakness of the Singapore Dollar.

2.3.1 Presence of Competitors

Firstly, presence of other competitors in the airline industry providing comparable services at comparable rates includes Cathay Pacific, one of Singapore Airlines greatest rival. The choice on which airline to fly, would ultimately lies with the consumers’ preferences, based on factors that are ranked in different degrees of importance to them, such as the reputations of the airlines. In addition, budget carriers like Jetstar are offering flights at lower rates, as compared to SIA. Being in a price-sensitive economy, consumers may seek to travel at lower costs. Thus, in spite of lower standards of services provided, consumers may choose these budget carriers, especially when they are travelling to nearer destinations where shorter journey durations are involved.

2.3.2 Risk of Financial Crisis

Secondly, there is an evident risk of a financial crisis occurring. As mentioned in the case study, “demand for airline travel is significantly impacted by income levels”. Should a recession occur, consumers would be less likely to splurge on holidays and airfares. The consumers may choose seek alternative modes of travel, such as by coach or by sea. Singapore Airlines would then experience a decrease in demand which would thus affect its sales and profits.

2.3.3 Continued weakness of the Singapore Currency

Thirdly, the continued weakening of the Singapore Dollar has proved to be a threat. As SIA has minimal control over fuel costs, the airline may constantly experience high fuel costs, compared to other neighboring countries. With greater expenses and the need to keep airfares reasonable, the airline may see itself with a lower profit margin. In addition, it is understood that with the number of fleets an airline owns and coupled with the regular maintenance, a substantial amount of financing is required. With this, the Singapore Airline may run a risk of incurring huge debts.

2.4 Opportunities

It has been identified that there opportunities for SIA to tap onto. They are namely the Introduction of budget carriers between Singapore and Kuala Lumpur, the decrease in regulatory barriers, Good reputation of Singapore Airlines, the incorporation of high levels of technology and safety, the Formation of various alliances and lastly, the steady growth of Tiger Airways.

2.4.1 Introduction of budget carriers

In November 2008, the regulators from both Malaysia and Singapore agreed to the introduction of one budget carrier from each country to operate flights between Singapore and Kuala Lumpur. The budget carrier was Tiger Airways, which SIA had a stake in. Thus, this has been identified as an opportunity, whereby the subsidiary would experience greater sales volume, allowing SIA to gain greater market share and boosting the profits on the whole.

2.4.2 Decrease in regulatory barriers

Similarly, the decrease in regulatory barriers is viewed as an opportunity where penetrating into new markets are made easier. This is substantiated by the open skies agreement between the United States and Singapore in the late 1990s, allowing the SIA to fly to new destinations in the United States. This would allow the airline to reach out to a new target segment, where demand may exceed its saturated local market. Restrictions on flight frequencies were also dismantled, which provided SIA with greater autonomy in its operations. With the freedom to increase its flight frequencies, the SIA boasted of an opportunity to reach out to its consumers by providing more flight timings to suit each individual’s needs.

2.4.3 Good reputation

The SIA has won a number of awards, some of which include the Airline of the Year by Air Transport World, in Year 2007. In addition, the airline has been awarded the Best Airline to Asia award for the 9th consecutive year and 13th time in 14 years. All of these awards channel towards the positivity of creating a good reputation of the airline. It is likely that that the airline has gained much respect of its consumers and being awarded these prestigious titles would no doubt, boost the confidence of the consumers, in making Singapore Airlines the preferred carrier on their travel trips. Thus, it is an opportunity where the airline can tap onto, to reach out to the masses, especially when word-of-mouth is a powerful mode of advertising.

2.4.4 Incorporation of high levels of technology and safety

The incorporation of high levels of technology and safety is also a contributing factor to the creation of a reputable organization. With the airline’s average age of its fleet standing at 6 years old, this is way below the industry’s average age of 13 years. This increases the level of safety of travelling on Singapore Airlines as compared to its competitors. Adding on, the airline too, has embraced the latest technology to train its pilots, ensuring that they were all well trained to provide safe flights and impeccable services to its consumers. This is thus viewed as an opportunity as the airline boasts of high safety levels, which would be able to put minds at ease. The airline can thus, market their safes flights and reach out to risk-sensitive consumers who would choose safety over any other factors in determining their preferred airline carrier. It might be able to capture a new market segment, thereby increasing market share.

2.4.5 Formation of various alliances

It has been understood that the Singapore Airlines has had formed a number of alliances with various companies such as Delta Airlines, Lufthansa and Swissair. The airline even acquired 49% stakes in Virgin Atlantics. Despite certain issues which arose from the formations, all of these alliances offered the airline opportunities to reach out to greater masses in increased destinations. The airline had new and greater segment markets to target, which could possibly boost sales.

2.4.6 Steady Growth of Tiger Airways

Since its launch in Year 2005, Tiger Airways, SIA’s subsidiary, has been experiencing good results and steady growth, with help from the Singapore government which had constructed a new budget terminal. This is seen as an opportunity where the Singapore Airlines can continue to expand the budget airline. With Tiger Airways gaining popularity, it is easier for the airline to gain a greater percentage of market share.

The External Matrix below, are the factors that contribute to both the threats and opportunities of SIA.