MGT489 (Strategic Management)

Section-20

Case-4

GROUP-6

US Airlines

Submitted To

Bobby Hajjaj
Lecturer, School of Business and Economics
North South University

Submitted By:

Name ID

Tahmin Islam 1330685630

Mohidul Islam 1410484030
Nazia Khan 1410635630
Jannatul Ferdous Sonia 1421009030
FatemaTuz Zohra Moumi 1420330030
RihanaAkter 1420808030
Sadia Khan Tania 1420744030
Introduction: US airlines industry providing air transport service since 1920. During that
time this industry has faced lots of difficulties. Building a leading position in this industry
with so many challenges and binding this industry survived till present. To make profit they
have struggled so hard. Between 2001 and 2005 this industry had been ravaged by the horror
of September 11. Because of the war fuel price goes up and there was also an unprecedented
competitive pressure from a new generation of low cost airlines. During this period the
industry faced losses of $35 billon. After lot of struggle in 2006 this industry getting its way
to remodelling in a positive way included some factors.

Scenario analysis of US airlines (PESTEL)

Industry: US airlines
Time framework: 2003 – 2007 (5 years)

Political FACTORS:
Drivers of change
Deregulation act regulated
by the government in 1978
Increased safety policies
after 9/11 attack
The air traffic controllers
strike in 1981
Mini scenario
Create free market
opportunity
Increase of new entry
impose high rivalry among
the major players
Safety become an issue after
9/11 attack but more
expense on security
measures may hamper the
nature of service.
Frequent strikes can impose
negative effect on the
passengers also the service.
Major scenario
 Before deregulation
passenger has low power
as CAB fixed the price of
tickets. But after
deregulation it creates a
chance for new entrants
and pricing power comes
to passenger. For that
reason airline become a
commodity product and
this industry faced a price
war.
ECONOMIC FATORS:
Drivers of change Mini scenario Major scenario
• Fuel price increased
 Operating cost went up  More loses for small
after 9/11. airline companies while
after the increase in fuel
their rivals earn profit.
• Labour cost went up
price and labour cost.
after 2000.
 Air travellers started
• Economic recession  Increase of cost for
looking for cheaper airlines
after 9/11.
flights as a result of
• Competition from low-
economic recession.
cost airlines

Social analysis:
Drivers of change Mini scenario Major scenario
 Most of the travellers  Customer can choose
are domestic flight  Airline Company will what type of flight they
customers. be affected if charged want after the change in
high. fare structures.

 Flight usage for  Flight service will

business trips and become more lucrative
leisure trips became after segmenting
segmented

 Excessive usage
increase in pays for
flight attendants and
pilot
Technological analysis:
Drivers of change Mini scenario Major scenario

 Improvement of  New company will

technology may come with their new
solve the issues technology.
regarding massive
accident.

 Process of
 Travel cost will be purchasing tickets
comparatively lower will be easier.
for the proper use of
new technology.
 Overall cost
 Technological decreased and
advancement might operations became
settle on profoundly easier. Processing  Customer will be happy for
compelling planes financial data was the development of
that might reduce much easier than technology
those expenses for before.
operation by gigantic
number.

 Consumers started
perceiving air travels
as commodities.

 Leisure travellers
looked for cheaper
flights where
business travellers
looked for superior
service.

 Using internet reduce

the necessity of
travelling for work
purpose.
Ecological analysis:
Drivers of change Mini scenario Major scenario
 Sustainable aviation  Fuel efficiency will  Less using of fuel
biofuel should be ultimately make it more might help the airline
introduced to make the cost effective. industry being eco-
industry more friendly in few years.
profitable as well as
eco-friendly.
 More eco-friendly.
 New planes with
modern technology
require lesser use of
fuels.
 Less fuel use tends to
 Buy Fuel efficient harm the environment
plane or electric plane less.
or hedge against crude
oil price.

Legal analysis:
Drivers of change Mini scenario Major scenario
 The US and the EU  It increases the  After 9/11 incident safety
Agreement for competition and practices increased a lot and
sharing their sky. creates significant severable laws has been
changes. introduced in the favour of
 Deregulation act of  It increases the new airlines companies.
1978 entrants in the
market which bought
up more competition
and reduces the
ticket value.
 Employee union had  Strict union laws
the power to increase produced those chop
salaries expense a down for job
lot. expense.

 The 9/11 effect  Safety became an

important issue after
9/11 and companies
had to follow strict
rules for safety
Airline industry is highly susceptible to weather condition. The performance of any airline is
highly dependent on weather conditions. Hence it is a threat for the overall industry.

Strategies:
- The Low-cost carriers should concentrate on lowering their prices to be the cost
leader.
- Whereas, the larger companies should concentrate on differentiation.
In this way both the airlines will be able to hold on to their market. This will also
enable the industry to overcome the rise of fuel prices
- They can do more promotions and assure the customers that it is safe to ride a plane,
this will reduce the effect of the 9/11 attack.
- It is essential to have a good relationship with the suppliers (to get the efficient parts
of the plane that will reduce fuel consumption), and the institutions (to get the
available location of the gates and landing slots).