Free Essays

Marketing Strategy Analysis for Emirates airline


As the airline industry is especially increasing and highly competitors so, there are many market share in the industry. Moreover, the airline industry is affected by the environmental (e.g. political, economics and etc.) that decreasing the number of passengers. At this point, there are many reasons, which have an affect on the airline industry to competitive among industry, so many airline companies need have developed their strategies to be more effectively in order to lead the market area.

Emirates airline is one of the big company in the airline industry, but today there are large number of Airline companies are still growing in the market, which are looking for stealing a market share. In this point, with in the growing industry there are more and more choices for the customer to be able to chose the airline who they wanted to traveling with and yet still looking for the one which can serve their need also. Due to the hitting of economic slump, it’s sent the effect to the large commercial airline shrinks them and may not be able to expand the company. Therefore, the switching cost to the low cost airline has also created an impact on the Emirates airline.

In order to maintain the business success and obtain customer to flying with, the airline also need to modify their strategies and service which could give to customer feels the different and added value after purchasing the products. The aim of this report, the author is trend to analyze and evaluate the strategic issues, which can be able to give and effectiveness for the airline to develop their strategic use to be more effectively.

In this report will consist of two major parts: part one will analyze which strategic formulation and lead to implement strategic approach as gaining ahead competitive advantages from resolving the switching cost of consumer leak to the budget airline. In the following part, the author will recommend and conclude at the end of the section.


In this research, the author trends to use a secondary data sources to seek and conduct this research. This is because of the use of the secondary, it’s also give the reader to gather information a wider range from the different sources which can justify and analyze in order to achieve the tasks. In addition, the use of the secondary data will also give an efficiency in term of saving time to conduct this research from the available sources e.g. The Internet, Books and journals are also an important in term of apply and develop with their own report.

Target Market and Positioning

In terms of performing the business, the marketer should be identifying who is the customers and understand the customer action for a product or service in order to providing the satisfy goods or service for them.

Emirates airline is one of the air carrier, which have hardly felt the economic and airline down turn. There are three major categories of passengers: tourism and business, expatriates and transit passengers.

UAE’s Tourism and Business segment Customers.

Dubai’s emergence as a regional business and tourism hub that has provided Emirates airline plenty of room for increasing and has fueled regional air passenger traffic. Dubai aims to attract 15 million visitors by the next year. Therefore, Emirates airline should plan to take advantage from this situation that can make more passengers to the airline.

Expatriates in UAE

Because of Dubai economic is rapidly increasing, it has created huge demand of workface and the highly paid labor market is a major attraction for the various workface around the world. The diversity of population enables Emirates to plan their route; they have reached mutual agreement with almost all the national authorities around the world to operate in. Dubai operate in an “open sky” policy, which allow any carrier to compete with Emirates airline.

Transit passengers

Due to Dubai is the operational hub for Emirates airline; it is the best position to connect between Europe, Asia and Australia that can be support to the airline. Emirates has been using “connecting point” in the promotional of their marketing especially transit passengers, the well established and marketed wide range network enables their to prosper in particular segment.

Strategic formulation

Marketing Plan

In order to identify Emirates airline strategic options, ANSOFF directional matrix can be used as a starting point to identify the options that are available. According to Aaker and Mcloughlin (2007), there are four possible alternative growth strategies that can be developed. It consists of market penetration, market development, product development, and diversification.

(see appendix 1)

– Marketing Penetration (Improving In-fight Service)

Business focuses on selling existing products to existing markets drives growth strategy for Market Penetration.

1) Retain and boost market share of Emirate airlines product and services.

2) Protect market dominance of Emirates airlines existing markets.

3) Driving out competitors by restructuring mature market.

4) Enhance usage of existing passengers.

Tele-communication is essential element in everyone daily life, in order to enabling passengers to make voice and data call over aircraft’s telecom system, Emirates would like to add communication while on the airplane, it would be very good service for the business passengers. Currently, Emirates have an expensive telecommunications method to make voice call and Internet, passenger’s mobile phone should be beam signal to the ground satellite system and from Immarsat, which is already installed on most of the Emirate airplanes.

– Marketing Development (Extending New Routes)

Due to the number of services is increasing into new markets where company seeks to sell their product to new areas so, the launching existing services to new area or new market segments is a possible way to achieve this strategy.

The objective of Emirates airline is building up Dubai into a popular aviation centre that will finally serve as an important universal long haul hub. It provides an alternative to the traditional European airline hubs as Heathrow Airport (London), Charles De Gaulle (Paris) and Schiphol (Amsterdam). The airline heavily promotes Dubai as a destination, offering reduced hotel rates as well as insight to event like the Dubai shopping Festival that hope to attract more travelers to the city. In order to improving the number of tourism, Emirates airline add new route and destination especially in UAE tourism.

Due to the airline managed road shows and press convention to announce its entry to new city, these event allow travel agents, tour operators and local airline personnel in contact and gain information about Emirates’ new routes, holiday packages and other promotion that can give a advantage for the airline.

After performing a new route to the country’s economic hub – Shanghai – the airline offers passengers a chance to visit the epicenter of China’s political and cultural activities. Because of China’s richest city in terms of historical value and has a heritage that dates back over 3000 years and houses marvels as the Forbidden City, the Great Wall of China and the Ming Tombs.

The success of Dubai as an intercontinental hub, it has been facilitated by airline such as Emirates. The centre point of Dubai has become extremely important; because of it hardly two points on the globe where it is not logical or possible to use Dubai and connecting point, and it usually a good direct route.

– Product Development (Private Suite)

Introducing new services into existing markets implies product development is strategy, which involves the development of skill and requires business to expand customized services that can apply to current markets.

As Dubai is a hub for international business travelers, this is time to improve new product to provide for top-level business executives. The CEO’ imagine of multi-national company makes lengthy overseas journey to attend a board meeting that could have a main impact on the company financials. The fact, company would like CEO to be on top for the rested, refreshed and relaxed so, the cost of CEO’s air travel is doesn’t seem so expensive when comparing to service for them.

Emirates airline has more services for business travelers that is reason why Emirates airline introduce high quality first class private lounges to attract business travelers. The premium class private suit would be fully outfitted with personal storage, coat cabinet and desk and individual mini bar. Long seat reclines to become fully horizontal couch and TV wide screen. Exceptional level of personal services including a gourmet and wines provided by specially trained multi-lingual cabin crews are the other value addition for this product.

– Related Diversification (Low-cost carrier)

The last strategic option allows Emirates airline to exploit its competitive advantages in airline service qualities. Diversification is a strategy, where business sells new services to new market segment. It is more precarious strategy because of limited experience on particular new market areas (Lee and Carter, 2009).

After the European low cost carriers are a successful, Middle East operator also started expression to explore new marketing concepts of “Frills-free” fly. The low cost airline is increasing at more times in the average industry.

The low cost airline offers lower prices than traditional airline by fascinate promotion. The low cost has flexibility fare that is one reason why some people is switching cost to them.

Air Arabia dominates exclusively to this low cost carrier service in UAE. Therefore, Emirates Airlines must decide how to respond this threat posed to the large expatriate market in UAE. Among the options considered there is scope to introduce low-cost subsidiary of Emirates Airlines.

Emirates Airlines be supposed to slightly spread from current marketing objectives to obtain the low cost airline market share and to retain its customer base of UAE expatriate market. This can be done launching new subsidiary to cater budget airline market. The key routes should be high demand and large number of expatriate’s home country like Egypt, India and Pakistan.

In terms of Emirates Airline system, new budget airline is help to introduce new Al-Makthoum International Airport in Jebel Ail that is located on Dubai border. This will provide residents of Dubai and Northern emirates enhanced travel option to neighboring destinations. Emirates Airlines is placing lease order of for 200 aircrafts. The carrier is expected to use Airbus A320 or a Boeing 737 on lease basis for the first few years prior to acquiring ownership status.

Implement Strategic

As Mintzberg, Ahlstrand and Lampel (1998) the implement strategic is going to using after the marketing plan, it should be evaluated. The evaluation is necessary for extent the marketing objectives, it have been achieved during the specified time period.

Improving In-Flight Service:

Success criteria of deploying a system to allow passenger to use their mobile phones for communication, it is increasing market penetration. It can be measured in terms of voice and data usage and expansion of market penetration. There is not corrective action plan if it fails to respond.

Extending new routes

New destinations are implemented to achieve market development. Flight market occupancy is showed the result of this strategy. It needs to re-discover new destination if the flight occupancy level is lower than expected.

First Class Private Suites

The first class private suites is a new product of Emirate airline, it can be measured the success of the product. Quantitative measurement of this product would be number of booking or occupancy. If it fails, the corrective plan is reducing the tickets price.

Budget Airlines

Success criteria would be capturing new customer base for the airline. Since its separate operating entity we can estimate financial results of operating profit would be good measure to evaluate the success of budget airline subsidiary.


To conclusion, the related diversification options were suggested as the firm strategic business solution. The overall analytical approaches primarily from the positioning operational hub as a Dubai. However, the firm has high capability to expand its competencies and capabilities into other market areas that the resource based view approach is estimated as the most suitable one.

Free Essays

Impact of Deregulation and Low Cost Carriers on the Airline Industry


The report will be assessing and evaluating how deregulation and the growth of low cost carriers have affected global competition and market trends in the types of products offered to customers in air travel. The report will identify the key roles of the low cost carriers and how they are affecting the global competition and the market trends by introducing their means and methods over the bigger airline industry. It will also be witnessed in the report how the airlines have come a long way from the past till now and how the industry is on a constant change due to needs and demands put up by the customers which currently is being handled by the low cost carriers in some ways.

While air travel was once a luxury only the rich could afford, the entry of more airlines serving the busiest and most profitable routes has caused airfares to plummet. Some of the airlines that will be looked at are Buzz, Go, Ryan Air, and Easy Jet. These are well known low cost airlines. This report will look sequentially at the marketing environments of the airline industry and will analyze the main forces shaping its future. It will concentrate on the impact of low-cost airlines on this industry.


The airlines are relatively new as a market driven industry. In 1938, the airlines faced steep competition that was vigorous and unstable. The industry asked the government for a regulatory body to control competition. The newly formed CAB froze the industry structure and blocking out new firms, which ended up creating monopolies. The industry continued in this state despite growth in traffic, increased profits, and changing conditions. The turning point for the airline industry began in the late 1970’s when the industry needed to break free from its regulated environment. New technology and ample profits made competition a viable option. The result was the passing of the Airline Deregulation Act in 1978.

One of the large effects of deregulation was the increase in the number of carriers and increased competition. In 1978, there were 43 carriers certified for scheduled service with large aircraft. By 1983, there were over 60 new carriers since the act was passed. With the slew of new airlines, the airline industry was able to reach new markets and grow tremendously. United with the price drops, air travel became a more favorable way to travel. Today there are no close substitutes for travel over 150 miles. However the trend of an invasion of airlines eventually turned into many mergers, acquisitions, and bankruptcies in the late-1980s to early-1990s (see Figure 1)

Still seen today, another effect of deregulation is the development of the “hub-and-spoke” network. The major airlines developed this network to efficiently manage and serve more markets with the same fleet of planes. Another advantage of the “hub-and-spoke” network is that airlines will carry the traveler from departure city to arrival city and not have to hand over customers to competing carriers. Travelers enjoyed traveling with one airline though an extra stop was required.

A marketing innovation that airlines initiated after deregulation was the frequent flyer program. Repeat customers earned points toward free tickets or upgrades. This program generated loyalty beyond service and satisfaction with travelers. Recently, the frequent flyer program extends beyond receiving points for flying. The most popular is the use of credit cards (points per pounds/dollars) and using points to purchase things other than airline tickets.

A technological advance in the industry came with the introduction of computer-reservation systems (CRS). This allowed airlines to keep track of fare and service changes. The systems allow agents to process millions of reservations a day. Today these transactions have significantly increased and with the introduction of the Internet redefined how travelers shop, purchase, and receive tickets.

According to Geneva News article low-cost carriers found not just tourism to help it establish it self in travel. They found out that what could begin as a tourist route may be quickly adopted by businesspeople. This meaning that the low cost airlines also are used by business. So the companies also get some business even during the off-seasons. These airlines help offer a cheap way to be able to get to the business places, historical area, and Interesting cities. We see in Belobaba (2003) report that Easy Jet, Europe’s leading low-cost airline. Now what helped it become such a big name in low cost air travel in EuropeGoing to Easy Jets website, they attempt to explain how they work. It can be seen that they broke it down into three things to make them a low cost airlines; The first thing is it is a ticket less airline, this cuts cost of paper and printing. The next thing they do is efficient use of airports; this means Easy Jet can make the most of its time. Easy Jet also made a few deals with airports cutting landing fees. The last thing Easy Jet has done to make its airline so low cost is there’s no such thing as a free lunch. This helps as it cut costs of food, and may help the airlines earn money on the food they sell.

In Belobaba (2003) report we see the U.S. situation with airlines. The report starts off talking about the 11/09/01 incident. Were after the attacks on the twin tower, the whole thing had negatively affected the volume of business travel and 12.5% lower than in the preceding year. The report goes on talking about the growth of low cost airlines. Reduced willingness on the part of business travelers and tourist to pay the higher airfares charged by network carriers. Also some interesting points in the report are.

“In the US, low-fare airlines have exhibited slow but steady growth since deregulation, but low-fare carriers as a group accounted for less than 7% of US domestic air passengers in 1991, compared to 81% by Major network carriers [The remaining 12% was carried by smaller regional and local carriers]. Low-fare carriers grew more rapidly in the US through the 1990s, to the point that the carried 20% of all US domestic passengers as a group in 2002.”

To look at a more world aspect of tourism we see in Christianto (2003) article that in 2000, there were 7.58 million passengers, but the number increased to 8.27 million in 2001 and to 8.96 million in 2002. Also according to the article the figures are expected to reach 10.34 million in the coming years. It goes on talking about the price war. A war between the more high class big Airlines, and many of the airlines that offer cheaper tickets. In this war they are trying to set a floor price were airlines may not go under this price. This is due to the high numbers of passengers going to low cost airlines to travel.

We are starting to see that with these low cost airlines the bigger airlines are having problems holding on to their customers. Now there are airline companies that are forced to lower their price to compete with these low cost airlines. We see British airways as one of those companies. British airways have recently launched a series of cheap flights.

In the future there is a big possibility that all these big airlines will have to lower their prices considerably. As theses low cost airlines seem to be taking all the possible clients away from these big airlines. There is also too say that these big airlines are holding on to their passengers for long distance travels. As these airlines are more comfortable and more advanced the travelers like them more. As if you have to spend a long time in an airplane you would choose the best situation. There are only a few low cost airlines that are set up. The number of airlines in general isn’t too high. We see in the U.S. for low cost airlines you have only two or three. As it’s about the same for Europe as we see airlines like Easy Jet, Ryan Air, Go, Buzz and only a few others. As for other areas it was hard to find information on cheap airlines.

Europe seems to big the biggest point of low cost airlines. In Christianto (2003) report its shown that travel between Europe has been seeing some serious growth. This alone shows that with low cost airline, there comes more tourism. There is also to say that in Europe it is convenient for people to move around for business and travel.

The first successful low-cost carrier is generally acknowledged to be Southwest Airlines in the United States, which pioneered the concept when founded in 1971 and has been profitable every year since 1973. With the advent of aviation deregulation the model spread to Europe as well, the most notable successes being Ireland’s Ryan air, which began low-fares operations in 1991, and easy Jet, formed in 1995. As of 2004, low cost carriers are now edging into Asia, led by operators such as Malaysia‘s Air Asia. Many carriers have opted to launch their own no-grills airlines, such as KLM’s Buzz and British Airways Go, but have found it difficult to avoid cannibalizing their core business.

The European airline industry is being shaken up by the presence of low-cost airlines. It is estimated that existing low-cost airlines has expanded their European market share from 5% in 2000 to 25% by 2010, as illustrated in figure 7, establishing themselves on a long-term basis which will have major effects on the European airline industry as a whole

The low cost carrier’s airline industry is having a huge impact on the global airline industry. The table below highlights how the market is migrating to a new business model:

customer behavior is changing> Customers expect internet to provide lowest possible price offer> Price becomes decisive factor:– Destination is not!

– low cost carrier’s develop routes according to costs

> low cost Carriers have generated growth of aviation in this segment

– People fly who would not have otherwise flown

Market structure is changing> Erosion of traditional “national” markets:> Segmentation of market into:– low cost on local markets

– Regional niche markets

– International/alliance markets

Greater flexibility and simplicity of traditional model> Established airlines are questioning their models.> Some have moved into the no-frills segment.
Flexible adaptation of traditional pricing models> Many full-service carriers offer simple and low prices.
Marketing focus on the actual product offered> Some carriers are marketing frills aggressively.

The SWOT analysis is used to analyse the internal and external view of the low-cost airline industry with a view to analyse the situation of the no-frills model upon today’s world wide global industry.

STRENGTHSSimple fare structureRelative low unit costs

Multi-base network offering point-to-point service

Strong corporate culture i.e. Easy Jet

High commitment to safety and customer services

Efficient use of airports with rapid turnaround times

Highly profitable with rising demand

WEAKNESSESCustomer expectations of service are increasingHigh aircraft utilisation means more vulnerable to delays

Prices are low, but they are not as low as they could be.

Weak brand loyalty between low-cost airlines and passengers

Growth in size means complexity

Seasonal variations and cyclical demand

Affected by economic downturns

OPPORTUNITIESEurope is a land of opportunity for low-cost airlinesSignificant growth of internet bookings expected – 17% annual compound growth rate of Internet user population

Increase in Britons buying second homes abroad

Outsourcing of IT functions such as call centres in India

Airport expansion

THREATSFlag carriers imitate low-cost business model offering ‘cheaper flights to people booking well in advance’BA, as well as other airlines has redesigned its website to make online booking easier

New EU legislation travel compensation laws

Air passenger duty to rise ?5-?15 on economy tickets

Some customers prefer to book through a travel agent

The development of rail network within the EU

Video conferencing may take an increasing share of the business clientele

Threat of terrorism e.g. bombings in Madrid

Lack of take-off and landing slots


Since deregulation arrived, budget carriers such as Easy Jet and Ryan air have grown to account for around a fifth of European air travel, thriving after the events of September 11th; their market share has grown rapidly. Observers of the European airline industry have long believed that the flag-carrier system has created too many airlines and led to inefficient excess capacity. The suggested remedy is consolidation of the European industry via cross-border mergers, an avenue that is now open as a result of EU deregulation. The first major consolidation event is currently with the proposed Air France-KLM merger recently approved by EU regulators.

It is likely too that the low-cost sector will experience consolidation leaving Easy Jet and Ryan air as the two main players. While the big airlines consolidate, trying to win more premium business traffic, the cheap fares airlines will fight ruthlessly for leisure traffic. British Airways has already withdrawn from European routes where it makes a loss.

In the longer term, airlines are looking to join forces in the context of the prospects of the liberalization of air traffic between the United Statesand Europe, which is expected to lead to fierce competition on both sides of the Atlantic.

Two things matter to airlines – the amount of empty seats on their planes and the cost of getting those planes into the air. Reducing those two factors leads to profits, and in recent years, the European industry has been struggling.

The fear of terrorism and disruption in the world’s aviation system has simply made things much worse. And looking to the future of European aviation, it seems that the issues associated with the environment will be addressed severely, possibly leading to taxation on the one thing supporting airline growth; Kerosene. Furthermore, the matter of over-capacity, which has lead to a lack of taking-off and landing slots, could hinder further growth and drive up prices for the low-cost airlines.

While the full-service carriers are struggling to get back to the traffic levels they enjoyed in 2000, the budget airlines are growing by more than 10 per cent a year. The expansion of the EU provided vast opportunities for the low-cost sector but for the budget airline industry to thrive; low-cost really does have to mean low-cost.

References and Bibliography

Lectures notes – week 1, 2, 3, 4, 5, 6.

Graham, A. (2009) 3RD edition Managing airports: an international perspective

Definitions of deregulation from

Wensveen, J. and Leick, R. (2009) the long-haul low-cost carrier: A unique business model, Journal of Air Transport Management Volume 15, Issue 3,

Hanlon, J.P. (2007) 3RD edition Global Airline: competition in transnational industry

Morrison, S. and Winston, C (1986). The Economic Effects of Airline Deregulation

Belobaba, P. (2003) The Airline Industry and Current Challenges.

British Airways. (2003). Can be obtained at;

Burghouwt, G. and Huys, M. (2003). Deregulation and the Consequences for Airport Planning ORL website:

Christianto, I. (2003). Airlines earn their wings in increasingly crowded skies

Easy-jet. Company website. Accessed May 10, 2004 from

Easy-Jet. (2003). How We Offer Such Low Fares. Can be obtained at;

Ryan air.. Progress Report. Can be obtained at;

Two UK low-cost air lines open up new direct links between North-East England and Geneva. – Geneva News

Free Essays

Study of Customer Needs and Desires in the Airline Industry


As quoted by Kotler et al 2007:324 “Almost 28% of all production ideas come from watching and listening to customers”. In the airline industry, customer’s needs and wants are two of the three prime elements to be considered for its development. Other element being desires or demands, which is equally important but not everyone can afford it as it is backed by buying power which is not similar for all. The two prime elements endeavours to enhance the marketing decisions by selecting various methods such as addressing questions as to what are the currents needs and wants of customers, setting the decision making agenda, etc. Enhancing the flow of goods, services and ideas from its creators to the consumers wants and needs, is an activity known as Marketing. Everyone have their own needs, wants and desires, and in order to fulfil these everlasting desires, goods and services are required. Marketing concepts can only be applied if the basic needs, wants and desires of the customers are known. In order to satisfy the customers, promote and sell the products, services and ideas in an effective and more efficient way, marketing strategies like advertisements, campaigning, etc. are being incorporated. Organisations, through effective use of marketing research, should be able to ascertain the needs and wants of the customers and endeavour to deliver benefits that will amplify customer’s lifestyle ensuring a healthy turnover for business.

When undertaking to meet the requirements of its customers, an organisation has to consider the four key factors also known as the 4P’s of the marketing mix. The 4P’s consist of product, price, place and promotion. Further to this, in order to serve the customers more effectively and efficiently, additional 3Ps were introduced; people, process and physical evidence respectively. Briefly explaining these,


According to Holloway 2004, is anything that is offered to the market to satisfy a want or need. Kotler suggests that a product should be viewed at three levels; core product, actual product and augmented product respectively.


Must be conflicting and must bring about profits. The pricing strategy can consist of discounts, offers and the like.


Is an area where the products are made available through different channels for the customers to buy.


Includes the methods of communicating to the customers of what the company has to offer and to make them aware of product’s benefits rather than just talking about it.


Expand to customers, management and everyone who is involved in it. It should be realized that the reputation of the brand remains in people’s hand.


Is a procedure of providing service and thoroughly knowing whether it is helpful to the customer, if they are made available in time and many such things.

Physical evidence

Refers to such things which aid the customer in what he is buying. For instance, brochures, pamphlets, etc.

If properly conducted and implicated, marketing research could have a positive impact in an industry. Therefore, qualitative and quantitative methods, which are frequently used in airline industry, will be appraised in this essay. Over to that, their strengths and weaknesses will be explored while comparing and contrasting these methods, as they apply in airline industry. There is a need to apply qualitative and quantitative research methods, taking into consideration above Kotler’s 2007:324 quotes, to ascertain customer’s needs and wants.

According to Alan Bryman and Emma Bell, “By contrast, qualitative research can be constructed as a research strategy that usually emphasized words rather than quantification in the collection and analysis of data…” Helle neergaard, John P. Ulhoi 2007:5 suggest that definition of qualitative research provided by Denzin and Lincoln (1994) is considered by many which say that “it is a multi method in focus, interpretive, naturalistic approach to its subject matter. This means that qualitative researchers study things in their natural settings, attempting to make sense of or interpreting phenomena in terms of meanings people bring to them.” Denzin and Lincoln 1994 suggests the basic characteristics of qualitative research are case study, personal experience, introspective, life story interview, observational, historical, interactional, and visual texts.

Application of wide range statistical methods to quantify or measure data in terms of value or volume is known as quantitative research. “Quantitative research uses numerical data, and it characteristically has structured and predetermined research questions, conceptual; frameworks and designs.” (Punch, 2005, 28). According to Lamnek 2005 quantitative research characterises a rather inflexible procedure that is best suited to explanatory, statistical and theory testing purposes. Paul N. Hague (2002) points out that quantitative research is related to the measuring aspects of number of consumers constituting the market. This includes soft phenomena as well as hard phenomena such as consumer’s attitudes and market size, purchase frequencies, brand shares, etc. The elementary characteristics of quantitative research are heart of the research, defined objectives that include hypothesis and focused research design identifies who, how, what, why and when, large enough sample to allow for generalisation.

In an airline industry, a large scale survey design i.e. quantitative research method would only allow a narrow and restricted view on innovation because such approaches lack depth due to focus shifting on large sample offers only. Besides, within the service sector there is relatively poor data collection and low availability of statistical data on innovation activity (Howells, 2009, 9; Richter & Theile, 2007). It is unlikely that senior executives will choose to answer a fairly anonymous survey, as typical percentage for response in surveys on innovation in airline industry are in the low single digits (Maximilian, 2002, 47). As the airline industry is a global industry with a large number of small carriers, it would yield no statistically substantiated results and depth would be missing. Example of such an approach would be a likert scale; all the answers to the questions are numbered as: 1) strongly agree, 2) agree, 3) neither agree nor disagree, 4) disagree, 5) strongly disagree. The strength of such a survey is that consecutively a large number of people can be surveyed all at a time and the questions are close-end. All together they do have a weakness as well which is that interaction, feelings and thoughts will not be expressed freely as needed.

Qualitative research, on the other hand, besides using non-numerical and unstructured data, alsy typically has research procedures and questions which are basic at the beginning and become more focused and perspective as the study progresses (Punch, 2005, 28). Qualitative methods permit the analyzer to analyse selected issues in detail and depth (Patton, 1990, 13-14) as they generate detailed information. By contrast, qualitative data are rich while also having a strong handle on “real life” (Miles & Huberman, 1994). As the airline industry is unstructured from a practical point of view and is largely unexplored, therefore that method is applicable which would take advantage of rich empirical data. Consequently, this essay pursues a qualitative approach. The strengths of such an approach are that they encourage greater intensity of ideas and participation of participants in an interactive way where deep feelings and thoughts are considered. Therefore, findings can be turned into creativity portraying the reality of research population (Masterson & Pickton, 2004). The weaknesses of such an approach are that they can be time consuming, difficult to get participants or volunteers to be open with their views depending on the questions asked and, participants are viewed as a small group representing a whole population )Baker, 2007).

The purpose of this essay, to compare and contrast the two different approaches (research methods) of which one was quantitative and the other qualitative using surveys and other methods to meet the needs and wants of customers, is now explored. It can be understood from the above that both the procedures (qualitative and quantitative), praise and strengthen each other and aid to build strong and healthy procedures to help meet customers’ desires. Hence marketing research methods are necessary for airline industry to continue to deliver optimal services to customers.


Alan Bryman, Emma Bell. (2007). Business research methods. Oxford University Press.

Hague, P. N. (2002). Market research: a guide to planning, methodology & evaluation. Kogan Page .

Helle Neergaard, John P. Ulhoi. (2007). Handbook of qualitative research method in entrepreneurship. Edward Elgar.

Holloway, J.C. & Plan R.V. (2004). Marketing for Tourism. Harlow: Financial times Prentice Hall.

Kotler, P. (2005). Principles of Marketing. Harlow: Financial Times Prentice Hall.

Philip Kotler, Gary Armstrong. (2010). Principles of Marketing. Pearson Education.

Punch. 2005.

Rothkopf, M. (2009). Innovation in Commoditized Service Industries: An Empirical Case Study. LIT Verlag Munster.

Baker, J.M. (2007) Marketing Strategy & Management, 4th ed. Palgrave Macmillan

Kotler, P. (2003), Marketing Management, 5th ed. New Jersey: Pearson Education

Kotler, P., Bowen, J. & Makens, J. (2006) Marketing for Hospitality and Tourism, 4th ed. Harlow: Financial Times Prentice Hall

Masterson, R. and Pickton, D. (2004), Marketing An Introduction, Berkshire: McGraw-Hill Education

Kent, R. (2007) Market Research Approaches Methods & Applications in Europe.

Lambin, J. (2000), Market-Driven Management Strategic & operational Marketing, Basingstoke Hampshire: Palgrave

Free Essays

Airline Management (Analysis of the ‘four pillars’)


In 2008, the aviation sector signed a declaration, committing itself to the ‘four pillars’, an initiative to reduce emissions from the industry, (UNFCCC, 2008).

This tone continued when world government’s met in Montreal in September 2013. The aviation industry recommended that, as part of a broad approach to address air transport’s climate impacts, a single global market-based measure (MBM) be agreed upon, allow for carriers to effectively compare efficiency. This should be included into a broader package of measures including new aircraft technology, more efficient operations and better use of infrastructure, (ICAO, 2013) [Online].

The industry determined that a carbon-offsetting policy would be the best method, giving carriers the opportunity to tailor their response to their business development; in effect, ensuring that carriers feel the plan still allows for expansion to meet rising demand, (IATA, 2013) [Online].

The meeting concluded with the following, (ATAG, 2013) [Online]:

Agree a roadmap for development of a single global MBM for aviation to be implemented from 2020 that can be adopted at ICAO’s next Assembly in 2016.
Agree the principles for development of a global MBM, including:

o The goal of carbon-neutral growth from 2020;

o That aviation emissions should only be accounted for once;

o That a global MBM should take account of different types of operator activity.

This report will evaluate the progress made on ONE of the four pillars to reduce emissions from the aviation sector; whilst also paying attention to the barriers that carriers face in achieving these targets.

The first section will provide a brief introduction to the four pillars as well as reasoning behind the choice in evaluation. A discussion will then follow answering the requirements of the report, before a conclusion summarises the findings.


The four pillars cover the entire scope of feasible methods to improve efficiency and reduce emissions. The pillars are technological process, improved infrastructure, operational measures and economic measures. Table 1 below provides a summary:

This report has chosen to focus on the development of operational measures; the decision was driven by an interest in the development of fuel efficiency, business optimisation and carrier integration in a bid to reduce emissions from an industry that has always been labelled a major global polluter.

With demand for air travel booming on the back of global urbanisation and emerging economies, more attention is being paid to carbon emissions from air travel. According to data from the Air Transport Action Group [ATAG] (2014), global emissions from air travel total 689mt, against a total of 34Billion tonnes of CO2 produced annually from human activity. With these figures, CO2 emissions from air-travel total 2% of annual emissions; in terms of transport, aviation is responsible for 12% of total emissions, compared with 74% from road transport.


As mentioned above, there are a number of factors, which with improvement can lead to a reduction in emissions. This section will concentrate on fuel efficiency, which will touch upon optimal aircraft use, new aircraft design and route optimisation. Also mentioned with be business optimisation, paying attention to carrier ‘load factor’, optimisation on ground-operations and also integration between carriers, which has included M&A activity and also the introduction of alliances in the industry. The discussion will touch upon carrier cost reduction, which has become a major supporter of reduction on CO2 emissions given its link to fuel usage and so exposure to high oil prices.


In terms of achievements so far, the issue of fuel efficiency has supported in recent years by the economic downturn and high oil prices. Carriers have look to reduce their fuel bills to stay profitable, focusing on a number of methods which also support fuel efficiency. To start, carriers have invested heavily in new aircraft after developments from both Boeing and Airbus support greater fuel efficiency. Airbus experienced its biggest year in 2011, receiving net orders for 1,419 new aircraft, buoyed by the launch of its A320neo, (Morrow, 2013) [Online], with similar success from Boeing, (BBC Business, 2014) [Online].


Figure 1 shows that out of U.S. carriers Alaska Airlines came out as the most fuel efficient airline; what is most surprising is that the company has increased its business and routes by 33% 2000-2010, however has reported no increase in fuel use/emissions as investing in new planes has improved fuel efficiency greatly.

The report also found that the fuel-efficiency gap between the best/worst airlines was 26%, (ICCT, 2013); the report also found that about one-third of the variation in efficiency likely comes from the deployment of different technology; for example Allegiant operates a fleet of McDonnell Douglas aircraft that date back to the 1970’s, while Alaska Airlines uses new Boeing planes that have technologies like ‘winglets’ to reduce fuel burn. These finding bode well for Boeing and Airbus as they continue to offer newer models. Recent additions such as Boeings 777X, a more fuel efficient version of the 777 Jumbo and Airbus’s A320 family have been well received; according to Boeing (2013) [Online], customers for the 777X include Gulf carriers along with Cathay Pacific and Lufthansa, with record breaking orders of 259, while Airbus (2013) [Online] confirmed its backlog of orders for the A320’s at over 10,000. These new planes will reduce both emissions and noise pollution, allowing for negative externalities to be controlled as expansion continues.


Carriers have adopted a number of methods to optimise their operations. One factor has been the adoption of alliances between carriers, allowing for them to effectively ‘share’ their capacity. This has reduced the need for such aggressive expansion by some, which would have created too much competition on some routes. Furthermore, airlines have invested in newer aircraft to meet the needs of routes, such as smaller aircraft for new, short-haul routes and larger aircraft, such as the Airbus A380 for busier, long-haul routes. Emirates currently have orders for 90 A380’s as the carrier looks to expand capacity on a number of routes, (Wall, 2013) [Online].



As more attention is paid by governments and consumers onto CO2 emissions and other negative externalities, company’s such as Virgin Atlantic (2013) have put more into reporting their impact on the environment from sustainability reports; in some continues such as the UK, reporting into emissions and environmental impact are becoming mandatory for listed companies, (UK Government, 2013), which will only increase the amount of information that the aviation sector will make public, (Sustainable Aviation, 2014) [Online].

According to Virgin Atlantic (2013), through its Sustainability Report 2013, the company focuses on a number of programs to improve sustainability. These include:

Reducing CO2 emissions by 30% between 2007 and 2020.
Improving the fleet of aircraft – currently Virgin Atlantic are taking delivery of 10 Airbus 330-300, which will replace the older Airbus 340-600 and be 30% more fuel efficient.
Implementing technology to monitor aircraft fuel-use and routes to identify further carbon savings.


This section will touch upon PESTEL analysis to look into the future possibilities to meet operational measure targets.

In terms of driving-forces, a number of carriers will look to improve operational performance in a bid to lower costs and remain profitable as low-cost carrier reduce market prices and higher oil prices affect carrier margins. However, it has been noted that each carrier will take a differing approach, designed to also meet the requirements of current expansion plans. For example, take British Airways (BA); currently the carrier is involved in its ‘One Destination’ initiative, with a number of schemes underway to make the carrier carbon neutral from 2020, (Brittlebank, 2012) [Online]. According to British Airways (2013) the international community’s aim is to cut net CO2 emissions by 50% by 2050 (relative to 2005 levels). Figure 2 below provides a graphic to the proposal, identifying some of the key factors which will support the reduction.

As mentioned prior, one of main drivers will be the continued improvement and market adoption of new aircraft. For example, British Airways (2013) estimates that the new Airbus A380 will have a 16% improvement in fuel efficiency compared to the aircraft it will replace, mainly down to the capacity of the aircraft, which can be used on longer routes, such as Hong Kong and Los Angeles. Improvements such as these will continue to drive down CO2 emissions per passenger kilometres, a metric widely used in the airline industry to measure efficiency. In 2012, BA aircraft emitted 101.9g/CO2 per passenger kilometre, while Emirates emitted 100.6 (Emirates, 2013), Lufthansa 109.3 and EasyJet 95.6 (EasyJet, 2013) [Online]. One factor that each airline has in common is major deliveries of new aircraft. While new aircraft will continue to benefit both the environment and also the airline in terms of lower fuel bills, headwinds will appear in the long-term. While the current spate of aircraft orders has been supported by growth opportunities and profitability in the industry, long-term risks to demand could dampen the need and justification to purchase new aircraft. Furthermore, it has also been noticed that the recent rise in airline purchases has been fuelled by expansion projects from carriers in the Middle East and Asia, while European airlines seen less reluctant to purchase than previously as profitability has waned. Given this, the risk is that in the long-term, order may decline, which would impact on carriers ability to further reduce emissions. For example, British Airways (2013) are targeting efficiency of 83g/CO2 per passenger kilometre by 2025, which will require the support of capital expenditure. Given the current reduction in the carriers profitability over the year, continued weakness may make current expenditure plans un-obtainable.

Figure 2 also highlights the potential for low-carbon fuels to support the four pillars. Both BA and Cathay Pacific (2013) among other have highlighted development into biofuels as a future growth area.

The process involves inputting commercial/ residential organic waste into a boiler, where extremely high pressure plasma breaks down the waste into gases. These gases are then cooled and cleaned, before the Fischer-Tropsch process re-forms the gas into low-carbon jet fuel, (British Airways, 2013). BA is currently involved in a UK-based project with Solena Fuels Corporation to construct a waste-to-fuel plant, which at its peak will convert 500,000 tonnes of water into 50,000 tonnes of jet fuel each year, (British Airways, 2013). Cathay Pacific (2013) also remained optimistic on biofuels, implementing a number of projects itself. While development will be buoyed by social/ political acceptance of biofuels in the future and the green-credentials it provides, there are also factors, such as the costs involved and its competitiveness with current kerosene supplies.

Another driver to mention will be the potential for demand. Figure 2 highlights that in the long-term, BA see a reduction in demand as one support for lower emissions; however this may not be the same for carriers such as Emirates, or others in Asia, Africa. Emirates recently reported a 4.5% in aircraft movements given new routes and higher demand, (Emirates, 2013). Given this, the need for a streamline of global initiatives is needed as emerging airlines increase slights to meet increased demand.

Another driver identified is the purchase of emission reductions, or ‘carbon offsets’, with the money invested into initiatives to reduce emissions in other areas, which could be seen to offset the emissions from carrier operations. For example, Cathay Pacific (2013) has used money raised to invest in hydropower/ wind power projects in China. These programmes are now run by over 35 airlines, however require voluntary donations from passengers, IATA (2014) [Online]. The main risk is that the projects rely on the social responsibility of customers; an over reliance on these programmes to reduce emissions could back-fire if customers do not share the view; PriceWaterhouseCoopers (2013) suggests that carriers may need to purchase an extra ˆ1.1Billion of carbon offsets annually by 2030 to reach targets.

PriceWaterhouseCoopers, hereafter PWC, (2013) backs up the above in its latest report. After mentioning the halving on aviation emissions by 2050, PWC shows its scepticism, saying that reaching the target will not be easy and would require improvements in carbon intensity of 5.1% every year. Ultimately, advances in fuel efficiency would need to be accelerated along with adoption of biofuels. To add, the report mentioned that a global consensus on sustainable aviation was needed before acceleration in improvements can be seen. The fear is that any improvement from airlines operating in advanced economies could be offset on a global scale by less-efficient emerging airlines from China and India etc., who may not have the financial means to invest heavily in the newest aircraft.


As mentioned in the Four Pillars, efficiency in ground operations will also support a reduction in emissions. Easyjet (2013) [Online] mentioned that they avoid ‘congested hubs’, such as Heathrow and Frankfurt, to help reduce taxiing and holding patterns, which will use less fuel and so emit less carbon. Furthermore, low-cost airlines have also been known for quick turnaround, allowing for greater efficiency from their current fleet, (Barrett, 2009).


The report chose to focus on operational management as a tool to reduce emissions, focusing on fuel efficiency, new aircraft, and route optimisation. The report found that fuel efficiency, driven by new aircraft models has become a high priority; while the decision will have been impacted by a move to reduce emissions, there is also the thought that the trend of high-oil prices, coupled with lower earnings over the economic crisis would have pushed a number of carriers to seek cost-reductions and efficiency drives.

Given this, past improvements in efficiency have been strong; however, strong growth in demand from emerging economies has led to a marketable rise in flights, pushing overall emissions higher. For example, Emirates, seen as one of the fastest growing carriers could be used as a barometer. While the carrier has reported improvements in fuel efficiency, due to new aircraft and routes, the carrier reported a 15.9% increase in overall CO2 emissions to 22.4Million tonnes, (Emirates, 2013).

Looking ahead into the future, the report has highlighted a number of factors for improvement; being higher adoption of new aircraft, increased adoption of biofuels and purchase of emission reductions. Carriers will continue to place attention on new aircraft/ biofuels as focus remain firmly on cost-reductions; however, the level of long-term success will depend upon profitability, which will impact directly on future capital expenditure plans. To add, not all carriers may share the same plans as emerging carriers may focus on growth and profitability over the environment. To combat this, PWC (2013) identified that a global consensus is needed; currently regulation in the USA/ Europe is much higher than seen in Asia/ Middle East/ Africa, creating unfavourable discrepancy to airlines, such as BA. Carbon offsetting was also identified as a major growth initiative, however as mentioned this currently relies on customer donations; as so both social and political attention on the effects of emissions need to be heightened to encourage offsetting by the public.

Operational measures provide great opportunities to further reduce emissions; however, carriers need to ensure they have the funds available for capital expenditure, and the public support/ donations to move ahead with carbon offsetting plans.

Finally, it is important to mention that while fuel efficiency will continue to improve, strong increases in demand may lead to overall emissions increases as flight numbers/routes are increased by emerging airlines. This has been seen with data from Emirates; under these circumstances carriers would need to accelerate all initiatives in a bid to meet targets that would seem ambitious. All four pillars will need a global consensus to support target achievement.


Airbus (2013) [Online]: Orders & Deliveries, Available at, Accessed 12/01/2014.

Air Transport Action Group (2014) [Online]: Facts and Figures, Available at, Accessed 12/01/2014.

ATAG (2013) [Online]: 38th ICAO Assembly, Available at, Accessed 22/03/2014.

Barrett, S (2009): Deregulation and the Airline Business in Europe, EU, Routledge.

BBC Business (2014) [Online]: Boeing reports record orders and deliveries for 2013, Available at, Accessed 22/03/2014.

Boeing (2013) [Online]: Media Releases; Boeing launches 777X with record-breaking orders, Available at, Accessed 12/01/2014.

British Airways (2013): Corporate Responsibility Summary, London, British Airways.

Brittlebank, W (2012) [Online]: British Airways aims for carbon neutral growth, Available at, Accessed 22/03/2014.

Cathay Pacific (2013): Sustainability Matters, Hong Kong, Cathay Pacific.

EasyJet (2013) [Online]: In the air, Available at, Accessed 22/03/2014.

Emirates (2013): The Emirates Group Environment Report 2012-13, UAE, Emirates Group.

IATA (2013) [Online]: IATA Carbon Offset Program, Available at, Accessed 22/03/2014.

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ICAO (2013) [Online]: 38th Assembly Session, Available at, Accessed 22/03/2014.

International Council of Clean Transportation (2013); U.S. Domestic Airline Fuel Efficiency Ranking 2010, USA, ICCT Publications.

Morrow, D (2013) [Online]: Airbus close to setting new order record, Available at, Accessed 23/03/2014.

PriceWaterhouseCoopers (2013): A sustainable future for aviation; the future of international aviation emissions could be determined in the next 12 months, London, PWC.

UNFCCC (2008): The right flight path to reduce aviation emissions, USA, UNFCCC.

Virgin Atlantic (2013); Sustainability Report 2013, UK, Virgin Atlantic.

Wall, R (2013) [Online]: Emirates orders additional 50 airbus 1380’s to expand fleet, Available at, Accessed 22/03/2014.

Free Essays

Airline Consumer Engagement Marketing Essay

Airline Consumer Engagement Marketing Essay

This paper discusses how airline companies engage with their consumers. It discusses the modes of consumer engagement and the process of engagement. Most companies use integrated marketing approach to engage consumers because of the diversity of needs in the market. It also outlines the various theories of decision-making as applied in the airline industry. The aim is to establish how different consumers make their decisions about services and products in the market. Cognitive dissonance theory, maximization utility, the reasoned action and the theory of certainty provide realistic concepts for predicting the behavior of consumers. Companies are more likely to use them in designing and implementing consumer engagement strategies.


Customer engagement marketing refers to all the strategies that a company or business use to establish a relationship between the consumers and the operations of the company. Effective consumer engagement strategies are important because they influence consumers towards developing values in relation to companies. Consumers who value the services or products of a particular company tend to be loyal customers (Bowden 2009). Consumer engagement can also be perceived as a marketing strategy that aims at creating and maintaining loyal customer base in the market (Bowden 2009). This paper seeks to discuss how companies in the airline sector engage with consumers of their services in the market. It also seeks to discuss how consumers make decisions using relevant theories.

The Reasons for Consumer Engagement Processes

Understanding why companies need to engage with consumers in the market is useful in determining how they conduct the process of engagement. Consumer engagement is a crucial aspect of brand management. Brand management is one of the marketing strategies that companies use to establish brand loyalty. It aims at increasing the positive perception of a particular product or services (Ashworth & Kavaratzis 2010). For instance, companies in the airways sector engage in awareness campaigns to inform the public of their services and routes of destination. The awareness campaign is one of the aspects of brand management strategy. Consumer engagement strategies may provide platforms for receiving feedbacks regarding the services that companies offer in the airline sector. The companies can use the feedbacks to improve the nature of their services (Ashworth & Kavaratzis 2010). For instance, an airline company may learn that their flight attendants take relatively longer time to serve customers compared to other companies. The airline company may use the information to serve as a basis of investigation and improvement of all services.
Customer engagement strategies also provide information that a company can use to understand the composition of the market. The information regarding the composition of the market is useful in determining why certain age groups do not use the available services. It also makes the company understand how to change and improve their services to accommodate the interests of other people who do not use the services (Bowden 2009). Companies may also understand their competitions using the feedback they receive from consumers.

Consumer Engagement Strategies Modes of Engagement

Companies use various modes to engage consumers. The suitability of the modes depends on the objective of engagement. For instance, a company that seeks to get feedback on their new product will use Facebook because it provides options for receiving comments. The strength of the methods of engagement lies in the ability of consumers to provide feedback regarding the operations of companies in the airline sector. The market composition for airline services has become complicated. It consists of different groups of people who have varying needs. Each group of consumers requires a different advertisement method. The methods of advertisement include the traditional modes such as televisions, radios and printed articles. Most recently information technology has become the predominant mode of engagement. Information technology supports various social platforms such as Facebook and twitter. Information technology also involves advertisement through mobile phone applications. Most airline companies use an integrated marketing strategy to respond to the challenge of diversity in the market.
Integrated marketing strategy involves using various advertisement methods together. The scheme offers a comprehensive approach for engaging consumers of airline services in the operations of the company (Shakeel-Ul-Rehman & Ibrahim 2011). Media planners in such companies acknowledge the diversity in the market in relation to the interests of people. For instance, the traditional advertisement methods may be helpful in reaching people who might find the use of technology a daunting task (Shakeel-Ul-Rehman & Ibrahim 2011, p. 188). It can be argued tha tthe use of information technology offers more appeal to the younger generation and business people who value time. Consumer engagement through social media works on principles that are different from the traditional methods. It offers a platform for receiving feedbacks regarding the operations of the company.

The Process of Engagement

Bijmolt et al. (2010) maintains that the process of consumer engagement begins from acquisition of the same. The process of acquisition involves selecting prospective customers on the basis of their potential responsiveness and their ability to purchase the services. This aspect is important to airline companies in African countries because of the high rate of charges they impose for the services. Only people with adequate financial resources can afford the charges. The selection criteria might help companies to conserve their resources by focusing on customers who fit the qualification criteria. The selection process helps the airline companies to establish their focus in the market. The companies use the Recently, Frequently and Monetary model to select prospectus customers (Bijmolt et al. 2010). RFM is a strategy that companies use to determine the value of customers. The assumption of the valuation model is that a future customer has the same characteristics as the customer of the past.
The second step in the process involves the management of the acquired customers (Bijmolt et al. 2010). This step also involves a sub-process of allocating resources in relation to the establishment of effective marketing approaches. Media planners select suitable advertisement modes based on the analysis of the characteristics of the prospective customers. Airline companies might, therefore, use an integrated marketing approach to counter the challenge of diversity in the market. A higher proportion of people aged above 65 years and above find technology intimidating and involving. Majority of people aged below 45 years find technology appealing to their interests (Shakeel-Ul-Rehman & Ibrahim 2011). Business people and executives of various corporations prefer direct inquiry because other processes consumes a lot of time. Correspondingly, the consumer management process follows a successful analysis of the characteristics of prospects consumers (Posavac 2012). Other steps involve customer development and retention (Bijmolt et al. 2010). The processes aim at attracting loyalty to the services of airline companies by engaging in vigorous campaigns of the same. In general, airline companies engage consumers through a process that begins from a careful selection of the same and ends at retention. They also engage consumers through carefully planned advertisement techniques (Bijmolt et al. 2010).

Consumer Decision-Making Process

Making a decision involves engaging in a process that would help decide the right course of action in a situation with more than one alternative. Young (2010) people develop risk-benefit frameworks in most situations to analyze the options that are present. An individual would want to make decisions that impact positively on his or her life. The outcomes of situations depend on the nature of decisions that individuals make. Decision-making processes also apply in situations where consumers need to choose between products and services. The airline industry has several companies that offer same or similar services. The theories that explain decision-making processes include cognitive dissonance, consistency theory, commitment, certainty effect, choice-supportive bias, confirmation bias, the scarcity principle, and reasoned action theory (Young 2010).
Cognitive dissonance theory maintains that individuals always seek to minimize the extent of discomfort in contradicting situations (Young 2010). According to the theory, individuals experience discomfort due to the conflicting ideas in their minds (Cooper 2007). It explains that an individual in such a situation is likely to take the easy option of eliminating the source of discomfort (Young 2010). Cognitive dissonance affects how consumers process information in relation to various products and services. Individuals will always have ideas that conflict with their pre-conceived perceptions about certain companies. The diversity in ideas results from the emerging trends, the shifting needs and social circles (Young 2010). In social circles, everyone tends to defend what they believe to avoid the uncomfortable situations. For instance, an individual may experience cognitive dissonance when he receives a message that contradicts the value that he attaches to an airline company (Cooper 2007). A friend may try to convince him that there is another company that offers better services than the company he has been using. Marketers may use the concepts of this theory to present consistent information when engaging consumers.
Consistency theory asserts that lack of constancy in the relationship between beliefs and actions evoke uncomfortable feelings in individuals (Little-John & Foss 2008). It affirms that people wish to engage in acts that are consistent with their belief and cultural system. The discordance in the relationship between the belief system and actions evoke uncomfortable feelings. An individual in such a circumstance is likely to change the belief and value system to accommodate the emerging trends. Human beings have predetermined belief and value systems that they use to evaluate decisions before making them. In other words, the choice that people make should always be consistent with what they perceive as right or wrong (Little-John & Foss 2008). Any slight variation between the belief system and the course of action evokes the feelings of discomfort in individuals. The consistency theory explains why some people are particular about the flight attendants who serve them in an airplane. The theory may not find much application in customer engagement compared to cognitive dissonance theory. Most processes engaged in the provision of airline services do not contradict the belief systems of individuals.
The theory of certainty result discusses how probabilities of outcomes influence the behavior of individuals (Secchi 2011). The theory maintains that people tend to develop less interest in situations which present low probability outcome of the desired results (Loughran et al. 2012). Similarly, an individual will develop more interest in a situation if the probability of achieving the desired results is high (Secchi 2011). Individuals make choices on the basis of the probability of the outcome of the situation. They perceive outcomes based on their past experiences or the experiences of other people. For instance, engaging consumers through social media provides a platform that consumers may use to present their feedbacks. Some of the feedbacks can be critical of a company’s operations. If so many people acknowledge the efficiency in operation of an airline company, then people are more to likely seek the same services. In other words, people want to get a hint of what would happen if they were to make a particular decision. The behaviour pattern is driven by the need to eliminate the negative feelings that come from disappointments. People have various expectations regarding how they want the outcomes of various situations to become (Loughran et al. 2012). Most airline companies use influential personalities in advertisements to create an impression of better past experiences. The personalities convince potential consumers that the services of the company were better. The aim of the advertisements is to influence consumers to develop positive opinions regarding the services of the company.
Maximization utility theory predicts that human beings behave as if they were economists and were business-minded. It asserts that an individual is likely to make a choice of a product that offers the greatest value for the least amount of money possible (Kahneman & Thaler 2006). In extreme circumstances, the costs of products and services are more likely to influence the purchasing behaviour of individuals even if the quality is compromised. Inadequate resources influence this type of a decision-making process (Kahneman & Thaler 2006). In normal circumstances, people will want high-quality result for fewer inputs. It explains why people like to bargain when purchasing products and services. In the airline industry, people tend to go for companies that offer quality services at affordable rates. It can be argued that the understanding of this theory also affects the pricing strategies of various airline companies (Kahneman & Thaler 2006). For instance, most airline companies have different classes of passengers; first class, second class and third class. The first-class passengers can afford high charges for the highest quality of service. The low-class passengers are the people who wish to use airline services, but are discouraged by the high charges.
Choice-supportive bias theory explains that most people twist their memories to convince the present result that the decisions they made were the best (Ross 2009). The theory asserts that most people manipulate their memories to prevent the feelings of disappointment that the result presents. The case happens in situations where an individual has to take an early stand in the matter that involves multiple options. Individuals will always want to remember less negative things about situations that happened (Ross, 2009). In a business environment, the choice –supportive bias theory occurs for consumers who have used a particular product or service for a long time. Such consumers will always talk negatively about other products or services. It is an advanced level of brand loyalty that results from effective consumer engagement strategies. Various companies understand that subjecting prospective customers through effective and consistent consumer engagement sessions influences the way they perceive the services. Consumers would continue to stick even if their services were relatively poor compared other companies (Ross, 2009).
The principle of scarcity affirms that individuals are more likely to go for services and products that are scarce in the market, especially if the demand is high. Individuals tend to associate scarcity of products and services with quality. The notion is that the services or products could be scarce because several people went for them (Siebert 2008). If many people went for them then, they must have been impressive. The abundant supply of a particular service or product may create the impression that it is less desired by people (Siebert 2008). Most people analyze situations to ascertain the behaviours of others towards various products or services (Siebert 2008). The aim is to avoid first-hand experience of disappointing results. Airline companies understand this principle and use it to increase the consumption of their services. They create a demand crisis then offer limited opportunities for utilization of their services. The strategy encourages people to book flights in advance to avoid a last minute rush.
The reasoned action theory explains that individuals engage in certain actions because they planned to do so (Tanachart & Islam 2010). It also explains that the intention originates from his or her attitude towards that behavior (Tanachart & Islam 2010). In this context, the intention serves as the basis for prediction of a behavior pattern. Beliefs and values influence the formation of attitudes regarding certain patterns of behavior (Smith & Biddle 2008). Understanding people’s beliefs system is important in understanding their attitudes. Understanding attitudes helps in predicting what an individual plans to do in a circumstance. An individual is more likely to engage in a particular action if he or she believes that it is the right thing to do in the circumstance. What other people think of the choice plays a central role in influencing the actions of the individual. The theory recognizes that there are factors that limit the influence of people’s intentions towards engaging in a particular behavior (Smith & Biddle 2008). For instance, the airline companies are aware that many people wish to use their services but are incapacitated by the lack of financial resources. The understanding has compelled the airline companies to develop different classes of service; high class, middle class and the low class. Cognitive dissonance theory, maximization utility, the reasoned action and the theory of certainty provide realistic concepts for predicting the behavior of consumers. Companies are more likely to use them in designing and implementing consumer engagement strategies.


Companies in the airline industry engage consumers through an integrated marketing approach. The approach is influenced by the diversified nature of the market. The engagement process begins from the selection stage and ends at retention of customers. There are various theories that explain how consumers make decisions regarding products or services. Such theories include cognitive dissonance, consistency theory, commitment, certainty effect, choice-supportive bias, confirmation bias, the scarcity principle, and reasoned action theory.


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Free Essays

Low cost airlines are an environmental disaster

A low-cost carrier or low cost airline is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. The concept originated in the United States before spreading to Europe in the early 1990s and subsequently to much of the rest of the world. The term originated within the airline industry referring to airlines with a low – or lower – operating cost structure than their competitors. Through popular media the term has since come to define any carrier with low ticket prices and limited services regardless of their costs. While most discount airlines have more fuel-efficient fleets than older carriers, their significant contribution to sky traffic is unprecedented.

Commercial passenger airlines, especially low cost and Internet sales-based carriers, are experiencing growth internationally. In the United States, airline flight sales dropped 30 percent directly following September 11, but have since made a comeback and are now experiencing slow but steady growth.Today, the U.S. has been able to maintain its place as the leading nation in air travel, and North America accounts for 40 percent of worldwide air traffic.

Low-cost airlines such as Jet Blue Airways have led this domestic growth, topping the Bureau of Transportation charts for domestic profit gains. Airline sales in Asia are escalating as well, and the skies are becoming increasingly more crowded. In China alone, the market is projected to grow more than 200 percent from 1999 to 2014.

While these flares may seem like a dream come true for low-budget travelers, the resulting surge in air traffic carries with it major environmental costs. Even with the more fuel-efficient technology that has evolved over the last 30 years, air travel remains a significant contributor to climate change. Air transport has increased twice as fast as road transport over the last 40 years. Air travel produces more carbon dioxide per km travelled for each passenger than car travel.

There are clearly environmental effects increasing as a result of air travel, while others are decreasing or staying constant. Environmentalists say airlines rate as one of the most polluting forms of transport, with 16,000 commercial jets producing over 600 million tonne of carbon dioxide every year.

Meanwhile, precise guidelines on international aircraft emissions are excluded from the Kyoto Protocol, with the stipulation that airline emission reform must be taken up by a separate organization, the International Civil Aviation Organization (ICAO). Internationally, fuel used for aviation is tax exempt, and according to ICAO Secretariat John Crayston, “While the ICAO has established emissions standards for certain emissions there are no standards for CO2.” The International Air Transport Association (IATA) estimates that aviation’s share in climate change is at about 3.5 percent of the total contributions, which is predicted to climb to five percent by 2050.

According to the International Panel on Climate Change (IPCC), aerosol particles that are emitted in aviation such as soot, metals and sulfuric acid can indirectly influence climate change by causing additional cirrus clouds to form, which in turn trap the heat rising from the Earth’s surface. The IPCC projects an overall global temperature increase from 34.7 to 40.1 degrees Fahrenheit between 1990 and 2100.

Unlike in the US where a large number of domestic flights emit carbon dioxide over one area, the SDC has said that 97% of UK air transport is non-domestic, with carbon dioxide emissions generated on flights between countries. PARIS – The European boom in ”low-cost” airlines, fueled by tax incentives, is increasing the level of toxic gases in the atmosphere and displacing less polluting and more efficient means of transportation for shorter distances, like trains.

The Kyoto Protocol and the UK government’s energy White Paper targets do not currently cover emissions from international aviation, as there is no global agreement on the allocation of these emissions to countries. It may not mean that the industry would be destroyed, but there are much more efficient and effective tools when it comes to dealing with emissions. One other possibility that has been put forward by the airline industry is emissions trading.
Numbers passing through UK airports expected to double to 400m by 2030.Air travel is growing globally at about 5% a year.

At the forefront of this revolution are the low-cost, no-frills carriers such as Ryanair, Easyjet and Buzz, which are growing at a phenomenal rate. In June, Easyjet passenger numbers were up more than 50% on the same month last year. Ryanair increased by 34% and Go saw an incredible 72% rise. The lesson learned from these airlines, especially post-11 September, is as clear as it is simple – the cheaper your fares, the more people will fly. But if air travel is allowed to grow unchecked in this way, it will spell disaster for the planet, say environmentalists.

More flights mean bigger, busier airports, which in turn means more noise and growing problems with air quality for those who live and work close to airports. But perhaps the biggest concern is the effect on global warming. The problem for environmentalists is that while efforts are being made to cut CO2 emissions from cars and industry, nothing is being done to rein in the airlines.

Climatic change

Burning aviation fuel releases greenhouse gases predominantly carbon dioxide (CO2) into the environment, causing the Earth to heat up leads to global warming and the process of climate changes such as higher sea levels, devastating floods and droughts. Air traffic worldwide produces emissions of more than 600 million tons of carbon dioxide.

In addition, it releases nitrates, ash, sulfates and water vapor. Some of these substances deplete ozone in the atmosphere. This layer of ozone gas is crucial for protecting life on Earth from the Sun’s harmful rays. Flying also releases nitrogen oxides and sulphur oxides, and even the vapour trails – contrails – left by planes are thought to be a hazard. It’s been suggested that they add to the insulating effect of cirrus clouds on our climate.

The Britain-based environmental group Tourism Concern predicts that by 2015 half of the annual destruction of the ozone layer will be caused by commercial air traffic and the United Nations Intergovernmental Panel on Climate Change estimates aviation causes 3.5 per cent of man-made global warming and that figure could rise to 15 per cent by 2050.

NASA scientists say condensation trails from jet exhausts create cirrus clouds that may trap heat rising from the earth’s surface. This could account for nearly all the warming over the United States between 1975 and 1994.
The guidelines on international aircraft emissions were excluded from the Kyoto protocol on climate change and aviation fuel is tax exempt.

Aerospace firms have made huge leaps forward, with commercial jets now 70 per cent more fuel efficient per passenger kilometre (mile) than they were 40 years ago, thanks to better engines, lighter materials and aerodynamic designs. Optimists, including Easyjet, pin their hopes on technology to make planes more efficient.

And cost-obsessed carriers are continuously searching for ways to use capacity better, find more direct flight paths and cut congestion in order to trim the hefty fuel bills which make up 25 per cent of airline operating costs. Most discount airlines have young, more fuel-efficient fleets and newer airlines in regions such as Asia have leap-frogged older technologies to buy new planes. Hundreds of flights by subsidized airlines in Europe are endangering the global climate and the ozone layer. For now, they fly free of environmental regulations.

The industry believes this Air Passenger Duty (APD), which raises £800m a year, can be regarded as a form of environmental compensation. It may not mean that the industry would be destroyed, but there are much more efficient and effective tools when it comes to dealing with emissions. Since April this year, airlines that use Heathrow Airport have been charged for nitrogen oxide emissions and carriers emitting less receive a rebate. This will happen in Gatwick in a year or so.

One other possibility that has been put forward by the airline industry is emissions trading. Under this scheme, to help with the environmental costs caused by civil aviation pollution, by 2008, the industry would pay for other industries, such as the nuclear fuels sector, to reduce their carbon emissions.

The proposal has been put forward to the European Commission, and includes an incentive for airlines to pay less into emissions trading if they use more environmentally friendly aircraft. The FOE says emissions trading, and the proposal to differentiate landing charges at airports according to noise levels and air pollution, outlined in last year’s aviation White Paper, has potential.

The issue of an aviation fuel tax is not top of the international climate change agenda, because it will have to be confronted at a global level. There are a lot of domestic issues the government has to deal with, areas that damage the environment more than the 5% of carbon dioxide emissions caused by the airline industry.On this basis, the likelihood of low-cost air fares rising in the near future is an unlikely one.


BBC news Europe. 2005 . EU plans airline CO2 reductions. [online] . [ 18 November 2006]
Christian Dietsche. 2005. The high price of low-cost airlines. [online] [18 November 2006]
Daniel Mann. 2004. Calls to control low-cost flights.[online]  [ 18 November 2006]
Jonathan Duffy. 2002. The high price of low-cost airlines. [online] [ 19 November 2006]
Julio Godoy.2004. EUROPE: The True Cost of Flying. [online]
Michael Smith. 2006. Branson launches plan to cut aviation emissions.[online].
Nicolas E. Antoine . , Ilan M. Kroo. 2002. Aircraft optimization for minimal environmental impact. 9th AIAA/ISSMO Symposium on Multidisciplinary Analysis and Optimization. 4-6 September 2002, Atlanta, Georgia

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Airline Bankruptcy Filings May Be Soon

Delta Airlines and Northwest Airlines are expected to file for bankruptcy protection in September to get ahead of the new bankruptcy law. The new legislature includes a provision that restricts payouts to executives in the time of bankruptcy protection and calls for quicker reorganization. Both Northwest and Delta failed to cope with rising fuel costs and continue to lose money. In fact, Northwest’s losses got even worse, with second-quarter loss going from $182 million in 2004 to $225 million in 2005. Delta’s loss in the second quarter was still higher: the airline lost $382 million.

The new, more restrictive law was probably inspired by delays in the reorganization of some companies. For instance, United has been under bankruptcy protection for two and a half years. During this period the management failed to prepare a reorganization plan and has asked for several extensions of the exclusivity period.

I believe this shows two things. First, it is painful to realize that the once booming airline industry has not yet recovered after September 11th attacks. True, an important factor is fuel cost, and this has been rising for a while due to increasing oil costs. But I think if the industry had not survived the nasty crisis of the attacks, it would be better prepared to meet the rise in fuel cost.

Second, it shows the difficult choices the rulers of the nation have to make. Take, for instance, bankruptcy – they certainly do not want to leave the airline companies out there in the cold coping with problems on their own. On the contrary, they do not want to encourage management to reserve huge bonuses for themselves at the time of the crisis. And yet companies in trouble need all the managerial talent they can get and so need to keep their managers. It sometimes scares me to think how careful a government leader needs to be to balance all these issues in order to stimulate management but also to keep their appetites in check.

No Driver’s License? No Parking Space

The article by Daniel Li focuses on the problems of illegal immigrants residing in one of the apartment complexes in Anaheim, Ca., caused by the decision of the management company to deny parking right to everybody who is unable to produce a driver’s license, vehicle registration and proof of insurance.

The opponents of the decision say that it is discriminating against illegal immigrants who are residing in Hermosa Village. The management definitely knows that many of the tenants are undocumented and thus have trouble getting a driver’s license. These people cannot park in the streets of the low-income neighborhood after its streets became public. Now they cannot park in front of their houses as well.

The management company representatives say that they did not mean to discriminate against illegal immigrants. They merely wanted to protect the safety of their tenants and remove those who had licenses revoked after they got in trouble on the road. The issue revives the debate the rights of illegal immigrants. Many believe they should be given drivers’ licenses. On the contrary, others say giving them the right would encourage more illegal immigration.

In my view, the management company has to decide for themselves how they position their housing. If they present themselves as cheap property for all kinds of low-income families and singles including illegal immigrants, it is probably absurd to ask people to present the documents they cannot have. Otherwise, they have to declare a war on illegal immigration and start looking for more ‘decent’ tenants. True, this can be very much like cutting the branch on which one is sitting.

As a management company, they have to show more consideration for the people they cater to and to be more committed to their customers who may not always be the most wealthy, well-bred or even law-abiding people in the world. Taking a stand on illegal immigration is a personal choice, but one has to be caring with one’s clients.


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Optimizing Pilot Planning and Training for Continental Airlines

Optimizing Pilot Planning and Training for Continental Airlines Summary Continental Airlines is the fifth largest airline based on passenger volume in United States. It provides over 1,100 daily flight services to five continents. Effective manpower planning is a key component for the success of Continental Airlines. It is essential for Airline Company to adjust its need for pilots constantly in different position in response to new market opportunities, changing passenger demand, acquisition and retirement of aircraft and training resources and evolving economic conditions.

Therefore, the company collected information from several separate database systems and built the training plans by using spreadsheet. However, this development method was time consuming and complicated and the database used was not capable for training plan as it was used for more 10 years. In order for solving the complicated, large-scale pilot planning and training program and increasing the competitive advantage in air transportation market, Continental Airlines replaced the old database system and spreadsheets by the Crew Resource-Solver integrated decision-support system.

It includes four main modules to handle staffing, vacation, planning and training. The staff-administration module and vacation-administration module maintain crew records including all current and past assignments, absences and training while the planning-optimization module and training optimization module provides information of pilot-planning and training functions (Yu, Pachon, Thengvall, Chandler and Wilson 2004). Generally, Continental Airlines uses system bid award to determine the needs of staff changing to different positions and handle the pilots’ requests to change positions.

It mainly uses seniority-based rules for decision making. In an average system bid award, 15 to 20 percent of the airline’s pilots receive new positions. As long with system bid award, the Crew Resource-Solver system can build the training program that establishes the timing of training, advancements, releases, and new pilot hires. The Crew Resource-Solver system includes two phase to solve the pilot training problem. The pilot-transitioning phase determines the timing of pilot transitions by using limited information about training capacities to restrict the number of pilots assigned to training.

The training-class-scheduling phase produces the detailed training schedule taking as input the solution from the pilot transitioning phase. As a result, the training program contains a set of detailed training schedules including all training events for each student and each training resource. The training program must satisfy all the constraints set by Continental Airlines such as pilots training will not be assigned during their vacations and other scheduled absences. Planners are able to use system to customize the training plans by changing the objectives and options (Verbeek 1991).

Analysis The main objectives of the Crew Resource-Solver system are: 1. The improvement of the efficiency of the training programs 2. The forecast of future airline pilots’ needs 3. The maximization of the cost savings There are a number of advantages in using the Crew-Resource Solver system. First, the system improves the airline’s processes by enhancing information sharing within the organization and by simplifying system maintenance. Second, the system enhances data integrity by eliminating duplicate data storage and automating processes.

Third, the system saves time compared to the old manual approach as it can produce a complete, optimized training plan that includes both the pilot transitions and the training class schedules within an hour (Yu et al 2004). Moreover, the system increases the flexibility of the training program as it is able to customize by adjusting objectives and setting options. The Crew-Resource Solver system provides an optimal set of components that can satisfy all training program requirements. However, there are several limitations to the Crew-Resource Solver system.

First, the training program constraint is based on the traditional training plan which highlights the inherent weakness of any optimization model as it relies upon sound data for accurate outputs (Sarker 2008, p. 5). Second, the potential sources of savings vary depending on different system bids. It is the fact that a bid will have no cost components associated with those activities when it is no required on new hires and pilot releases. Third, even using the system, there is a trade-off between block-hour shortages and other costs on the training plans.

Therefore, when block-hour shortages cost increases, the training cost will decrease, vice versa. It is unable to decrease both block-hour shortages cost and training costs together. Finally, the final decision of the training program is not automated and requires management to select the best option for each training program. Result The Crew Resource-Solver system is an important investment of Continental Airlines to upgrade the management of manpower-planning needs by resource optimization and operation and financial performance improvement.

Based on the evidence given in the article, the Crew-Resource Solver integrated decision-support system is a successful program for Continental Airlines to achieve its above objectives. First, there are three ways for the cost savings. Training classes’ schedules become more efficiently and the number of pilots sending to training decrease. Second, there is reduction in pay-protection costs as promoting pilots in new positions in seniority order.

Third, it reduces payroll costs because the system can provide the optimized training plans which can use exiting pilots more efficiently and reduce the chances to hire new pilots. In fact, many recommendations derived from the Crew Resource-Solver integrated decision-support system have already been applied and have helped Continental Airlines to save approximately $10 million each year. Second, the integrated system have focused process improvement and improved data integrity, and it is easier to maintain than the numerous legacy systems and spreadsheet application it replaced (Yu et al 2004).

References Sarker, R & Newton, C 2008, Optimization Modelling: A Practical Approach, CRC Press, Florida. Verbeek, P. (1991) Decision support systems – An Application in strategic manpower planning of airline pilots. Eur. J. Oper. Res. (55)3, 368-381 Yu, G. , Pachon, J. , Thengvall, B. , Chandler, D. & Wilson, A. (2004) Optimizing Pilot Planning and Training for Continental Airlines. Interfaces, Vol. 34, No. 4, July-August, p. 253-264

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Northwest Airlines Confronts Change

Deregulation of the airline industry in 1978 Increased competition, new travelers’ needs, problems, strikes, concern about the safety of aircraft, oil crisis problem … Northwest has a reputation for being very conservative financial control and relationship rules work very hard. Despite the six years since the start of deregulation, Northwest does not yet have the technological capabilities (electronic reservation systems … ) or human skills that are more customer-oriented and service.

Steve Rothmeier took over the management and committed to his side a psychological Ken Myers to help change the organization (potentially hostile environment) in depth   : Have more balance between mgmt and workers operate more service-oriented… Rothmeier’s Story   : Part 1 The strong point of the company is the trust and employee pride The main weakness is unionism (95%). Dr. Ken’s job is to prepare supervisors and managers to adopt a more participatory role.

Ken style (”   bearded academic   “) Is quite different from mgmt in place (”   weird   “) He did not rank high not to be perceived as a member of mgmt but is a general help to communicate, understand the problems of organization and motivation, to pass messages. Northwest is now in a strong position on the domestic market with a strong presence   : The most difficult thing is to maintain this leading position and that change can help. A peculiarity of such a large aviation company is that people are still running and it is therefore difficult to convey factual messages. Rumors faster than new.

Drivers etc are dif ficult to gather together (via cassettes solution does not really work either for channeling rumors). The efforts of Dr. Ken led the company to become 4th in customer service. To deal with all major operators in 1986 announced Rothmeier acquiring Republic Airlines (Minneapolis, stpaul). Ken’s Story   : Part 1 Arrived in 1985 in an organization where there is no   : No marketing (and sellers), no HR (relations punitive, negative), no operations (old infrastructure). For him this represents a great challenge  ”   I was coming out there to do my magic   . We do not give unfortunately not re s sources or status he asks. He gives the first 6 months to build a network of relationships (as a politician) and to gather information on the organization. ”   to build myself into the system, and to build some k nowledge and credibitiliy. “In me me time, travel and visit for a maximum gain confidence and Co-operation of employees, he immersed himself as much as possible to understand the pr e occupations workers (hostility, emotions, frustrations, difficulties). Finally, it refers to Rothmeier regularly its experience, and interpretation of events it becomes necessary.

They establish a personal relationship. Mission Dr Ken   ”   analyze the culture and lead to a culture more oriented to meet customer and people oriented. Build a new spirit, professionalism, pride in the company. Develop and conduct the training that will support these goals, and destroy processes that go against the expected change   ‘ Rothmeier someone has the image ”   Who Does not care about people   “. Ken launches campaign with logo pin and People – Pride – Performance with party and announced in the newsletter.

It is also launching a 3-day program for supervisors on communication and behavioral techniques. Managers were able to meet and talk. It also reviews with a mixed group of employees in the form of performance that everyone hates. Despite these small successes, Dr. Ken is frustrated because Steve does not follow at financial support (buying a projector … ) and Ken pushed farther and faster than it wants to move. Regarding the merger, Dr. Ken believes that the two companies have not prepared enough fusion of cultures (service-oriented old militaristic structure) with team building and planning.

The merger took place in October 1986, and 33 500 employees and the company is now the 5th largest box sector. Rothmeier’s Story   : Part 2 He wants to merge all departments and systems at once. Disaster very fast   : Flight delays, double-booking of passengers, baggage lost, numerous logistical problems, etc … Not to mention the war between the two worlds unionists from each company. Wage inequality, cuts in wages etc.. Unions of Corporate Republic ”   Planned program has HAD to try and destroy the service levels of the airline company and bring the knees to icts   “.

They destroy the image of Rothmeier in the press, pretending to be a boss who does not communicate. Thinks Steve at it again, it would impose more control over the merger (procedures, discipline, structure). He received death threats and tone hardens with unions in daily confrontations. A plane crashes in Detroit   : 156 dead. Ken’s Story   : Part 2 We could have avoided many of the problems by better planning   : Prepare employees how their jobs and responsibilities would change. As he predicted everything that is finally produced, seen as a prophet and called for advice.

He then feels really good. But the company continues to suffer, the operations do not work. He launched the Crew Chief and Supervisor Academies for one week seminar for leaders   : Very positive effect on the leaders, but hardening of Trade Unions (vandalism   ! ). Rothmeier’s Story   : Part 3 Meeting all employees involved in the incident and sharing his experiences with them and listen. The public’s reaction is amazing   : Complaints about incidents that never occurred on flights that do not exist. But catharsis effect for employees who understand that change is necessary.

Ken then starts to dialogue programs to deal with problems without the intervention of management etc.. Great success. Ken enthusiastic people. The barrier decreases with the unions but Ken gets the status of Staff Vice President which provides a barrier with Steve. It loses its power to influence employees, it exceeds the limits of its competence and loses ”   general aid   “. 1988 is the year of profits, union agreements and reduced passenger complaints. But hostile takeover of Marvin Davis … we regret the time wasted in wars union … Ken’s Story   : Part 3

For him, the company has managed the post-crash exemplary manner. This unit employees and accelerated integration. Ken launches ”   On-the-line   “For managers. The program ”   Operation Breakthrough   “Is his greatest achievement over 9 months. Another merger announced in 1989 and Steve is more occupied with that. This undermines the relationship with Ken and Ken frustrating. Budget Ken is also reduced. With the sale of the company, Ken feels that collaboration ends. According to him, Northwest has never been sufficient resources to carry out the change. Report Ken   :

To achieve integration it takes 3 things   : Indoctrination   : Reduce the anxiety of change, take care of personal and professional needs, identify themselves with the company and get to carry out his work. Should be informed about the position, benefits, privileges, new rules of society etc.. Socialization   : Symbols info continuously playing field, trainings, team building, to strengthen the organization, and not to leave the hands of the unions. Organization   : Clarifying roles, reduce potential conflicts, improve communication, solved problems together and ion accelerating natural processes.

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Malaysian Airline System

From a small air service that began with a 5-seater twin engined Airspeed Consul in 1947, Malaysia Airlines has grown into an award-winning airline with a fleet of more than 100 aircraft, servicing more than 110 destinations across six continents. Today, Malaysian Airlines System Berhad is a corporation with a vision of global expansion. The airline’s network will grow extensively in response to consumer demand for worldwide coverage. The airline’s enhanced in-flight services, reliable ground support and excellent infrastructure will set new world standards.

Company History: Malaysian Airlines System Berhad is the holding company for Malaysia’s national airline carrier, one of Asia’s fastest growing airlines. Through several other subsidiaries, the company manufactures aircraft parts, offers trucking and cargo transportation services, caters food, provides laundry and dry-cleaning services for airlines and other industrial institutions, and oversees a travel agency.

Company Chairman Tajudin Ramli owns a significant share in Malaysian Airlines System (MAS), and the Malaysian government retains a strong voice in MAS affairs. 930s Origins The history of Malaysian Airlines dates back to 1937, when the Straits Steamship Co. of Singapore joined forces with two British companies–Ocean Steamship Co. and Imperial Airways–and won approval from Singapore’s government to operate an airline in the region. Malayan Airways Limited was registered on October 21, 1937. Getting clearance and getting planes in the air, however, proved to be two different things for Malayan Airways Ltd.

Operations did not begin until 1947, well after the Japanese occupation had come to an end, when a twin-engined Airspeed Consul lifted off from Subang International Airport in Kuala Lumpur, linking that city with Singapore, Ipoh, and Penang in the north of the country. In 1947 the fledgling airline added a 21-seater DC-3 to its fleet of three Airspeed Consuls. By the end of the year the airline was flying to Jakarta (then called Batavia), Palembang, Bangkok, Medan, and Saigon (later called Ho Chi Minh City).

Jointly controlled by the intercontinental carriers BOAC and Qantas, Malayan Airways as for a time run by Keith Hamilton, who would later become head of Qantas. 1960s Independence Following Malaysia’s political establishment in September 1963–the new country comprised the former states of Malaya and Singapore, and the one-time colonies of North Borneo, Sabah, and Sarawak–Malayan Airways became Malaysian Airways and was reorganized to focus on connecting the new country’s disparate regions. Expansion brought more aircraft into the fleet after Borneo Airways was purchased and folded into Malaysian Airways in 1965.

This brought four Dakota jets and two Scottish Aviation Twin Pioneer aircraft to the carrier’s stable of aircraft. More organizational changes for the airline occurred in 1966, a year after Singapore seceded from Malaysia to become a sovereign state on its own. That year, the governments of Singapore and Malaysia jointly bought a controlling stake in the airline and renamed it Malaysia-Singapore Airlines Ltd. (MSA). Powerful Boeing jets then entered the fleet and enabled flights to reach a number of far-flung Asian destinations. However, differences between Kuala Lumpur and Singapore over the future direction of MSA prompted a split in 1972.

Lee Kuan Yew, prime minister of Singapore, desired a truly national carrier for his country, the aim being to fly a small fleet of Boeing 707s displaying the yellow and blue colors of Singapore Airlines. Malaysia likewise chose to go its own way. In October 1972, Malaysian Airline Systems (MAS) was established. (The acronym MAS means gold in the Malaysian language. ) Each of its aircraft would henceforth sport a winged tiger logo, a stylized form of the traditional Kelantan “wau” or Malaysian kite. The split was crucial to the future fortunes of MAS.

From 1972, the airline continued to see itself as a regional carrier, connecting a myriad of remote destinations in Peninsular Malaysia, including Sabah and Sarawak. Singapore Airlines, on the other hand, was committed from its inception to becoming an international success. By 1975, Singapore Airlines was flying to Seoul, Hong Kong, and Taipei. A year later, that airline was carrying passengers to Paris, Dubai, and New Zealand. Unlike Singapore, Malaysia looked to focus on exploiting its vast reserves of natural resources–petroleum and petroleum products, natural gas, timber products, and rubber.

The country’s government would choose much later than Singapore had to attempt competing with Western companies in manufacturing and high-tech markets. Thus, maintaining a successful regional airline carrier was judged the best strategy for Malaysia during the 1970s. The company slowly built up its regional services to Jakarta and Medan in Indonesia. Later the destinations of Bangkok, Hong Kong, Manila, and Singapore were added. “Malaysia felt that MAS was not serving the needs of Malaysians,” explained Abdullah Mat Zaid, director of corporate planning at MAS.

Expanding as a regional airline was not without incident for MAS. In 1978, the company’s low-wage policy met with a setback. Kuala Lumpur had set out rules limiting union activity at the national air carrier as a means of keeping wages and costs down, and a bitter and disruptive labor dispute occurred in 1978. Events surrounding a strike at the national airline prompted the government to intervene and cite MAS workers as being engaged in illegal activity. Several union officials were subsequently arrested.

Growth in the 1980s–90s An economic boom in Malaysia during the 1980s helped spur growth at Malaysian Airlines. By the end of the decade, MAS was flying to 47 overseas destinations. These included eight European cities: London, Zurich, Paris, Frankfurt, Istanbul, Vienna, Amsterdam, and Brussels. MAS also flew at this time to six Australian cities–Brisbane, Adelaide, Darwin, Perth, Melbourne, and Sydney&mdash well as to Auckland, New Zealand. Besides flights to such Asian hubs as Hong Kong, Tokyo, and Peking, MAS also connected with Los Angeles and Honolulu.

By 1992, MAS had added scheduled flights to Athens, Madrid, and Rome, and plans were in motion to reach at least one destination in Eastern Europe. Moreover, a new service to South Africa and Brazil was scheduled for 1993. The airline would also look to reach one city on the eastern seaboard of the United States. MAS also chose during the early 1990s to expand by teaming up with other airlines to make additional destinations available for its customers. For example, Iran Air connected Kuala Lumpur with Tehran, and Royal Jordanian connected MAS flights with Amman.

In addition, joint services to Chile and Argentina were discussed in late 1991. The impetus for this expansion came from Malaysia’s burgeoning economy. Between 1986 and 1991, the country’s export-oriented economy posted an average real growth of nine percent. Changes to Malaysia’s foreign investment rules during the mid-1980s were designed to help speed a shift from an economy previously dependent on natural resources to a finely tuned industrialized economy. At the same time, a number of large Asian and Western corporations such as Sanyo, NEC, Toshiba, and Philips established branch plants in Malaysia.

The extra traffic of company officials flying back and forth from their headquarters to Malaysia, and the transportation of their high-tech goods, spurred on ticket sales for the airline. The number of business passengers MAS accommodated was underscored by gross foreign investments in Malaysia that rose 30 percent in 1991 to M$10. 7 billion ($5 billion). The 1980s–90s Tourist Trade As the country’s export trade thundered ahead in the late 1980s, so did the domestic passenger traffic in and out of Malaysia, and naturally tourism also provided a springboard to expansion for MAS.

By the late 1980s Malaysia began to go after the prized Western tourist, a market already well exploited by neighboring Thailand and the Philippines. Nearly 5. 5 million travelers visited Malaysia in 1991. Although the country, and its airline, were hit by the effects of the Gulf War and global recessionary conditions, tourism contributed M$5 billion–or $2. 4 billion&mdasho the country’s trade balance in 1991. The bulk of these tourists came from neighboring Brunei, Indonesia, the Philippines, Singapore, and Thailand.

Kuala Lumpur’s plans to build a number of luxury golf courses in the country were expected to help secure growing numbers of Japanese tourists. Getting into the package tour business also helped MAS encourage increased passenger traffic. Malaysia Airlines Golden Holiday packages and Malaysia Stopover packages were established in 1984. These encouraged European and Australian travelers in transit between the two continents to take a rest break in Malaysia before carrying on to their final destination. To further stimulate tourism, a joint campaign was run by the Malaysian government and MAS to declare 1990 Visit Malaysia Year.

During the year, some 7. 4 million tourists flew into and out of the country, as compared with the 4. 8 million tourists who visited Malaysia in the previous year. Another source of new traffic for the airline was the growing number of foreign students attending educational institutions in Malaysia. In September 1989 the International School of Kuala Lumpur registered 700 students; a year later, the school had doubled its enrollment. By the same token, young Malaysians were studying in Europe and North America.

In Canada, where many Malaysian students attended universities, it was felt in early 1992 that this new traffic source might warrant regular service between the two countries. Canada’s own national airline, Air Canada, which was suffering from economic recession and increasing global competition, was slow to grant Malaysian Airlines landing rights. The Canadian government felt that allowing MAS to land in Vancouver would encroach on territory commanded by Canadian Airlines International Ltd. , while Toronto International Airport was considered the preserve of Air Canada.

Malaysia’s case at the time was not helped by Ottawa having a year earlier announced the cancellation of Singapore Airline’s landing rights in Toronto. Even so, Kuala Lumpur officials reasoned that Canada was out-of-step in trying to protect its national airline carriers. The global airline industry as a whole was going the opposite way, towards increased deregulation and competitiveness. Malaysia was prepared to wait for Canada to accept its growing economic might and grant reciprocal landing rights. Intercontinental traffic for the airline was encouraged by the purchase of Boeing 747 wide-body jets.

By 1991, the airline had four of them, and three more were added a year later with an average of two more due for delivery each year until 1995. In 1992, a tightening labor supply in Malaysia, in part the result of its increasingly prosperous economy, was cited by international corporations as the prime obstacle standing in the way of future expansion plans. Manpower shortages were especially acute at the middle management and technical levels. All of these circumstances would impact on MAS’s passenger and cargo traffic figures as the country’s economy moved from the farm to the factory and beyond.

Amid this backdrop, the Malaysian government in 1992 forecast that passenger traffic on the country’s combined airways–international and regional–would grow by ten percent annually in the five years before 1997. International freight volume in the same period was expected to rise by 13 percent annually. Officials in Kuala Lumpur announced in 1992 that they had plans to build a new international airport in Sapang, adding that all other airports in the country were expected to cope with the increased passenger demand of the 1990s without the need for expansion.

Government forecasts in 1992 pointed to 9. 5 million passengers to be carried by MAS that year, a figure expected to jump to approximately 15 million by 1995. Cargo was also identified as an expanding source of revenue for the airline in the 1990s. In recognition of this potential, MAS in 1992 introduced MASkargo in order to begin providing a full cargo service to the United States and Europe. A DC-10-30 jet was fitted to carry up to 60 tons of cargo per flight. Further plans were announced to purchase an additional Boeing 747-400 freighter to carry 45 tons of extra cargo per flight.

In 1992 MASkargo also opened a fully automated cargo handling center in Penang. The new facility complemented the expanded MAS Cargo Center at Subang Airport, which provided semi-automated and computerized facilities including elevating transfer vehicles and electronic scissor lifts fitted with computerized scales. Expansion at the cargo center brought MASkargo’s total warehouse storage space to 150,000 square meters.

The ambitious expansion plans taxed the carrier’s profits, which were nearly halved, from M$206 to M$120, between 1991 and 1992. Turnover increased 23 percent in 1992, however, reaching M$3. billion. Correspondingly, employment at MAS rose from 17,575 workers in 1992 to 20,370 in 1993. Demand for flight crews was so great that the carrier contracted for 35 percent of these positions with overseas personnel, mostly Australian. Fifteen hundred of the employees worked in the airline’s unique flight kitchen, which served 22 airlines. All 17,000 meals a day were hallal, that is, observing Muslim dietary restrictions that prohibited pork. During this time, MAS hired Star Wars producer George Lucas’s special effects unit to create a stunning sci-fi television commercial.

The spot, which aired around the world, was commissioned to present MAS as a modern, world-class airline and featured a huge kite-shaped space station. The cost was estimated at between $2 and $4 million dollars. In 1993, MAS bought a 24. 9 percent interest in U. S. charter operator World Airways. The company also leased five of its MD-11 aircraft. Operations personnel, in high demand at MAS, were also made available. 1994: Ramli Buys a Stake in the Airline In 1994 Malaysian entrepreneur Tajudin Ramli bought a 32 percent controlling interest for M$2 billion ($745 million) worth of stock.

The government retained an 11 percent interest. Tajudin, who had earlier put together a mini-aviation empire in preparation of competing with MAS, was saddled with an overlarge fleet and diminishing profits. Although sales rose to $M4. 1 billion ($1. 6 billion) in the fiscal year ending March 3, 1994, profits fell from M$145. 4 million ($56. 4 million) to M$7. 7 million ($2. 9 million). The carrier was still receiving large shipments of new aircraft, including Boeing 747s, and sales of its used aircraft were slow. Some of MAS’s new A330 aircraft were delivered late, resulting in penalty payments from Airbus. )

Tajudin immediately set out to trim the fat. He introduced a more businesslike attitude and required better reporting from the company’s managers. Aircraft utilization was increased. The carrier signed code-share agreements on transpacific routes and promoted its Kuala-Lumpur-Los Angeles route to attract more business passengers. Virgin Atlantic Airways teamed with MAS in 1995 to operate joint London-Kuala Lumpur flights. The service proved convenient for Virgin’s Australia-bound passengers.

Planes stayed just as full after the number of flights was increased from eight to 14 a week, although the two carriers faced very formidable competition from the British Airways/Qantas alliance, which operated the only single-plane service between London and Australia. MAS recorded its highest ever pretax profit in 1996–97 of M$349. 4 million ($120 million). The company continued to buy new planes and relocated to Kuala Lumpur’s new Sepang International Airport, a move expected to further enhance its reputation. However, the new airport’s opening was plagued with lost baggage, computer malfunctions, and other annoyances.

Depreciating Malaysian currency brought MAS debt up to M$12 billion by 1998. Debt servicing helped MAS lose M$260 million ($62 million) in 1997–98. In response, the carrier deferred new aircraft purchases, sold old planes, and slashed underperforming routes. A new restructuring plan put forth by Tajudin, whose hands were tied by the government when it came to cutting jobs, was rejected on the grounds it would rescue Tajudin at the expense of minority shareholders. Foreign airlines with an eye towards global expansion (such as Thai Airways and British Airways) seemed interested in investing in the troubled carrier, however.

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Turning Around Malaysia Airlines

12 Nur Ain Binti Muhammad Yusuf Turning Around Malaysia Airlines Turning Around Malaysia Airlines Table of Content NO| TITLE| PAGE| 1. 0| Executive Summary| 1| 2. 0| Introduction to Case Study| 1| 3. 0| BTP1 Assessment| 1| 3. 1| Financial Analysis| 1| 3. 2| SWOT Analysis (BTP1)| 2| 3. 3| BTP1 Turnaround Analysis| 2| 4. 0| BTP2 Assessment| 3| 5. 0| Bottlenecks & Recommendation| 3| 6. 0| References| 4| 7. 0| Appendices| 5| 1. 0 Executive Summary Malaysia Airlines (abbreviated MAS), is the government-owned flag carrier of Malaysia.

Due to fuel price hiking, inefficient management, global economic crisis, government intervention and low load factor, MAS suffers substantial loss which peaks during 2005. Afterward, Tan Sri Idris Jala was brought into MAS strategizing for turnaround program to bring MAS back to profit. The main target for Business Turnaround 1 (BTP1) is for profit turnaround of 1. 1 Billion improvements in 2006 Exhibit 1. 1. MAS proposes plan to tackle on the financial aspect, as well as non financial aspect such as operational, enriching stakeholders bonding, increasing customers value as well as for people.

Several decision made includes selling off headquarters, increasing fares, cutting-off unprofitable routes (Exhibit 1. 9) and Mutual Separation Scheme to enhance its financial. Firefly and MasWings are launched to cater domestic flights. BTP1 proved to be a success and subsequently, BTP2 follows. BTP2 focuses on detailed project and procedure to carry on the success of BTP 1. 2. 0Introduction to Case Study This report will discuss and analyze the positioning of Malaysia Airlines.

The key objectives are to identify the current market situation as well as analyzing the Business Turnaround Plan 1 and Business Turnaround Plan 2 and its success or failure as well as providing some recommendation for future sustainability. 3. 0Assessment on Business Turnaround Plan 1 (BTP1) 3. 1Financial Analysis During the implementation of BTP1 (2006 &2007), the operating profit recorded high. Based on the computation of MAS’ ratio as shown in Exhibit 1. 2, BTP1 period shows a favorable ratio as compared to other year. Based on efficiency ratio, there is remarkable increase in the ratio in 2006.

It measures how effectively the firm is managing its assets in generating the sales, and it is due to increase in operating profit. The gearing ratio as per Exhibit 1. 5 show a slight dipped in 2006, however recovers in 2007 due to sale of the headquarters building. Exhibit 1. 7 favors greatly to MAS as the cash flows increase in 2006 and 2007 show near 4 million of cash flows due to issues of shares and selling off the building. Overall, financial analysis during BTP1 period shows favorable impact financially to MAS, however does not improves continuously during period in which BTP2 commence. . 2SWOT Analysis (BTP1) Strength By initiating Mutual Separation Scheme, it emphasis on increasing staff efficiency, cutting down routes leads to a focus on services and network structures that were profitable. The intention to diversify with MasWings and Firefly promotes larger scope for market. Weaknesses The BTP1 initiative focuses on the financial aspect, since they have to recover from massive losses previously. The extreme cost reduction might impact the service indirectly, or being too financial-focus, BTP1 merely recognized the non financial aspect.

The decision also largely attributed to gaining quick cash to solve the liquidity problems; ie; from the selling off the building. Whilst it can become their advantage, but by diversifying, because MAS itself in a shaky state, thus by diversifying, it lack focus as well as imposing larger operating cost for MAS as a whole. Opportunity Connell (2006) comments that medical tourism has been a success in Asia especially and has prompted global interest, with the increasing in GDP worldwide including Malaysia, as well as emerging worldwide fascination with travelling, thus it can be taken as a tool for Malaysia Airlines to expand their customer.

This BTP1 plan can become the turnaround aspect financially and non-financially. Threat Even AirAsia is seen as Mas biggest threat, however, seeing that how both of these airlines promotes entirely different packages and offerings, Mas deemed these few obstacles as their main threat, which is the volatility of fuel price due to Iraq invasion by US, staff resistance of given plan and government intervention in setting up boundaries for the CEO to act accordingly to what they thinks fit. 3. 3BTP1 Turnaround Analysis

BTP1 Turnaround Analysis will be done based on the core strategies in which BTP1 proposed (in which two important aspects are further elaborated). First is by financing and aligning the business on the Income Statement. As per financial analysis above mentioned, MAS shows remarkable transformation during this phase. Based on Exhibit 1. 1 the actual performance supersedes the projected plan projected a year ahead of time. This is a success due to fares increment, elimination of unprofitable routes and increase in efficiency.

Other core strategy is flying to win customer and by observing and studying the non-financial aspect during the implementation of BTP1, they succeed in maintaining the customers’ value. This resulted in MAS receiving 11 non financial-awards during this phase including 5-Star Airline Award, 2006 and 2007 from Skytrax, Best Airline to Asia, 2006, Travel Weekly Globe Award and numerous cabin service awards from Skytrax, Readers Digest and so on. They also encourage mastering operational excellence by increasing employees’ value and efficiency, Unleashing Talents & Capabilities and winning coalition.

While it is based on value judgment and rather subjective, however it is proven to be a success referring to relevant articles, audited financial statement and to some extent word of mouth by former and existing employee. The efficiency increases as well and can be observed by some of the decision made by Tan Sri Idris Jala which by reducing unprofitable routes, selling of the building in Jalan Raja Chulan, and drastic cost reduction scheme. 4. 0Assessment on Business Turnaround Plan 2 (BTP2)

As per financial analysis, most analysis shows an unfavorable financial state during the implementation of BTP2. BTP2 is a more comprehensive, step to step planning in conjunction with the success of BTP1. Referring to Exhibit 1. 10, BTP2 strategize on Breaking New Ground (BNG), Gaining New Business (GNB) and Making The Most (MTM). With the current state of Malaysia Airlines and from the analysis gathered financially and non-financially, BTP2 make slight downturn from the success of its previous predecessor. 5. 0Bottlenecks & Recommendation

There are many bottlenecks that lead to diminution of momentum for BTP2 including competition with AirAsia, stepping down of Tan Sri Idris Jala as CEO, the diversification effects, MAS internal culture and strategies gone awry. In order to gain sustainability, the first is how to capture customer. MAS has been underperform financially due to stagnant and average load factor which in turns affect RRPK & RASK; example exhibit 1. 8. Thus, in order to capture the market, MAS have to strategically plan for its marketing approach to attract broader customer and thus larger scale promotion need to be made.

They also should assess the manpower requirement and sell unnecessary asset. 6. 0Reference 1. “Malaysia Airlines Business Turnaround Plan” (PDF). Malaysia Airlines 2. “Malaysia Airlines Business Transformation Plan: Project Mosaic”. (PDF) Malaysia Airlines. 3. http://en. wikipedia. org/wiki/Malaysia_Airlines 4. http://www. flightglobal. com/news/articles/idris-jala-transforming-malaysia-airlines-222296/ 5. http://sakmongkol. blogspot. com/2011/08/mas-turnaround-was-real-debate. html 7. 0Appendices Exhibit 1. 1Projected Profits: BTP1 Exhibit 1. 2Table of Ratio from 2003- 2008 | 2003| 2004| 2005| 2006| 2007| 2008|

Current ratio| 1. 04| 1. 18| 0. 81| 0. 74| 1. 42| 1. 38| Acid-test ratio| 0. 92| 1. 08| 0. 70| 0. 67| 1. 35| 1. 31| Fixed assets turnover| 3. 53| 3. 59| 3. 09| 4. 03| 5. 59| 4. 55| Debt ratio| 0. 55| 0. 54| 0. 68| 0. 73| 0. 61| 0. 49| Gross profit margin| -0. 0067| 0. 0003| -0. 1670| -0. 0486| 0. 0186| -0. 0108| Operating profit margin| 0. 056| 0. 041| -0. 143| -0. 003| 0. 061| 0. 022| Net profit margin| 0. 039| 0. 054| -0. 143| -0. 010| 0. 006| 0. 016| Exhibit 1. 3Liquidity Ratio Exhibit 1. 4Efficiency Ratio Exhibit 1. 5Debt Ratio Exhibit 1. 6Profitability Ratio Exhibit 1. 7Cash Flow Analysis Exhibit 1. 8Performance Analysis

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Eagle Airlines

[pic] Eagle Airlines Business Decisions with Data Models Assignment on Risk Analysis Team Members: Sfykti Dimitra Goumas Evangelos Manikas Athanasios Papaspirou Yiannis As assigned by Mr. Hadjistelios, President of Eagle Airlines, a simulation analysis is developed in order to evaluate company’s intention to proceed with the purchase of a new aircraft. According to the President’s estimations, the uncertain parameters which affect the annual cash flow are the below; 1. Hours flown 2. Charter Price/Hour 3. Ticket Price/Hour 4. Capacity of Scheduled flights 5. Ratio of charter flights 6.

Operating Cost/hour The main assumption to work upon the scenarios is that the numbers generated for the different variables remain the same across the years. Initially, a base scenario is built and a profit-and-loss account for a typical year of operation is derived using the most likely values of the different parameters. Upon construction of the base scenario, the optimistic and pessimistic scenarios are also formulated in accordance to the assumptions by the President in respect to possible variations to higher and lower values than the most likely ones used for the base scenario.

For all three scenarios, the demand/cash flow is calculated revealing a wide range of values (from €273. 180 to -€39. 040) among the 3 possible cash flows. In addition, the one-way sensitivity analysis conducted for all six uncertain parameters demonstrate the impact of each parameter on annual cash flow and by the designation of a scatter plot, we can identify to what range of values every uncertain parameter affects the demand. Upon that, a Tornado diagram is plotted in order to visually demonstrate the range of impact of each parameter.

According to the diagram, ticket prices/hour and capacity of Scheduled flights seem to be the two important parameters that most influence the annual cash flow, whereas the ratio of charted flights and operating cost/hour are the ones affect the least. Following this determination, a two-way sensitivity analysis is implemented and the outputs shown in a 3D plot illustrate a one-level relationship between the variables. By assuming that the probability distributions are the ones assessed by Mr. Hadjistelios, a test scenario is run using the @RISK add-in with 50. 00 iterations and the results’ interpretation is described below. Interpretation of results The basic data and the main decision factors to be taken into consideration by the President are raised below in order to provide substantial argumentation for the final business decision. ? According to the given data, the annual cash flow of the base scenario is €46. 184, less than the breakeven point by €7. 513. Therefore, in case the base scenario will actually happen, the company will need more than a 5-year lifetime in order to pay out the investment of the new aero plane. In the optimistic scenario, the annual cash flow is €273. 180 and the difference from the breakeven point is €219. 483. According to this scenario, the investment is highly profitable and will be paid off by the end of the first year while a number of approximately €93. 180 profits will be generated. ? In the pessimistic scenario, the annual cash flow is – €39. 040 and the difference from the breakeven point is €92. 737. , which is a bad scenario but at the same time quite unlikely to happen. According to @RISK analysis, as illustrated in the figure below, some important observations are derived; [pic] The probability that the investment will be profitable within a 5-year lifetime is 73. 4%, meaning that the annual cash flow will be greater than the breakeven point of €53. 697. ? The probability the annual cash flow to be less than the breakeven point is 26. 6%, as presented in the graph above. ? However, it is important to refer that the same probability (26. 6%) applies for the company to generate cash over €96. 511. The above implies the fact that if in one year the cash flow is below breakeven point, this under the same probability can be offset by another year’s revenues. [pic] According to the normal probability distribution, the expected value (mean) is approximately €77. 342 that actually is translated into a €23. 645 return on investment. ? A probability over 50% that the company will generate cash flow of at least €74. 467 (median) which represents the 40% of the aeroplane current value. ? However, another important statistical parameter to be taken into account is the standard deviation of €35. 257 that describes a quite wide dispersion/variability of the probability distribution. ? If we do not take into consideration the discount rate of 15%, then the breakeven point will be 36. 00 (180. 000/5) and the probability of the investment to be profitable is 89%. ? In case the company self-funds the purchase out of the cash surplus of the company, the investment seems to be less risky since potential deviation from the breakeven point does not imply financial obligations to third parties, such as banks (loans and interest rates). [pic] ? The probability that the investment will be paid off already by the end of the first year is 0. 7% while the probability that the company will generate negative values by the end of the first year is 0. % which seems a quite extreme case, with a smallest value of -€22. 642. [pic] ? However, it should be considered that the company operates a number of business parts and it is being taxed for the total activities as a whole, thus with a tax rate of 33% the actual loss will be €22. 642 * 0. 67 =€15. 170, with the assumption that the company is profitable overall. Another important factor to consider is the operations’ expansions by 33% with the purchase of one additional aircraft to the current equipment of the three twin – engine aircrafts which provide charter flights and scheduled commuter services.

The company may redefine the strategy and decide to add new destinations in the services, currently limited to south Balkans, so as under the promising prospects analysed above, to further strengthen the company’s brand name and grow the Share of Market (SoM). The above can be well justified considering both cases of charter and scheduled flights. On the one hand, in respect to charter flights the company seems to have already identified available ground to grow by further building on the level of service.

On the other hand, the scheduled flights, currently holding a percentage of 60%, represent the variable that mostly affects the cash flow, according to Tornado diagram. This in combination with the fact that the company “had slightly more control over the ticket price per/hour of scheduled flights” demonstrates a high future development potential with a thorough strategy. The critical service category in the context of the new investment risk analysis for Eagle airlines to analyze is Scheduled flights.

Ticket prices/hour and capacity of Scheduled flights, the two most important and correlated variables, should be in depth evaluated according to the most likely possible estimations. For example, according to the data given, the variability for the price per ticket is greater in the higher values than the lowest ones. However, the actual price per ticket is highly correlated to the capacity/utilization rate and the flight hours. The base scenario argues for good prospects, but a deeper analysis could identify opportunities that Eagle airlines should closely monitor and evaluate in order to maximize its profits.

It is important also to refer that according to the estimations, there is no high variability of the operating costs compared to the expected value of €445/hour (only €15 in either direction). Some important facts are given also throughout the case providing additional argumentation over the purchase; Piper Chieftain has been maintained according to the legislations and regulatory environment, is in a good condition and the expected normal use is 5 years with possibilities for more, contains the necessary navigation and communication equipment, and insurance has been included in the fixed costs.

The above, in case were unknown, would be important cost factors to analyze and include in the risk analysis assessment. The above analysis argues the business decision to proceed with the investment in the Piper Chieftain, having calculating and evaluating the risks involved while recognising the opportunities.

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Budget Airlines

In both Europe and North America, established airlines are desperately cutting costs in order to compete with the increasing number of budget airlines. However, it is highly unlikely that these airlines will ever match the cost efficiency of Southwest, Jetblue or Ryanair. What opportunities are there for established airlines to improve their competitive position through differentiation strategies? Make specific proposals for how established airlines can differentiate their customer offerings more effectively.

Few other industries generate the amount and intensity of attention given to airlines, not only among its participants but from government policy makers, the media, and almost anyone who has an anecdote about a particular air travel experience. Since the economic deregulation of airlines in the United States in 1978 the questions of cost efficiency, operating profitability and competitive behavior have become the dominant issues facing airline management.

In early 2001 the combination of reduced business travel budgets and substantial cutbacks in airline passenger service quality led more business travelers to look for alternatives to paying premium air fares – namely low-fare airlines for business travel. Southwest, Jetblue and Ryanair are very efficiently run airlines that offer customers consistently cheap airfares in the mature airline industry.

Over the past 10 years, the established airlines have attempted to differentiate their services to compete with these companies in numerous ways. However, while such differentiation has proved critical to competitive advantage in business class, for economy fliers, differentiation initiatives have met limited market response. Attempts to increase legroom, offer “economy-plus” seats, superior in-flight entertainment and achieving superior punctuality have met little market response from customers.

The only differentiation strategy that has proved wildly successful is frequent flier programs and services offered to first- and business-class travelers (Grant text Ch. 13). A critical question for the established airlines is whether any differentiation characteristics are capable of creating more value for customers than their costs to the airline. I think it is important to examine the airline passengers’ value chain of activities to identify opportunities for creating customer value.

Creating opportunities are likely to be improvements in the form of time savings and increased convenience. Legacy carriers simply have to maximize efficiency, either by reducing frills or by providing a good value for premium product. They should keep costs at a minimum to reduce price, offer better schedules, service and faster, more reliable reservations and check-in systems.

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Thomas Cook Analysis Swot

The company was founded by Thomas Cook, a cabinet-maker, in 1841 to carry temperance supporters by railway between the cities of Leicester, Nottingham, Derby and Birmingham. [6] In 1851, the founder arranged transport to the Great Exhibition of 1851. [6] He organised his first tours to Europe in 1855 and to the United States in 1865. [6] In 1865, the founder’s son John Mason Cook began working for the company full time. In 1871, he became a partner, and the name of the company was changed to Thomas Cook and Son. [7] In 1884, John Mason Cook attempted to relieve General Gordon from Khartoum. 6]

In 1924, the company was renamed to Thomas Cook & Son Ltd. , after acquiring a limited liability status. [7] In 1928, the business was sold to the Compagnie Internationale des Wagons-Lits et des Grandes Express Europeens, operator of the Orient Express. In 1948, it was acquired by Britain’s mainline railway companies. [6] It was then bought by a consortium of Midland Bank, Trusthouse Forte and the Automobile Association in 1972 and by WestLB in 1995. [6] In 1999, it merged with Carlson Leisure. [6] In 2000, the company sold off its worldwide foreign exchange business to Travelex to concentrate on tours and holidays. 8] After the market depression, particularly following the 2001 September 11 attacks, the company started a disinvestment programme, disposing of subsidiaries and business ventures. In 2002, the company was acquired by C&N Touristic AG, a German group, who in turn changed its own name to Thomas Cook AG. [9]

On 21 December 2005, Thomas Cook AG sold off Thomas Cook International Markets, a venture which includes 60% of the stake in Thomas Cook India Ltd to Dubai Financial LLC, a part of the Dubai Investment Group (DIG) which manages the financial and real estate interests of HH Sheikh Mohammed bin Rashid Al Maktoum, ruler of Dubai. 10] Then in 2006 Dubai Financial LLC acquired a license to use the Thomas Cook name in the Middle East. [11] Thomas Cook Middle East consists of the Middle East region, which has experienced a boom in travel and tourism, especially in places like Dubai, Qatar, Oman and so on. Also in 2006 Thomas Cook Canada was sold to Transat A. T. marking Thomas Cook’s exit from the North American market. [12]

In 2006, Thomas Cook AG became wholly owned by KarstadtQuelle. [13] In July 2010, Thomas Cook Group buys German tourism company Oger Tours, which was owned by Vural Oger. edit] MyTravel Group PLC Further information: MyTravel Group The company was founded by David Crossland in 1972 when he purchased a series of small travel agencies in Lancashire, United Kingdom. [14] The company began operating package holidays and launched its own in-house charter airline operating under the Airtours brand in the early 1980s. In 1996, Airtours purchased Scandinavian Leisure Group (SLG) including award winning tour operators such as Ving and airline Premiair.

In the late 1990s, Airtours formed the North American Leisure Group, which operated several airlines and cruise lines from its offices in Canada and California, including Sunquest Air, Sunquest West and several others. [16] Thomas Cook Airlines Airbus A320-200 In 2002, Airtours Group PLC rebranded under the new company-wide banner of MyTravel Group PLC. [17] This included a name change for Airtours International and Premiair to MyTravel Airways. Shops throughout Northern Europe were rebranded to MyTravel however UK retail outlets remained under the banner of Going Places.

The company ran into financial difficulties in 2004 and needed to implement a debt-for-equity swap in order to restore its profitability. [18] [edit] Post-merger The merger between Thomas Cook and MyTravel was completed in June 2007. [4] On March 6, 2008, the company bought back its licence to operate the Thomas Cook Brand in the Middle East and Asia from The Dubai Investment Group for an amount estimated to be around 249 million euros. [19] The company took over Preston-based Gold Medal International, owner of NetFlights, in a deal worth ? 87 million in December 2008.

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How the Aviation Industry Is Affected by the Economy

Airports are vital international resources. They play a key role in transportation of people and goods. And in regional, national and international commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal responsibility for managing and regulating air traffic operation meet with the role of state and local governments that own and operate most airports. This paper reviews how oil prices affect the airline economy and views the extent to which the economies and developing countries remain vulnerable to a long period of higher oil prices.

I have chosen this topic because the airline industry in the economy of any country plays a very important role. Today’s airlines face many long standing problems. The historical trends show the true story of what is happening in the airline industry. There are many factors that contribute to these problems and Increase in fuel rates/cost is one of them. The value of a barrel of oil has a direct impact on airliners within the World’s aviation industry, at the present moment the price of a barrel of Oil has held at about “$89 a barrel”, this figure however, is very unstable.

To emphasize further, in mid July 2006 a barrel of oil had broken the “$78 mark” and has since stabilized, the long term issues however, suggest the value of oil could rise even further which can of course have cost complications for airliners. With the current political disputes in Eastern Europe and the unrest in the Middle East, the cost of oil is likely to rise, as is the unstable nature of this resource and industry in general.

According to the latest statistics from the General Aviation Bureau, due to the fuel price surge, the cost of fuel has accounted to 41% of the cost of major business of airline companies. The whole airline industry has an additional cost expenditure of 1. 27 billion. Why does the airline industry which is always sensitive to price change take no action this time? The South-west Airline Company said “if we raised the ticket price at this time the passengers would scare away”.

Several transportation companies also mention that the domestic transportation is steady but not rising, and it would be further overwhelmed if the airline raised prices now. Therefore under the present condition of fuel price surge, the airline should lessen costs through management strengthening, cost lowering and efficiency improving, but not simply raise the price. Passenger carriers have reported over $10 billion in 2005 net losses. Industry debt now exceeds $100 billion, while the industry’s $15 billion total market profit continues to decline.

Our ability to borrow to support continuing losses is lessening. The few airlines that have been able to achieve a profit are doing so under tremendous difficulty. The reasons for the dangerous condition of the industry are clear. Profit has declined dramatically following the 9/11 attack on America. Although carriers are aggressively reducing costs where possible, stubbornly high fuel prices and escalating security and insurance costs, among other things, have combined with a particular vengeance in an under-performing economy.

The industry has already achieved annual savings of over $10 billion in capital and operating expenses. Issues such as fuel prices, however, are obviously beyond our ability to battle alone The industry was suffering from the softening economy in early 2001. The events of 9/11, however, drove losses that year to $7. 7 billion, despite the $5 billion in government compensation for the costs of the terrorist shutdown of our aviation system. A few years back the picture darkened when despite industry cutbacks in spending, losses topped $10 billion.

And analysts predict that the industry will lose another $2 to 4 billion this year, meaning that airlines are on target to lose about $25 billion in the 2008 to 2013 period. Increases in fuel prices affect the airlines in two ways; the cost of fuel has an obvious and direct impact on the cost of operation, and fuel cost increases have repeatedly triggered economic recessions, which in turn result in a decline in demand for air travel and air cargo.

Fuel price increases have a negative impact on airlines because even in good time fuel costs account for roughly 10-12% of our operating expense. Every penny increase in the price of jet fuel costs the airline industry $180 million a year. In the absence of pricing power – the ability to pass these costs along in the form of higher airfares – these increases come right off the bottom line. An even more hurtful aspect of the fuel price increase is the relationship between the economy and air travel. The link between fuel prices and the health of the economy is clear.

Three of the major recessions of the past thirty years can, in large measure, be attributed to the steep increases in fuel prices that accompanied the 1973 Middle East oil embargo, the 1980 Iran Crisis, and the1990-91 Gulf War. The airline industry is undeniably tied to the overall economy – even minor recessions result in reduced demand and increased sensitivity to prices for leisure as well as business travelers. Past fuel spikes and attendant recessions have brought about widespread hardship in the airline industry. As analysis shows, airline profitability suffers as a direct consequence of a weakening economy.

During the first Gulf War, almost half of the major airlines filed for protection under Chapter 11 of the Bankruptcy Code, long-standing airlines went out of business, more than 100,000 airline employees lost jobs, and the industry went into a financial tailspin from which it took years to recover. We all have much at stake – it is not simply a matter of airline finances; it is the national economy. Civil aviation has a profound impact on the U. S. economy.

A recently completed analysis found that in calendar 2009: · Civil aviation’s total impact on the U. S. economy amounted to 9% of GDP. $343 billion and 4. 2 million jobs were produced in civil aviation or in industries related to civil aviation such as travel and tourism. · Combined direct, indirect, and induced economic impact of civil aviation totaled $904 billion and 11. 2 million jobs. Without question, the financial situation of the airlines has had a negative effect on the U. S. economy. Of the jobs lost in the United States since 9/11, according to the Bureau of Labor Statistics – nearly half have been in the travel and tourism sector. As airline pain spreads, communities across the country are dramatically affected.

Forced contraction in the industry means less service or no service to some communities, increasingly isolating them from the economic mainstream. The airlines are doing everything they can to conserve fuel. Throughout the history of commercial aviation, airlines have insisted upon the most fuel-efficient aircraft possible and have worked with airframe and engine manufacturers to reduce fuel consumption. In fact, our fuel conservation efforts have resulted in a fuel consumption rate of almost 40 passenger miles per gallon in today’s aircraft – a rate that compares favorably with the most fuel-efficient automobiles.

Changes in cruise speed, use of flight simulators, sophisticated flight planning systems, increasing load factors and the introduction of newer, more aerodynamic aircraft designs combined with modern engine technology, are all recent success stories. Airlines continue to look at every possible facet of their operations to further improve fuel efficiency through measures like taxiing on one engine, delaying startup and push back, removing all discretionary eight, and using ground power instead of on-board auxiliary power units while at the gate. These and similar measures are increasingly being used where commensurate with safety considerations to save fuel and, not incidentally, to reduce emissions. However, as of today our options for further dramatic improvements on the order of what we have been able to achieve over the past few decades are limited; leaving not only the aviation industry vulnerable but also all other services dependant upon air travel for a profitable living.

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Delta Airlines

The use of new technology, such as internet e-check-in and self-service kiosks, allows the processing of a significant number of passengers to be decentralized from the airport itself. This allows a better use of airport staff resources and reduces bottlenecks while, more significantly, allowing more departing passengers to be processed. Frequent flyers and business flyers who tend to travel with little luggage and appreciate any time-saving measures are currently leading the way in self-service check-in use.

The other functions of self service kiosks are the kiosks help customers shave 5 to 15 minutes off the time they have to stand in line. Passengers can use the kiosks to check in for their flights, get boarding passes for originating or connecting flights, select or change seats, request to stand by for an upgrade, check baggage, change flights, and initiate multiparty check-ins. Delta plans to add more than 400 kiosks and enhance functionality to include international check-in and fee collection.

With this change, Delta will offer customers more than 800 kiosks in airports nationwide. Airports such as Northwest and Delta airlines are now finding that the self-service kiosk is a valuable tool in the reduction of queues. But while the kiosk technology has been around for some time, it has still taken the industry a lot of coaxing to make passengers comfortable with the technology. The self service kiosk technology includes networked special-purpose microcomputer terminals * Video touch screens * Built-in thermal printers * Magnetic-stripe card reader

The TouchPort which is being manufactured by Kinetics USA provides the best of the available technology system for the implementation of the Self service kiosk. The system consists of: * Intel® P4 Processor 2. 8 GHz * 15” Touch Screen Display (Optional 17” Touch Screen Display Available) * 8” Wide-format Thermal Printer * Magnetic “Dip” Style Card Reader * Built-in System Support * Snap & Go Installation * Ease of Serviceability * System Reliability * The system is completely customizable and can be modified to include a large number of features as per the requirements of the buyers.

Moreover, the system is easy to maintain is not very costly also. Ans2. -Delta customers will benefit from: – · Broader reach and enhanced functionality – More than 400 enhanced kiosks will be available in 80 U. S. cities by the end of 2002. · Quicker transaction times – Delta customers who use kiosks will receive a boarding card in less than one minute, on average. · Dedicated customer service agents – Delta provides customer service agents dedicated to assisting customers with kiosk usage and baggage check.

Self-service check-in kiosks are just one product in an array of technology enhancements provided by Delta to make travel easier for its customers. Delta offers the industry’s most extensive line of virtual check-in products available, including virtual check-in through delta. com, a toll-free telephone line, wireless Palm Powered handhelds and Web-enabled phones. Additionally, Gate Information Display Screens (GIDS) and Flight Information Display Screens (FIDS) are other technology products designed to save customers time, while keeping them informed.

Delta Air Lines, the world’s second largest carrier in terms of passengers carried and the leading U. S. airline across the Atlantic, offers 5,590 flights each day to 410 destinations in 71 countries on Delta, Delta Express, Delta Shuttle, Delta Connection carriers and Delta’s worldwide partners. Delta is a founding member of Sky Team, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Without the use of such information kiosks, the customers had to spend a lot of time waiting in the queue for checking-in the airport.

Moreover, the customers who are frequent travelers and business class people who do not have much time get annoyed with such long waiting times. As a result, such a system would definitely help the travelers and a lot of customers would be delighted to use this system and it creates a lot of value for the company as well. Ans3. – These fully automated information kiosks provide a very high business value for the airline industry which is one of the most emerging fields because of the increasing globalization. Thus a large no of people keep travelling for business purposes to various countries.

These corporate people do not like spending their precious time waiting in the queue to check-in to the airport. As a result, the implementation of such self service kiosks are always of a very high value for the airline industry as it helps them getting more customers. Yes, they do give an airline company a lot of competitive advantage. When an airline company implements such an information system, by which a customer can do all the things sitting at home and has to just walk in to the airport half an hour before his flight would surely give that company a competitive advantage over the others who are not implementing.

Because the customers of those airline companies have to spend a lot of time after coming to the airport when the other company lets them do everything at their convenience. Traveling for business or pleasure isn’t what it used to be. In order to develop and maintain brand loyalty while streamlining operations in an increasingly competitive global market, airports, air carriers and hoteliers have been challenged to transform their business processes and integrate new forms of customer-facing technology. Self-service technology has played an important role in this industry transformation.

Today, travelers can manage air, hotel, train, and rental car reservations and check-in using kiosk, web or mobile applications. Increasingly, these applications support preferences ranging from dietary restrictions to airplane seating to hotel room/bed types and much more. In addition, travelers can use self-service kiosks while at an airport, hotel or off-site location, bypassing long queues. While selfservice travel kiosks have the potential to improve the traveler experience by making traveling easier, quicker and more enjoyable, some travelers may experience barriers when trying to use them.

Self-service kiosks often utilize touch-screens which can be difficult if not impossible for persons to use if they are blind or have low vision or mobility impairments as a result of age or disability. Providers of self-service travel kiosks are increasingly interested in removing such barriers in order to: • Continuously improve the traveler experience and differentiate themselves. • Build brand loyalty in an increasingly competitive global market • Capture market share for the growing segment of travelers with disabilities, whose annual business and leisure.

Free Essays

How Do You Think the Asian Passenger Air Transport

The Asian passenger air transport marketplace will stable and growing rapidly. The latest Airbus Global Market Forecast (GMF), released in December 2010, shows that key drivers for the marketplace are the replacement of aircraft for newer more eco-efficient models in mature markets, dynamic growth in new emerging markets, the further growth of low-cost carriers – particularly in Asia-Pacific and Europe, further market liberalisation and capacity growth on existing routes.

In 2010, views on whether low-fare airlines would continue to flourish in Asia varied. Three factors regulation, population demographics, and socioeconomic trends -drove this calculus. Although the target consumer base for AirAsia was enormous -more than 500 million people lived within three hours of AirAsia’s hubs in Kuala Lumpur and Bangkok, more than Western Europe’s entire population -the failure of Asia’s regulatory environment to keep pace and the uncertain demand for low-fare services created uncertainty.

Those who sold airplanes, airports or advice tended to be of the opinion that low-fare carriers would redraw Asia’s socioeconomic map, offering affordable international travel to millions and thereby fostering the integration of a region divided by water, politics, and poor infrastructure. Analysts who saw a large and growing market predicted that budget airlines would tap pent-up demand among less affluent Asians, who typically travelled by bus and hardly expected attentive service.

Since the global economy peaked in the second half of 2006 and even during the recession of 2008-2009, Asian carriers had seen increased success. “We’re seeing that people in Asia travel as soon as they have some extra money in their pocket,” said Don Birth, president and chief executive officer of Abacus, a distribution services provider”) Although average incomes were lower in Asia than in Europe, Timothy Ross, an analyst for UBS, said that the region’s lower average incomes should boost rather than constrain demand for cheap fares.

Other analysts argued that there had traditionally been too few bilateral agreements that allowed new low-fare carriers to fly between countries and too few of the satellite airports that the airlines needed to keep costs low. In that vein, budget airlines such as AirAsia were hoping for increased cross-border travel in the wake of the December 2008 Asean open skies agreement. The agreement allowed carriers based in the region to make unlimited flights between all 10 Asean member states. Although it would be 2015 before the agreement was fully implemented, it was a positive step forward.

For instance, in January 2010, the Indonesian Transportation Ministry announced it was gearing up for the country’s full participation in the Asean air transport liberalization plan and intended to inc1ude five of Indonesia’s twenty-seven international airports in the implementation. ” Although this was only a small proportion, it was a symbolic start. “Liberalization tends to be infectious, and the germs of change are in the air,” concluded Peter Harbison, the executive chairman of the Centre for Asia Pacific Aviation. ‘

As more and more countries opened their skies, AirAsia was quick to start cross-border joint ventures, most notably in Thailand and Indonesia. AirAsia prompted increased passenger travel with its 2007-2008 “To Malaysia with Love” campaign. The campaign celebrated 50 years of nationhood for Malaysia, and offered travelers affordable fares “starting from MYR0. 50 (about 15 cents), available for all destinations to/from its Malaysian hubs. ,,36 Cheaper airfares were also made possible by the low-cost carrier terminal at Kuala Lampur Airport, with a throughput of about 10 million passengers annually.

Even though, external, industry-wide challenges -particularly the escalating cost of fuel -also posed a threat to AirAsia. As the lowest cost carrier in the world, the company suffered more from high fuel prices, as they were a higher percentage of total costs, than any other airline (assuming similar equipment and seat density). Surcharges and baggage fees covered some of this but the airline was conscious that if it loaded on the full charge, it might find no demand on some flights due to a high base price (e. g. inimum or zero fare plus taxes, fees and surcharges).

To offset this eventuality, AirAsia did a lot to improve operations and efficiency and also saw the benefits of the fuel efficient Airbus 320 help to maintain its low-fares brand position. To retain its cost advantage in the wake of the global recession, AirAsia entered into an alliance in January 2010 with Jetstar, the low-fare subsidiary of Australia’s flag carrier, Qantas. This was the first time two leading budget airlines had collaborated in this fashion.

The alliance allowed the companies to explore joint aircraft purchasing, passenger and ground handling services cooperation and the transportation of each other’s passengers in the event of a disruption. Assuming the focus of the alliance was on cost sharing for services and aircraft procurement, it might prove effective. AirAsia had played the game very well and had ambitious growth plans to keep ahead of the pack. Time would tell if Fernandes and his team could maintain the company’s position as Asia’s -or perhaps the globe’s -most successful budget airline.

But what were the business implications for AirAsia if oil prices remained above $100 a barrel for the foreseeable future? Little possibility. Between slim and none The pattern in other regions suggested that once rules start to relax, growth follows. In the United States, the upsurge of budget carriers saw passenger numbers rise nearly 50 per cent in the five years following deregulation, compared with four per cent for traditional airlines. In 2010, low-fare carriers now had more than a third of the market. In Australia, Virgin Blue took only three years to win a 30 per cent market share.

The growth of low-fare carriers had great potential to spill over into the broader tourist and business travel economy: having more air passengers generates higher demand for hotel rooms. This connection had been seen in Australia, where Virgin Blue took nearly one-third of the domestic market from Qantas Airways (which responded in part by setting up Jetstar). This resulted in a sharp upturn in demand for economy hotels, such as Accor. “In many cases, it’s entirely new business that wouldn’t have happened if it weren’t for cheap air tickets,” commented Peter Hook, general manager for communications at Accor Asia Pacific

. In addition, low-fare carriers might offer options for Asian travelers to mix business with pleasure, as many North American and European business travelers did, by extending trips or bringing family members to accompany them. Ultimately, Fernandes pointed out, budget airlines in Asia had an advantage in that Asia had almost no interregional highways and no high-speed international rail. “There’s a lot of sea in between,” he said. “Air travel is the only way to develop interconnectivity in Asia. “

Free Essays

Marketing southwest airlines

Gone were the days when companies used to be product-focused, utilizing salespeople to sell their products to the market without any specific goals in mind. The advent of marketing changed all this and has since revolutionized the manner of marketing certain products and services.

This paper shall look into the marketing strategies Southwest Airlines is currently utilizing to gain a good market share amidst a long list of airline companies today.

Southwest Airlines

Southwest Airlines was initially incorporated to serve three cities in Texas as Air Southwest on March 15, 1967, by Rollin King and Herb Kelleher.

Air Southwest changed its name to Southwest Airlines In early 1971 and the first flight was recorded on June 18, 1971.  Over the years, Southwest has added improved 737 variants but has stayed within the Boeing 737 family to reduce operating costs. Because this technique simplified training, maintenance, and ground operations, it revolutionized the industry’s approach to building aircraft fleets.

In January 2005 Southwest put to rest its remaining 737-200, the oldest type in its fleet. This event was highlighted with employees wearing pajamas for an early morning flight covering the original Dallas-San Antonio-Houston before returning to Dallas and called this “putting the -200s to bed”.

Marketing Strategies

Southwest is known for putting value to the most important people, the customers and the employees. The success of behind a company’s success is its people who understand the significant contribution of their company. Southwest believes that with unsatisfied employees may be translated to unsatisfied customers.

The company is known for its distinct customer service philosophy.  Lovelock and Wirtz (2002, p. 58) made is clear that a good customer service spells a big difference in gaining a good number of customers.

Southwest must see to it that despite the large number of airline companies that exist today, customers must continue to fly their airline. This is no easy task considering the challenge of trying to beat the other airlines who may offer lower fares or provide more valuable services.

Flying on Southwest is quite different from that of most other U.S. airlines such as that tickets are only available and may be purchased from the airline itself. They are not available through travel agents or through common online venues. The tickets may be bought over the phone or via online transactions at the company’s website.

Another thing that sets the company aparts from other airline companies is that reservations can be changed at will without corresponding penalties. To an ordinary customer, this service means so much.

There’s another way Southwest is doing to gain more customers. It offers Rapid Rewards where customers receive one credit per each one-way ticket ( This program was eventually modified to provide a better offer to customers who frequently fly the airline company.

In February 2006, Southwest instituted Capacity Controls to redeeming its free tickets. This means that the airline limits the seats offered to frequent travelers using free certificates on each flight, whereas previously if there was a seat available, you could use the award, provided you were not flying on one of the five blackout dates.

Southwest has added fun in its advertisements such as “just Plane Smart,” The Somebody Else Up There Who Loves You” and “The Low Fare Airline”. This is its way of reaching to its targeted audience in the simplest and easiest way possible.

Since the 1990s, Southwest has come up with television campaigns based on the phrase “Wanna get away?” Their TV commercilas are filled with funny scenes showing how people appear during situations they find themselves while ‘wanting to get away’. What really distinguishes Southwest from other airlines is its sound clip ‘ding which is now being associated with the company.


No amount of enticing marketing strategies will be able to entice the most number of customers if all they get are airline employees who give them the cold shoulder. This is something that Soutwest is being known for and its management is trying to build up among its employees. Southwest employees are generally regarded for their friendliness.

The Economist  came up woth a Special report entitled “Low-cost airlines Turbulent Skies” in July 8, 2004 highlighting the present dilemma airline companies are facing. The 9/11 incident actually changed the way people are dealing with airline companies. No one can deny the fact that people have started developing a kind of fear against flying.

Peterson (2004 p.124 ) illustrates the changes which companies like Southwest may undertake to compete with the times by using marketing principles attuned to the times. As Lovelock and Wirtz (2002), there are better ways to deal with certain situations that beset companies like Southwest.

The problem left by the 9/11 incident among airline companies, the best way to sell or encourage more customers to fly Southwest is to offer them more than just low-cost fares. It is important to provide them the best customer service experience no other airline can give.

Works Cited: (Retrieved September 12, 2006)

Lovelock, C., & Wirtz, J. Services Marketing People Technology Strategy. McGraw-Hill/Irwin. July 2002

Low-cost airlines Turbulent Skies. The Economist Special Report. Jul 8th 2004

Peterson, B.  Blue Streak: Inside jetBlue, the Upstart that Rocked an Industry. Portfolio Hardcover. 2004



Free Essays

Business Strategy of British Airways

According to the Annual Report, 2009, the main strategic intent of the BA this year is to become ‘the world’s leading global premium airline’. A few main strategies of British Airways are identified; firstly, BA want to ensure that customers receive unique premium service whenever they fly with BA and no matter where they are, for example, they would like to improve the Terminal 5’s facilities and other lounges in different airports. Secondly, new produced will be launched, such as new aircraft, upgrade long haul’s flight business class seats and redesign First class cabin. Lastly, BA wants to work closely with BAA in order to improve baggage and punctuality at Heathrow Airport and to keep up their good reputation among customer, and continue being the leading airline in London (BA Annual Report, 2009).

British Airway External Environment Analysis Porter’s Five Forces In order to have a well – planned development of organisation future strategy, it is crucial to analysis the competitions within the industry, which may be threaten to the business. Porter (1980) developed a framework and proposed five forces that may affect the degree of competition with other competitors. These five forces are the threat of new entrants to the industry; the threat of substitute products; the power of buyers or customers; the power of supplier and rivalry among businesses in the industry (Johnson, Scholes, Whittington, 2008). Rivalry among competitors

Competitive Rivalry

BA is facing a very high competitive rivalry, as recent years, higher competition among the short haul flights, budget airline such as Easyjet and Ryanair have been very popular, the old- established airlines such as Virgin Atlantic and Cathy Pacific have also been in a high market competition, according to Shaw (2004), they almost used the same models of aircrafts. Also the government has a strict control on the frequencies and the timing of the flight slot, and also strict pricing policy. Therefore, reputation of the airlines becomes more important for the customers to be loyal.

Free Essays

Traffic Movement in Lufthansa Airlines: a Supply Chain Perspective

Journal of Services Research Volume 10 Number 2 October 2010 – March 2011 FORECASTING THE PASSENGER TRAFFIC MOVEMENT IN LUFTHANSA AIRLINES: A SUPPLY CHAIN PERSPECTIVE Aniruddh Kr Singh Faculty of Management Studies University of Delhi, India. Debadyuti Das Associate Professor, Faculty of Management Studies University of Delhi, India. The Journal of IIMT FORECASTING THE PASSENGER TRAFFIC MOVEMENT IN LUFTHANSA AIRLINES: A SUPPLY CHAIN PERSPECTIVE Aniruddh Kr Singh Debadyuti Das

The present paper attempts to find out the forecasted passenger traffic movement of Lufthansa Airlines on quarterly basis at a global level by employing four forecasting methods namely moving average, exponential smoothing, Holt’s model and Winter’s model with the help of published data pertaining to passenger traffic movement of Lufthansa Airlines. The study has also found out the forecasting errors of all the four methods through Absolute error (AE), Mean squared error (MSE), Mean absolute deviation (MAD) and Mean absolute percentage error (MAPE).

The study also carried out the comparative analyses of the above forecasting methods in the light of the available data. The findings reveal that the forecasting errors are the least in case of Winter’s model. Further the forecasted values suggested by Winter’s model more closely resemble the observed data of passenger traffic movement of Lufthansa Airlines. This provides a valuable insight to the top management as regards formulation of suitable strategies for addressing the varying demand of passenger traffic movement.

Few strategies in respect of both demand side and supply side options have been suggested with a view to improving the overall supply chain profit of Lufthansa Airlines. INTRODUCTION irlines industry across the globe is currently undergoing recession due to severe financial crisis faced by the major economies of the world. As per the estimates of International Air Transport Association (IATA), globally air travel has declined by 2. 9% and 1. 3% during September and October, 2008 respectively compared to the same months in the previous year.

Segment-wise passenger traffic estimates provided by IATA further reveal that the Asia Pacific Carriers and North American Carriers registered a decline in passenger traffic flow by 6. 1% and 0. 9% respectively in October, 2008 compared to the same month in the previous year. African Carriers recorded the largest decline in traffic flow by 12. 9% in October, 2008 Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) ©2010 by Institute for International Management and Technology. All Rights Reserved. A 4 Forecasting the Passenger compared to the same month in the previous year. The remaining segments namely European, Latin American and Middle Eastern Airlines experienced a moderate growth in its traffic flow to the tune of 1. 8%, 4. 5% and 3. 5% respectively in October, 2008 (IATA International traffic statistics, 2008a, 2008b). However, the financial crisis sweeping across the globe does not appear to have much negative impact on Lufthansa Airlines in respect of its passenger traffic flow till September, 2008 as revealed from the data provided in table 2a.

A cursory observation into the table 2 further demonstrates that the passenger traffic flow in Lufthansa Airlines has been following a very systematic pattern since October, 2006 to September, 2008. There has been hardly any departure from the pattern observed in passenger traffic movement during the above period. Despite difficult market conditions, Lufthansa passenger Airlines was able to achieve a sales growth of 4. 2% and 0. 7% in September and October, 2008 respectively.

It registered an increase in its passenger traffic flow in three major markets namely America (North/South), Asia/ Pacific, and Middle East & Africa both during September and October, 2008. American segment recorded a growth rate of 6. 9% and 1% during September and October, 2008 respectively. Asia/Pacific region exhibited an increasing trend of 8. 8% and 6% while Middle East and African region recorded an increasing trend of 2. 5% and 11% during September and October, 2008 respectively. Only European market experienced a declining trend to the tune of 0. 4% and 3% during the above periods (Lufthansa Investor Info, page 1, 2008).

The above phenomenon has motivated us to apply the most popular and well-established forecasting methods with a view to finding out the forecasted demand of passenger traffic movement of Lufthansa Airlines for future periods. The main objective of the paper is to find out the quarterly forecasted demand of passenger traffic flow in Lufthansa Airlines at a global level with the help of moving average (MA), exponential smoothing (ES), Holt’s model and Winter’s model by making use of published data pertaining to passenger traffic movement in Lufthansa Airlines.

In addition, the paper has also attempted to find out the most suitable forecasting model for the above problem by comparing the forecasting errors of the above four forecasting models obtained through absolute error (AE), mean squared error (MSE), mean Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 65 Singh, Das absolute deviations (MAD) and mean absolute percentage error (MAPE). The following section provides a brief review of literature. Section 3 provides a brief overview of Lufthansa Airlines along with the recent data on passenger traffic movement.

It contains a thorough analysis of forecasted passenger traffic movement by employing four forecasting methods and the comparative analysis of the same. Section 4 suggests few strategies for absorbing the varying nature of demand. The paper is concluded with a brief summary, potential contribution and limitations of the same. REVIEW OF LITERATURE Forecasting literature is replete with a number of studies ranging from simple time-series forecasting models to econometric models as also the forecasting models employing artificial intelligence techniques etc.

Researchers have employed the forecasting models with a view to finding out the forecasted demand of traffic for a particular period. However, the study findings reveal that there does not exist a single model which consistently outperforms other models in all situations. Quantitative forecasting methods can be categorized under three broad heads: (1) time-series modeling, (2) econometric models and (3) other quantitative models (Song and Li, 2008). Under time-series models, several techniques are available, e. g.

Moving Average, Exponential Smoothing, Holt’s Model, Winter’s Model, ARIMA etc. (Makridakis et al, 2003). In time-series model, particular attention is paid to exploring the historic trends and patterns of the time-series involved and to predict the future of this series based on trends and patterns identified in the model. Since time-series models require only historical observations of a variable, it is less costly in data collection and model estimation. However, these models cannot account for the changes in demand that might occur in different periods.

The major advantages of econometric models over time-series models lie in their ability to analyze the causal relationships between the demand and its influencing factors (Song and Li, 2008; Makridakis et al, 2003). It is possible for econometric models to take into consideration several variables together, for example, air fare charged by an airline, competitive fare offered by other airlines, promotional campaign, perceived security threat, price and income elasticity of Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 6 Forecasting the Passenger demand etc. However, it is difficult and costly to collect data on each individual variable, incorporate the same into the model and explain its contribution towards the dependent variable. A number of new quantitative forecasting methods, predominantly Artificial Intelligence (AI) techniques, have emerged in forecasting literature. The main advantage of AI techniques is that it does not require any preliminary or additional information about data such as distribution and probability (Song and Li, 2008).

Table 1 provides a brief overview of some related works pertaining to forecasting and traffic movement in airlines. Table 1: Brief Overview of Few Works Relating to Traffic Movement in Airlines Author Choo and Mokhtarian (2007) Contribution Developed a conceptual model in a comprehensive framework, considering causal relationships among travel, telecommunications, land use, economic activity and socio-demographics and explored the aggregate relationships between telecommunications and travel using structural equation modeling of national time-series data spanning 1950-2000 in the US.

Proposed an artificial neural network (ANN) structure for seasonal time-series forecasting. Results found by the proposed ANN model were compared with the traditional statistical models which reveal that the prediction error of the proposed model is lower than the traditional models. The proposed model is especially suitable when the seasonality in time-series is very strong. Developed a methodology for assessing the future route network and flight schedule at a medium-sized European airport.

The existing origin and destination demand from the base airport across the world is considered. In addition, the growth rates by country or region is also taken into account. The future origin and destination demand in then converted into route traffic subject to a threshold for direct service. Where demand falls below this level, traffic is reallocated via various appropriate hubs. Applied Static-regression trend-fitting model for the purpose of forecasting future tourism demand in North Cyprus.

Applied different types of time-series forecasting modeling with reference to China and compared the forecasting accuracy of the models. Applied different types of time-series forecasting modeling with reference to Australia for the purpose of forecasting business tourism and compared the forecasting accuracy of the models. Employed autoregressive distributed lag model (ADLM) for the purpose of forecasting tourism demand at Greece.

Hamzacebi (2008) Dennis (2002) Bicak, Altinay and Jenkins (2005) Kulendran and Shan (2002) Kulendran and Witt (2003) Dritsakis and Athanasiadia (2000) THE CASE OF LUFTHANSA AIRLINES Deutsche Lufthansa (Lufthansa), the third largest airlines of Europe, is the world’s fifth largest airline in terms of overall passengers carried and operating services to 209 destinations in 81 countries. It has the 6th largest passenger airline fleet in the world.

Lufthansa is headquartered in Cologne, Germany with its main base and primary traffic hub at Frankfurt International Airport in Frankfurt and a second hub at Munich International Airport. Lufthansa has built a premium brand synonymous with quality, innovation, reliability, competence and safety despite operating in a tough market where cost cutting is commonplace. Lufthansa founded the world’s first multilateral airline grouping, ‘Star Alliance’ along with Air Canada, SAS, Thai Airways and United Airlines.

At the same time, the airline invested in the most advanced passenger aircrafts and in 1999 it embarked on a vast IT programme that would transform the revenue and profit of its passenger Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 67 Singh, Das airline business (Lufthansa, Wikipedia, 2008). However, estimating the demand of passenger traffic for a particular period has always been the principal determinant in generating revenue for the airline. Table 2a shows the passenger traffic movement in Lufthansa (excluding the number in Swiss Airlines) Airlines for the period during October, 2006 to September, 2008.

Table 2 (a): Monthly Traffic Flow for the Last Two Years Traffic Year – Month Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Passenger traffic (in thousands) 4936 4327 3969 3851 3820 4668 4635 4991 5003 5241 5067 5193 5241 4604 4132 4141 4223 4625 5031 5152 5203 5171 4883 5164 2006 Q- 4 2007 Q- 1 2007 Q- 2 2007 Q- 3 2007 Q- 4 2008 Q- 1 2008 Q- 2 2008 Q- 3 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000

Table 2 (b): Quarterly Data of Passenger Quarters Passenger traffic Source of data: Key data, Lufthansa Investor Relations, 2008; Lufthansa Investor Info, page 2, 2008 The monthly passenger traffic shown in table 2 (a) has been utilized to calculate the quarterly data of passenger traffic for the last two years Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 68 Forecasting the Passenger (from Quarter 4, 2006 to Quarter 3, 2008) which has been shown in table 2 (b).

With the help of these quarterly data of passenger traffic for the last two years, we have attempted to find out the forecasted values of passenger traffic movement by employing four forecasting methods namely 4-period Moving Average, Simple Exponential Smoothing, Holt’s Model and Winter’s Model. Table 3 presents the forecasted values through 4-quarter moving average while table 4 shows the forecasted data through simple exponential smoothing. Table 5 and 6 shows the forecasting through Holt’s model along with forecasting errors.

Table 7 through 10 reveals, in detail, the forecasted demand of the passenger traffic flow by employing Winter’s Model. Table 10 also includes the forecasting errors. The exercise reveals that the forecasting errors are the lowest in case of Winter’s Model which are indicated by the values of AE, MSE, MAD and MAPE. Moreover, the quarterly forecasted values suggested by Winter’s Model closely follow historical pattern which is clearly depicted in figure 1. FORECASTING THROUGH 4-PERIOD MOVING AVERAGE (MA) Moving Average method is generally employed in a situation in which only level, i. e. eseasonalized demand is present and neither trend nor seasonality is observed. We took the average traffic flow of four quarters starting from the 4th quarter of 2006 and continued the exercise till the 3 rd quarter of 2008 for the purpose of finding out the forecasted passenger traffic movement in the immediate following quarter. Table 3 presents the forecasted values of passenger traffic movement through four-quarter MA method. In the same table, the values of forecasting errors measured in terms of AE, MSE, MAD and MAPE are also shown. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 9 Singh, Das Table 3: Forecasting through 4-Period Moving Average & Forecasting Errors Period(t) 1 2 3 4 5 6 7 8 Quarters Traffic (D) Level (L) Forecast (F) Four Period Moving Average Method Absolute Error Mean Squared Error Error (E) (AE) (MSE) Mean Absolute Deviation (MAD) 2006 Q- 4 13232000 2007 Q- 1 12339000 2007 Q- 2 14629000 2007 Q- 3 15501000 13925250 2007 Q- 4 13977000 14111500 13925250 2008 Q- 1 12989000 14274000 14111500 2008 Q- 2 15386000 14463250 14274000 2008 Q- 3 15218000 14392500 14463250 -51750 1122500 -1112000 -754750 51750 1122500 1112000 754750 2678062500 6. 31342E+11 8. 3076E+11 7. 67219E+11 51750 587125 762083. 3333 760250 % Error MAPE Forecasted Traffic F9=F10=F11=F12=14392500 0. 37025113 0. 37025113 8. 64192779 4. 50608946 7. 22734954 5. 41317615 4. 95958733 5. 29977895 Formula used Systematic demand = Level Lt= (Dt + Dt-1+….. Dt-n+1)/N Ft+1=Lt Ft+n=Lt (Chopra and Meindl, 2007) FORECASTING THROUGH EXPONENTIAL SMOOTHING (ES) Like moving average method, exponential smoothing is also used in a situation, in which only level is observed. However, ES attempts to smoothen the fluctuations observed in demand data of different periods through smoothing constant (alpha).

We first calculated the level of passenger traffic flow of the initial period by taking the average of actual traffic flow for the last eight quarters, which has been considered as the forecasted value of passenger traffic flow for quarter 1. Table 4 demonstrates the forecasted values through simple ES. The same table also contains the values of forecasting errors expressed in terms of AE, MSE, MAD and MAPE. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 70 Forecasting the Passenger Table 4: Forecasting through Simple Exponential Smoothing & Forecasting Errors Period(t) 0 1 2 3 4 5 6 7 8 % Error 7. 0479897 13. 9977916 5. 02789835 9. 89599461 1. 02611209 8. 60018261 9. 04478131 7. 12621269 2006 Q- 4 2007 Q- 1 2007 Q- 2 2007 Q- 3 2007 Q- 4 2008 Q- 1 2008 Q- 2 2008 Q- 3 MAPE 7. 00479897 10. 5012953 8. 67682963 8. 98162087 7. 39051912 7. 5921297 7. 79965136 7. 71547153 Formula used Systematic demand = Level Ft+1=Lt Ft+n=Lt Lt+1=alpha(Dt+1)+(1-alpha)Lt alpha=0. 1 Forecasted Traffic F9=F10=F11=F12=14241980 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000 Quarters Traffic (D) Level (L) 14158875 14066187. 5 13893468. 75 13967021. 8 14120419. 69 14106077. 72 13994369. 95 14133532. 95 14241979. 66 14158875 14066187. 5 13893468. 75 13967021. 88 14120419. 69 14106077. 72 13994369. 95 14133532. 95 926875 1727187. 5 -735531. 25 -1533978. 1 143419. 688 1117077. 72 -1391630. 1 -1084467 926875 1727187. 5 735531. 25 1533978. 125 143419. 6875 1117077. 719 1391630. 053 1084467. 048 8. 59097E+11 1. 92114E+12 1. 46109E+12 1. 68409E+12 1. 35139E+12 1. 33413E+12 1. 42021E+12 1. 38969E+12 926875 1327031. 25 1129864. 583 1230892. 969 1013398. 313 1030678. 214 1082242. 762 1082520. 98 Forecast (F) Simple Exponential Smoothing Method Absolute Error Error (E) (AE) Mean Squared Error (MSE) Mean Average Deviation (MAD) (Chopra and Meindl, 2007) FORECASTING THROUGH HOLT’S MODEL We carried out a regression analysis wherein Time period was considered on X-axis and passenger traffic data was taken on Y-axis in order to find out the initial level and trend. Holt’s model, also known as trend-corrected exponential smoothing, is applicable in a situation, in which level and trend are observed in the demand data. However, seasonality is not considered in Holt’s model.

We used the “Linest Function”of Microsoft Excel to calculate the values of L0 and T0, which is shown in table 5. Table 5: Regression to Find Initial Level and Trend for Holt’s Model x (Period) 1 2 3 4 5 6 7 8 270154. 7619 T0 y (Traffic) 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000 12943178. 57 L0 Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 71 Singh, Das Once the initial values of level of trend are found, the subsequent values of the level and trend of each period are iteratively calculated following Holt’s model which is shown in table 6.

This finally helps in finding out the forecasted values of passenger traffic movement as per Holt’s model, which is shown in table 6. Table 6 also reveals the forecasting errors. Table 6: Forecasting through Holt’s Model Period(t) 0 1 2 3 4 5 6 7 8 2006 Q- 4 2007 Q- 1 2007 Q- 2 2007 Q- 3 2007 Q- 4 2008 Q- 1 2008 Q- 2 2008 Q- 3 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000 Quarters Traffic (D) Trend(T) 270528. 095 Level (L) 13215200 Forecast (F) 13213333. 33 13485728. 1 13618648. 82 13987484. 49 14436906. 91 14679788. 95 14765767 15095251. 1 Error (E) -18666. 67 1146728. 1 -1010351 -1513516 459906. 91 1690788. 9 -620233 -122748. 1 Absolute Error (AE) 18666. 66667 1146728. 095 1010351. 181 1513515. 506 459906. 9118 1690788. 949 620232. 9957 122748. 0864 T8=269916. 6 15377443 15647360 15917276 16187193 Formula used Systematic demand = Ft+1=Lt+T t alpha =0. 1 Beta = 0. 2 Lt+1 = alpha(D t+1)+(1-alpha)(Lt+T t) T t+1= beta(Lt+1-Lt)+(1-beta)Tt Level + Trend Ft+n =Lt+nT t Mean Squared Error (MSE) 348444444. 4 6. 57667E+11 7. 78714E+11 1. 15672E+12 9. 67677E+11 1. 28286E+12 1. 15455E+12 1. 01211E+12 270154. 762 12943178. 7 247593. 533 13371055. 29 267800. 557 13719683. 94 298070. 867 14138836. 04 288872. 729 14390916. 22 255056. 95 267461. 61 14510710. 05 14827790. 3 269916. 571 15107526. 72 Mean Average Deviation (MAD) 18666. 66667 582697. 381 725248. 6476 922315. 3622 829833. 6721 973326. 2183 922884. 3294 822867. 299 % Error 0. 141072148 9. 293525369 6. 906495187 9. 763986233 3. 290455117 13. 0170833 4. 031151668 0. 806598018 MAPE 0. 141072148 4. 717298758 5. 447030901 6. 526269734 5. 879106811 7. 068769558 6. 634824146 5. 90629588 L8=15107527 F9 F10 F11 F12 Forecasted Traffic Chopra and Meindl, 2007) FORECASTING THROUGH WINTER’S MODEL Winter’s model, also known as trend and seasonality-corrected ES, is generally employed in a situation in which all characteristic features of demand data, i. e. level (Lt), trend (Tt) and seasonality (St) are observed. The actual demand (Dt), being seasonal in nature, is transformed into deseasonalized demand (Ddt ). The deseasonalized demand data and corresponding time periods are employed to run regression analysis in order to calculate the initial level (L0) and trend (T0) which is shown in table 7.

The values of L0 and T0 are then used to find out the estimated deseasonalized demand (Dt) of passenger traffic of different time periods. Seasonal factors for each period are calculated using the formula Dt /(Dt) as shown in table 8. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 72 Forecasting the Passenger Table 7: Regression Analysis for Finding out the Deseasonalized Demand X (Period) 3 4 5 6 140439. 5 Y (Deseasonalized demand)(Ddt) 14018375 14192750 14368630 14427880 13619931 T0 L0 Table 8: Calculation of Seasonal Factors for Winter’s Model

Period(t) 0 1 2 3 4 5 6 7 8 2006 Q- 4 2007 Q- 1 2007 Q- 2 2007 Q- 3 2007 Q- 4 2008 Q- 1 2008 Q- 2 2008 Q- 3 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000 14018375 14192750 14368630 14427880 13760370. 5 13900810 14041249. 5 14181689 14322128. 5 14462568 14603007. 5 14743447 0. 961602015 0. 887646116 1. 041858846 1. 093029187 0. 97590243 0. 898111594 1. 053618578 1. 032187385 Quarters Actual demand (Dt ) Deseasonalized demand (Ddt) Dt =L+Tt Seasonal factors (Dt / D t) Subsequently seasonality (St) is recalculated for each period as per Winter’s model which is shown in table 9.

Level and trend of each period are also iteratively calculated following Winter’s model which have been mentioned in detail in table 9. Finally table 10 demonstrates the forecasted data of passenger traffic flow along with forecasting errors. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 73 Singh, Das Table 9: Determination of Level, Trend and Seasonal Factors (Winter’s Model) Period(t) Quarters Actual Traffic (Dt) Deseasonalized demand (Ddt) Estimated deseasonalized demand (Dt) 13760370. 5 13900810 14018375 14192750 14368630 14427880 14041249. 5 14181689 14322128. 14462568 14603007. 5 14743447 Seasonality St Level(L) Trend(T) 0 1 2 3 4 5 6 7 8 9 10 11 12 2006 Q- 4 2007 Q- 1 2007 Q- 2 2007 Q- 3 2007 Q- 4 2008 Q- 1 2008 Q- 2 2008 Q- 3 13232000 12339000 14629000 15501000 13977000 12989000 15386000 15218000 0. 968752222 0. 892878855 1. 047738712 1. 062608286 0. 968072702 0. 892415518 1. 047252432 1. 065603208 0. 968770988 0. 892874843 1. 047722994 1. 062255808 13619931 13755292. 34 13891430. 02 14027555. 72 14187811. 57 14334567. 79 14480348. 88 14626058. 49 14744278 140439. 5 139931. 6844 139552. 284 139209. 6254 141314. 2474 141858. 4444 142250. 709 142596. 999 140158. 8902 Table 10: Forecasting through Winter’s Model and the Forecasting Errors Forecast(F) 13330389. 5 12406751. 72 14700803. 33 15053722. 24 13871635. 54 12918987. 41 15313552. 98 15737526. 24 Error(E) 98389. 50148 67751. 71749 71803. 33314 -447277. 7569 -105364. 4571 -70012. 58968 -72447. 01855 519526. 2416 Absolute Error(AE) 98389. 50148 67751. 71749 71803. 33314 447277. 7569 105364. 4571 70012. 58968 72447. 01855 519526. 2416 Mean Squared Error (MSE) 9680494002 7135394612 6475502625 54870974917 46117113697 39247888533 34390843099 63830427174 Mean Average Deviation (MAD) 98389. 0148 83070. 60949 79314. 85071 171305. 5772 158117. 3532 143433. 226 133292. 3392 181571. 577 % Error 0. 743572411 0. 549085967 0. 490828718 2. 885476788 0. 753841719 0. 539014471 0. 470863243 3. 413893032 MAPE 0. 743572411 0. 646329189 0. 594495699 1. 167240971 1. 084561121 0. 993636679 0. 91895476 1. 230822044 L8=14407445 T8=3284577 Formula used Systematic component of demand =(level+demand)*seasonal factor Ft+1 = (Lt+T t)St+1 Ft+i=(Lt+iTt)St+i L t+1 = alpha (Dt+1/St+1)+(1-alpha)(Lt+Tt) T t+1= Beta (Lt+1 – Lt) + (1- Beta)T t St+p+1= gamma (Dt+1/Lt+1) + (1-gamma)St+1 Alpha = 0. 5 beta=0. 1 gamma=0. 1 Forecasted traffic F9 F10 F11 F12 14419610. 62 13415083. 6 15888462. 17 16257733. 32 (Chopra and Meindl, 2007) COMPARISON AMONG FOUR FORECASTING METHODS The following figure gives an interesting revelation regarding the behaviour of forecasted data by comparing the quarterly forecasted demand of passenger traffic obtained through all four methods. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 74 Forecasting the Passenger Historical traffic Forecasted traffic Moving Average Simple exponential smoothing Holt’s Model Winter’s Model

Figure 1: Comparison among four forecasting methods The portion of the graph before the vertical line indicates historical data while the portion of the graph after the line is the forecasted data. The forecasted data of the model graph (Winter’s Model) replicates the historical data. It indicates a positive trend as well as seasonality. FORMULATION OF SUITABLE STRATEGIES FOR ABSORBING VARYING DEMAND Keeping in view the overall objective of improving the supply chain profit, the management should explore all possible alternatives of both demand side as well as supply side options.

It is observed that demand for passenger traffic movement is not uniform throughout the year. In order to level the demand, the management of the airlines can undertake the following well-established measures: • • Formulate suitable marketing strategies to create new demand in the lean period. During peak periods, when the demand will exceed capacity, the management needs to offer seats to the customers who will pay the highest fares. Of course, other customers need to be motivated and informed that they would probably be charged less fare, if they undertake their trip at some other period.

Shift some proportion of demand from peak period to lean period by offering the customers a reasonable rate of discount in the lean period. Of course, the cost/benefit analysis of this exercise has to be thoroughly examined beforehand. • Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 75 Singh, Das • Considering the lean periods of the airline in different routes and destinations, the top management needs to explore new destinations which may appear to be very attractive from the perspective of the customers.

Accordingly the management can withdraw some of the flights from the existing underloaded routes and ply the same in the new routes. Alternatively the management needs to examine the passenger traffic data of different routes on monthly/quarterly basis. If it is found that during the same period, some destinations experience very high demand while others have low demand, the management may withdraw some of the flights from underutilized routes and introduce the same in the heavily loaded routes. •

In all cases, the detailed cost/benefit analysis of different alternatives is to be thoroughly examined. Then a particular course of a strategy or a combination of strategies may be adopted by the management. CONCLUSION The present study has attempted to find out the quarterly forecasted demand of passenger traffic flow of Lufthansa Airlines by employing the four forecasting methods, viz. moving average, simple exponential smoothing, Holt’s model and Winter’s model. The forecasted data suggested by Winter’s model reflect the historical pattern in a better manner than three other forecasting methods.

This gives a valuable insight to the managers regarding formulation of appropriate strategies in order to absorb varying nature of demand in different quarters. The same kind of study can be replicated in other airlines with suitable modifications. Of course, the present work have not taken into consideration important factors, for example, the prevailing slowdown in the global economy, perceived security threat in the wake of terrorist strikes at different parts of the globe etc.

Moreover, the study has considered the total passenger traffic movement of Lufthansa as a whole and has not paid attention to an individual market segment. This may not provide a clear picture to the management regarding increase or decrease in traffic flow in a particular segment. Future study should take care of this aspect. Journal of Services Research, Volume 10, Number 2 (October 2010 – March 2011) 76 Forecasting the Passenger The implications of varying demand on supply side need to be thoroughly examined and accordingly suitable strategies should be adopted for improving the profit across the whole supply chain.

REFERENCES Bicak, H. A. , Altinay, M. & Jenkins, H. (2005) ‘Forecasting tourism demand of North Cyprus’, Journal of Hospitality and Leisure Marketing, Vol. 12, pp. 87-99. Chopra, S and Meindl, P (2007) Supply Chain Management: Strategy, Planning & Operation, 3rd edition, Pearson Education, New Delhi. Choo S. and Mokhtarian, P. L. (2007) ‘Telecommunications and travel demand and supply: Aggregate structural equation models for the US’, Transportation Research Part A, 41 pp. 4 -18. Dennis, N. P. S. 2002) ‘Long-term forecasts and flight schedule pattern for a medium-sized European airport’, Journal of Air Transport Management, Vol. 8, pp. 313-324. Dritsakis, N. and Athanasiadis, S. (2000) ‘An econometric model of tourist demand: The case of Greece’, Journal of Hospitality and Leisure Marketing, Vol. 7, pp. 39-49. Hamzacebi, C. (2008) ‘Improving artificial neural networks’ performance in seasonal time series forecasting’, Information Sciences, Vol. 178, pp. 4550-4559. IATA International traffic statistics, 2008a, Facts & Figures – 2008 Traffic Results, Montreal, Quebec, viewed 30 November,

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Many wonder about the influence of product /service contents or features on business function. Why do people prefer certain airlines and not others? Some insist on KLM, while others prefer emirates . Some choose virgin atlantic airways, while some others go for british airways. Yet many people contend that there are no significant differences among well – known airlines. The passengers’ choice may be influenced by the quality of services offered or the attractive price package, or value for money programme.

Frequency, the ticket price, in-flight services, punctuality, time schedule, seat comfort and other characteristics combine to project an image to the prospective passenger. Consequently, these features are input element in a marketing programme. The aim of this study is to investigate the factors influencing choice and the extent to which customers are likely to exhibit loyalty in the face of severe price competition. This study explores the change in airline passengers’ preferences in situations where service quality improves.

This study is informed by the influx of foreign airlines into Nigeria and the attendant issue of how a prospective buyer takes a decision on which airline to fly. This investigation is conceived with the objective of measuring the effect on airlines the decision variable per passenger’s preferences. The aim is to ascertain how the effect of factors influencing the choice of airline significantly improves the marketing strategies employed by these airlines.

This research problem is undertaken by utilizing an approach which involves a literature review to identify key construct and a survey. The information gathered are then used in the development of a questionnaire. The key issues influencing the choice of airline are identified. In other to test the hypothesis, that ‘value for money’ acts a s key decision variable, a survey of customers is conducted using a convenient sample of respondents who have been responsible for purchasing airline tickets for themselves to undertake international travel in the prior twelve months.

Respondents rate the importance of a variety of issues relating to airlines choice. A factor analysis of these items is then carried out using a varimax rotation. Under the advance exploratory analysis, a multivariate analysis of variance is therefore undertaken to analyze the impact of some of these determining factors on likelihood to fly on an airline. The analysis shows that the two top factors affecting passengers’ choice of airline are “schedule of the time” and “safety”. The actor of seat comfort is ranked fourth by the total number of passengers.

The analysis of pasenger’s satisfaction tells us the quality of airline services that passengers actually received. The result shows that “seat comfort” is ranked far behind the other eight factors, indicating that the service quality that passengers received is below average. Under the choice model, the sign of price is negative implying that the passengers prefer the airline with lower ticket to that with the higher ticket fare which is identical with normal expectation.

The sign of seat type is positive which indicate passengers’ actually view seat comfort as an important factor in their choice decision. The above findings show that this market segment currently lacks loyalty and is driven solely by price related features. It may therefore be necessary for airlines to undertake further investigation that allows them to develop strategies and packages that particularly target the need of this group.

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The study will be performed using qualitative and quantitative methods using structured interviews and survey instruments. Redshaw (2007) reiterates that not all questions are theory based. She further argues that quite concrete practical questions can be addressed without placing the study in one of the theoretical frameworks and the methods of qualitative enquiry stand on their own as reasonable ways of fining what is happening in human settings. Carnall (1990) has pointed out that quantitative analysis is more likely to be secondary and exploratory (or descriptive) in nature, summarising data in the form of charts, tables, percentages and averages. Diefenbach (2007) has suggested that when a survey is carried out, the data obtained would mostly be categorical, hence is likely to be ranked across a scale.

This data might be represented in terms of frequency, central tendency or dispersion. It is highly unlikely the research might require the necessity of inferential data analysis. The survey instruments included multiple sets of Questionnaire and these can be regarded more as quantitative research. As suggested by Bordens (et all, 2005), a properly designed instrument allows for the research to be valid, reliable and accurate. According to Bordens, questionnaire is used in instances where a general interrelation between different variables is studied, ‘in situ’, meaning that there is no attempt to find out how changing one variable would effect the other.

The questionnaires are of multiple-choice questions and scoring has been done as per the Liker 5 point scale. Please refer to Appendix. Table 1. Scoring System for Questionnaire 1   (Trochim, 2006). For the study, a number of primary and secondary sources have been used and these include published literature, websites, company financial reports, interviews with key people and others. Respondents for the survey would be identified as per their role and job functions.

Bordens, Kenneth S., & Abbott, B. (2005). Research design and methods: a process approach. (6th ed.). New York; McGraw-Hill

Carnall, C A (1990) Managing Change in Organizations, Prentice Hall, London

Diefenbach Thomas (2007), The managerialistic ideology of organisational change management, Journal of Organizational Change Management, 20 (1), pp: 126-137

Redshaw Sue, Mandable Terence E, (July 2007), Managing the people side of major change at WMATA, Journal of Strategic Communication Management, Volume 11, Issue 4, pp: 28-32

Trochim William M.K. (2006). Liker Scaling. Retrieved 17 January 2008 from










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e- Book Series Guide to Writing a Killer Marketing Plan Written by: Steven Fisher Confidential ©2009 Network Solutions, LLC Purpose of this book You are either someone that has been doing marketing as a part of your professional career or you look at as that “thing you do to promote your business and attract customers to buy”. Regardless of where you are along that spectrum, you have arrived here because you have been charged by the CEO of the startup you work for to write a marketing plan for your business or you need to create one for your own business. You need to not just write just any marketing plan.

You need to write a Killer Marketing Plan. One that your boss will say “awesome, let’s get started” and which will tell all those people who have been looking for a product or service like yours for a long time. This book is written for you. Marketing plans are sexy mistresses that tempt you to include all of the coolest of campaign ideas without the sanity of budgetary constraints. While marketing is one of the more important functions of a small business, it is one that is limited by the budgets of that business and campaigns must demonstrate a return in order to justify their existence.

Since I have written more marketing plans than I care to tell you, I can share with you my knowledge and experience of what has worked almost all the time, some of the time and none of the time. While this is not the single tome on marketing plans, I hope that this helps you balance the unlimited creative ideas with the budget you have to work with and find a mix that is both innovative and results in sales. I invite you to explore as many resources out there, some of which are mentioned at the end of this book. I don’t need to wish you luck.

Just get started, get out there and crush it. Confidential ©2009 Network Solutions, LLC Overview: Section 1: Product and Purpose Part 1 – 5 Section 2: Analysis and Competition Part 6 – 10 Section 3: Strategy and Action Part 11 – 12 Section 4: Financials in Plain English Part 13 – 15 Confidential ©2009 Network Solutions, LLC Section 1: Product and Purpose Part 1: The Art of Marketing Doing marketing planning, which is captured in the marketing plan, is an essential organizational activity, considering the hostile and complex competitive business environment.

Our ability and skills to perform profitable sales are affected by hundreds of internal and external factors that interact in a difficult way to evaluate. A marketing manager must understand and build an image upon these variables and their interactions, and must make rational decisions. Here is a great description of Marketing from HowStuffWorks: “According to the Dictionary of Marketing Terms, marketing is “the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. What does that mean to you?

It means marketing encompasses everything you have to do in coming up with a needed product or service, making potential customers aware of it, making them want it, and then selling it to them. So then, is sales considered “marketing”? Is advertising “marketing”? Often, you’ll hear sales functions referred to as “marketing,” but really sales is just a part of the larger marketing process, as is advertising. In the olden days (back 30 or 40 years), marketing did consist primarily of sales. Rather than having marketing departments, companies had sales departments with an advertising manager and someone who did market research.

Sometimes they added a promotions manager or hired an agency to handle advertising and promotions. Things began changing as some companies grew larger and larger and began offering many product lines that warranted having their own brand managers, market segment managers and many more specialized positions that addressed and mulled over the needs of their particular markets. The need for a marketing department began to be seen as a vital part of business. The marketing department also takes most of the blame if a product (or company) isn’t successful, regardless of whether or not the fault actually lies there. Logically, your CMO or VP of Marketing would be in charge of this effort but in many startups you don’t have someone in that position so it is probably you with the ultimate responsibility. So my dear reader, I am here to the rescue to guide you through very important part of executing your overall business plan. Planning your company’s marketing program is a process much like the one you go through in writing the business plan. You go through phases of: • What are you going to do with the plan? • What are the company’s skills, strengths and weaknesses? Goal setting based on those strengths and weaknesses • Setting strategies for achieving your goals • Executing the plan • Putting the numbers together to back up your words But before you dive into the plan, you should know what type of plan you are expected to write. Confidential ©2009 Network Solutions, LLC Part 2: The Three Types of Marketing Plans Most of the time when you are writing the marketing plan, it is usually something that needs to stand on its own and in other cases it might need to be incorporated into another document like a business plan.

So before we dive into the executive summary, it is important to understand that there are three marketing plan types with various content and sizes. Marketing Plan Type #1: The Marketing Plan for the Business Plan In a business plan, the sales and marketing section as part and parcel to the business plan, which is true, but it is not the entire picture. The business plan essentially holds the executive summary and key components, graphics and financials that support the greater business plan. This means that the data came from somewhere • Page Range: Usually 3-6 Pages Marketing Plan Type #2: The Strategic Marketing Plan

Here is a great description of the Strategic version of the Marketing Plan from Sheridan College Institute of Technology and Advanced Learning in Oakville, Canada: At the strategic marketing plan level, marketers are scanning the environment, pondering what is happening and looking for emerging or robust market segments which they could consider as target markets. The outcomes of such plans are clearly identified target markets and the strategies which will meet their needs, as identified in our analysis. Marketing plan objectives are typically on the level of sales, profit, return on investment or, for the larger firm, market share. Page Range: Usually 3-6 Pages Marketing Plan Type #3: The Tactical Marketing Plan Here is another great description of the Strategic version of the Marketing Plan from Sheridan College Institute of Technology and Advanced Learning in Oakville, Canada: Tactical plans, in contrast, presume the target market and marketing strategy as a given and don’t look much at the external environment. They deal with issues such as raising awareness or getting more returning customers. The main way to tell at which level you are working is whether your target market is a given or not.

If you are scanning the environment, you are seeking new target markets or looking for subtle changes in your existing target markets; you are preparing a Marketing Plan. If however, you start from the premise that you know exactly who your target Confidential ©2009 Network Solutions, LLC market is, you would then develop a range of tactics to reach them; this is a Tactical Plan. Many people mistakenly operate at the tactical level when they should be at the strategic level. For instance, suppose your product sales were poor, so you came up with a plan to advertise more. The result was an even faster decline in sales.

Why? People found even faster that your product was terrible. Had a strategic marketing plan been developed, we would have determined what consumers want, compared those desires to our product and made the appropriate modifications. • Page Range: Usually 10 – “As many as people want to read” Pages Sometimes it is better to start big and widdle your way down There are different schools of thought on this one. The first being to write the tactical version with everything and then extract information to create the strategic and narrow further for inclusion in a business plan.

The second is to write the strategic one first to focus your thoughts and have one person tighten it up for the business plan and a team expand on it so the tactical issues are worked out. This can be a problem because your financial projections might not be totally accurate and your plan will fail. I would offer taking the tactical plan and mapping out the sections with the abstracts so that all the issues are addressed, then write the strategic so there is a plan that others outside of marketing can digest and only when it is approved should it be tuned up and included in a business plan.

Now you know so let’s get started Now that you understand what a marketing plan is, its purpose and the type you should write, let’s get to the heart of the matter. In Part 3 we will discuss the Killer Executive Summary. Part 3: Framing a Successful Marketing Plan In Part 2 we talked about selecting the right type of plan to fit your needs. Now that you have decided that, let’s get into the general structure of a marketing plan. Please note that this is a proposed outline and depending on your emphasis, this structure can and might change. Marketing Plan Outline Section I – Cover Page Section II – Table of Content

Section III – Situational Analysis (Market, Competitive Environment, Technological Environment, Socio-Political) Section IV – Problems and Opportunities Section V – Objectives Section VI – Action Plan Section IX – Financial Data Confidential ©2009 Network Solutions, LLC So there you go, a basic outline. I know that putting all this together might seem daunting, especially if you are not a marketing and sales person. Fear not, that is what we are here for and from here on out we will break down each section and subsection in detail so you understand what information is required and how to get it.

Part 4: Killer Marketing Plan Summary Everyone who begins the journey of writing a marketing plan usually looks at the Executive Summary section early on in the process. A Marketing Plan Summary is usually 1-3 pages long and the goal is to summarize the entire marketing and possibly sales plan into something digestible by new readers and those in other departments who want to get to the bottom line. Don’t despair, the hard work you put into the marketing plan will be useful to some people, not all of them.

Each reader is trying to get something different and the executive summary is the best way to give them the big picture so they understand their part in this area of the operation. When is the best time to write the Marketing Plan Summary? There are many schools of thought on when to write the Marketing Plan Summary, either write it first, write it along the way or write it at the end. I take a little different of an approach in that you should try and write it at the beginning and then re write it again at the end.

There are two reasons for this: Reason #1 – Writing it at the beginning can focus you and force you to answer questions in the shortest way possible. This is an interesting and valuable exercise for many because they work to answer many of the hard questions and because it forces you to get in the habit of getting to the point. Reason #2 – Writing it at the end is great because you will revisit what you wrote and either be on track with only a little tuning required or most likely will roll your eyes and see how far off you were and really have a much easier time tuning the summary up to make it truly a killer Executive Summary.

What are the overall components of the Marketing Plan Summary? Generally, you need to write 2-3 sentences MAX on each of the following sections: Company description of what you are doing Confidential ©2009 Network Solutions, LLC Problem and Opportunity Your products and/or services that address the problem and take advantage of the opportunity Money You Need and What it will be used for (this is if the summary is targeted at investors) The market and your customer The Competition and Your Differentiators (how you will kick the competitor’s butt) Your current Marketing and Sales (if you have them)

Your Management Team (If they are an A-Grade team this might be further up) Current Business Operations (if you are an existing business)3-5 Year financial projections and plans (How much have you made, how much will you make and if you are looking for investment, how you will use it) – This includes a small table of numbers in addition to the 2-3 sentences. What makes a Killer Executive Summary that stands out from other businesses? There are many well written Executive Summaries out there that have never been funded or missed the market or for whatever reason never got off the ground.

But what makes an Executive Summary “Killer”? Here are six key things to make it “killer”: 1. BE focused and clearly state what you do -Too many businesses, especially startups try and “boil the ocean” making you look like you are all over the place and will not be able to execute successfully. 2. BE a business that solves a problem and not a solution in search of one – You might have an awesome “widget” but if people don’t need it or companies can live without it, why are you starting a business? 3. BE strong and positive with your language – This is not a time to be passive.

From potential investors looking to give you money to those people willing to join the team, people must know that you ”are” going to execute, not “may” or “might” do something. 4. DON’T cut and paste – Read the sections and extract the best and write a new concise section 5. DON’T use Jargon – Most industries have acronyms or buzz words that are neat and catchy. One or two that make a point are fine but if your engineer is writing the business plan, don’t get all geeky on the solution. Remember, the Executive Summary is about telling someone the time, not how the watch works.

The business plan will have plenty of places for that type of content. 6. Write an “Executive Summary” of the Executive Summary – Most people have very short attention spans and once you are done the Executive Summary you should try and compose a 2-3 sentence summary at the top that gets all the critical elements in so that people really want to read the rest and get excited about reading the entire business plan. Confidential ©2009 Network Solutions, LLC Part 5: Understanding Your Market The Situational Analysis is designed to take a snapshot of where things stand at the time the plan is presented.

The Situational Analysis is probably one of the hardest sections you will write because you are essentially laying out how the product will function in various environments and how it will be perceived in the marketplace. In many marketing plans, the first section could be the product analysis. If you already have existing products/services you should start with this so that you provide a “lay of the land” for readers not familiar with where you are at with your current product(s) and/or service(s).

That section covers the product attributes, current pricing, current distribution and services offered. This should be about a page or two in length. For the purposes of this Marketing Plan series we will assume you are a new company and dive straight into defining the market. That is why the first part of the situational analysis is called the “Market Analysis”. This subsection of the situation analysis section should be about two to four pages in length and provides actionable information on selling to target buyers and stimulating purchases or usage by the ultimate end users.

Key questions answered in this subsection include: description of target buyers or end users in demographic, psychographic, and lifestyle terms target buyer/end user wants, needs, attitudes, and perceptions of category products and services where target buyers/end users are located and how to reach them, which segments of the total market or category are growing or declining and why. You will need to tell the story in a way that makes sense to you and your readers so the following outline should be arranged as you see fit: Target Market Approach Start with a description of your total potential market (your potential customers).

Present a general strategy that is used to reach targeted customers that might include a mass market or segmentation approach. Describe the needs/benefits sought by market, the product usage, the positioning and what people’s attitudes are regarding the product you are selling and the product category in general. Target Market Profile(s) Create and describe the demographic/psychographic profile(s) of the market including elements such as gender, income, age, occupation, education, family life cycle, geographic region, lifestyle, attitudes, purchasing characteristics, etc.

Confidential ©2009 Network Solutions, LLC Target Market Motivations Since you know the profile(s) within your target market you need to explain what motivates them to buy your products/services. Begin by describing how your product/service satisfies the needs of this market. Follow up with describing the particular customers that you will target. Expand into the size of your total potential market (number of potential customers), and then drill down into your target market so that you can make the motivational case you set out to in the first place.

Target Market Purchasing Strategy Ok, great. You have the market explained, the target profiles done, the market motivations are worked out, now how are people gonna buy your amazingly cool new widget? Well, you need to detail that out in your purchasing strategy. First, you will need to explain how the target market makes their purchases. Then explain what is involved in the decision-making process and the timeline for the purchase (is it an impulse buy or something that takes an extended period of time).

Finally you will cover who influences and then makes the purchase. Target Market Growth Strategy To wrap things up you will need to provide market size estimates but keep in mind these are estimates for the market, not for a specific product. You will need to provide size estimates for the potential market that include the largest possible market that would buy. Then you need to narrow your focus and provide estimates of size for the current target market (how many actually purchased this kind of product) and provide estimates for these growth rates.

Lastly, all of this needs to be projected out for at least through the timeframe for the plan (e. g. , 1 year) but most likely longer (e. g. , 3-5 year projections). A Final Thought on Numbers Throughout all of these explanations it is critical that you need to support estimates with factual data. You can have the best laid plans with awesome projections but if you have nothing to back up your story and make your case you are just fooling yourself that your strategy is the right one. Confidential ©2009 Network Solutions, LLC Section 2: Analysis and Competition

Part 6: Understanding and Beating the Competition This is the second part of the situational analysis which deals with the competition and appropriately called “Competitor Analysis”. I mentioned in Part 5 that the Situational Analysis is probably one of the hardest sections you will write and this section validates that statement. You believe your product/service is the best on the market but not just to validate yourself but to validate the strengths, weaknesses, opportunities and threats along with trends of those competitors.

Here is how the Competitor Analysis sub-sections break down: Competitive Landscape First you need to identify major competitors: name, location, and market share. The best thing to do is create a table that allows clear comparisons of your product/service with that of your major competitors (brand name, quality, image, price, etc. ). Then you need to perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis (coming in a future post) and compare your firm with that of your major competitors.

Include factors such as company reputation, size, distribution channels, location, financial standing, target market perception and if relevant, research and development capabilities. After your SWOT analysis is complete, use that as sounding board to honestly evaluate your chances as the new competition and how successfully you would be able to enter this market. Include your thoughts and observations on what you have learned from watching the competition and you can learn from the good and bad parts of their business models to increase your chances of success. Competitive Opportunities

While in the competitive landscape doing much of the SWOT analysis, you should include a section that really expands on the opportunities you uncover because those usually end up being the foundation for things like your marketing messaging and web site content. It is designed to really expose the differentiators that make you stand out in a competitive marketplace. Competitive Trends This section is where you should discuss the trends of your competitors. This includes whether your competitors’ sales increasing, decreasing or steady. Answering those questions clue into the growth or decline of competitors from a shifting market share

Confidential ©2009 Network Solutions, LLC perspective and also from a more macro market size perspective. This should also help you identify any future competitive threats that your team should be made aware of but not focused on, yet. Describe direct competitors in terms of: • • • • • • Target markets served Product attributes Pricing Promotion Distribution including the distributor network Services offered Discuss competitor’s strengths and weaknesses: • May need to consider much more than just marketing issues such as: financial standing target market perception R & D capabilities Part 7: Technology, Economy and Sociopolitical

Analysis As we continue our Marketing Plan Series and keep working our way through the Situational Analysis we make a pit stop to talk about the macro-level environments that impact your marketing and your competition. This part of the Situational Analysis is usually called “Environmental Problems and Opportunities” and is about 1-2 pages in length. This could easily turn into a diatribe about politics and economics so what you need to focus on in this sub-section is how technology, the economy and the socio-political environment affect the marketing of your products/services. The Technological Environment

When you discuss the technological environment think about how you create/leverage/affect creating new ways of satisfying needs (i. e. using technology to enhance the demand for existing products). Innovation can create or wipe out industries and businesses in less than a year. One example is the popularity and convenience of DVD players all but eliminated the sale of VCRs and seriously depressed the manufacture and sale of video tapes. This is especially important for you if your product is technology based. The Economic Environment Regardless of the current state of the economy, there will be good times and not so good times.

You need to describe how your company will survive and grow in this most challenging of economies. Look at the bright side, if you can find the opportunities and sell successfully in this market you could position yourself as almost recession-proof in the long run. Confidential ©2009 Network Solutions, LLC The Socio-Political Environment These are governmental policies and regulations that affect the market. It is also the economic environment around your company; which is the business cycle, inflation rate, interest rates, and other macroeconomic issues.

For example, here in America there is a sweeping trend to dress more casually, with function and comfort driving new clothing and shoe trends. People are cooking less and are more concerned about nutrition and fat in their diets. And today, American business people are less willing to sacrifice family life for business careers. These types of factors can impact the marketability of your product or service. Part 8: Financial Summaries that Sing You can’t have a product discussion and not include financial for the number geeks in all of us.

We will dive into our “Marketing Plan Financials in Plan English” toward the end of the series but many will need to connect some financial dots in the situational analysis at a high level leaving the detailed stuff (budgeting, break even analysis and cash flow analysis) for the “back of the book”. This section should be about 2-4 pages in length and kids, keep it pretty for the rest of us. Now while you will need to write some short paragraphs to explain your information, tables and graphs are your friend here. The Financial Analysis section is separated into two general areas – sales and profitability Part 1 – Sales Analysis

In this section you need to focus on the current sales that your industry and you business are doing across segments, product categories and various distribution channels. Let’s break it down like this: Overall Industry and Market Share • Sales for the Entire Market • Sales for Your Company • Sales for Your Competitors Sales By Segments and/or Product Categories • Sales by segments and/or product categories • Sales by company product(s) • Sales at this level compared to competition Sales By Distribution Channel • Sales for each channel • Sales for company product(s) by channel • Sales for Your Competitors by hannel Sales By Geography • Sales for Each Region • Sales for company product(s) by region • Sales for Your Competitors by region Confidential ©2009 Network Solutions, LLC Part 2 – Profitability Analysis Since we focused on sales which is really revenues, we need to splice this up and see what is actually profitable. Just because you can make money from it does not mean you make a profit. You will need to look across the revenues and include the marketing related expenses. Let’s break it down like this: • • Revenue Breakdown o Use the sales numbers from above but identify realized revenues not just projections

Marketing Expense Breakdown o Direct Marketing Expenses – These are the expenses that are tied to the product(s) and must be identified in that way o Indirect or Proportional Marketing Expenses – These are the general administrative and broad marketing expenses that may be assigned to a product based on some criteria like percentage of sales or a pre-determined distribution amount. Lastly, remember that this is the “30,000 foot view” • Since this part of the situational analysis, you are using this sub-section to make your point and support your overall analysis. • Stay high level •

More detailed financial stuff comes later and in the marketing plan and we will do explain it in plain English later in this book. Part 9: The SWOT Analysis Dance Concluding our dive into the sub-sections of the situational analysis, we wrap up with the all important SWOT analysis. It is a “dance” of sorts because you have to dance around the fact that in some ways your competitors might have over you but it is better that you learn this now and how to work around it or market against it that will help you in the long run. The term SWOT analysis stands for “Strengths, Weaknesses, Opportunities and Threats”.

Start with posing these sessions to your brainstorming team: • Are your competitors becoming stronger? • Are there emerging trends that amplify one of your weaknesses? • Do you see other external threats to your company’s success? Internally, do you have financial, development, or other problems? Confidential ©2009 Network Solutions, LLC Let’s break each part down and then wrap up with some the advantages this section can offer you and your team: Strengths: Here is where you must capture the positive aspects internal to your business that add value or offer you a competitive advantage.

This is an opportunity to remind yourself of the value existing within your business. Think about what your company does well. You should address the strengths within your business that add value to your product or your marketing efforts. You should also describe your positive tangible and intangible attributes. Weaknesses: These are factors that detract from your ability to have a competitive edge. It includes the negative aspects internal to your business that distracting customers from seeing the value you offer or place you at a competitive disadvantage. These are areas you need to enhance in order to compete with your best competitor.

The more accurately you identify your weaknesses, the more valuable the SWOT Analysis is to your readers. Some questions to help you get started are: What do your customers complain about? What are the unmet needs of your sales force? We continue breaking each part down…. Opportunities: Traditionally, a SWOT looks only at the external environment for opportunities. I suggest you look externally for areas your competitors are not fully covering, then go a step further and think how to match these to your internal strengths. Remember, these are opportunities external to your business.

If you have identified “opportunities” that are internal to the organization and within your control, you will want to classify them as “strengths”. Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company’s strengths? Is there a product/service area that others have not yet covered? Threats: What situations might threaten your marketing efforts? You have to ask this hard question. Get your worst fears on the table. A threat is a challenge created by an unfavorable trend or development that may lead to deteriorating revenues or profits.

As with opportunities, threats in a traditional SWOT analysis are considered an external force. By looking both inside and outside of your company for things that could damage your business, however, you may be better able to see the big picture. Competition — existing or potential — is always a threat. Other threats may include intolerable price increases by suppliers, government regulation, economic downturns, devastating media or press coverage, a shift in consumer behavior that reduces your sales, or the introduction of a “leap-frog” technology that may make your products, equipment, or services obsolete.

Confidential ©2009 Network Solutions, LLC Advantages of a SWOT Analysis – Uncovering Opportunities This is where you look externally for areas your competitors are not fully covering, then go a step further and think how to match these to your internal strengths. Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company’s strengths? Is there a product/service area that others have not yet covered? Once you have uncovered these opportunities take each one and discuss how you will market them.

Will it be a mixed marketing campaign? A targeted sales effort? What resources will you need (e. g. new collateral, selling guides, web site content, e-mail marketing)? Advantages of a SWOT Analysis – Address and Overcome Problems Problems are not necessarily a bad thing. They are just issues that need to be overcome. It is better to get out front of problems that may exist than have them rear their ugly head when you are selling or raising money. Problems could be strong competitors, your product lacking critical features that you are not able to roll out yet or a long sales cycle.

You should list each problem and discuss an approach to overcome them in a sales situation and with specific marketing messages that counter what a customer might be thinking. Part 10: Mapping Out Your Marketing Objectives OK. You are half done the marketing plan and while you might scream “only half! ” at the top of your lungs, you have suffered through the tough part – the analysis. You have spent time building the case that your products/services are competitive, viable and profitable. Now that you have proved that point you have to demonstrate how you are gonna actually do it.

The first part of telling this second half is setting out the overall objectives in the marketing plan. Now let’s breakdown the Marketing Objectives section. We have put together this great breakdown and outline of how you might want to structure the objectives section. Please note, some of this outline may or may not apply to your business so use this as a suggestion and not a list of requirements. Target market objectives • Market Share – total, by segments and by channel • Customers – total, by number/percentage new, by number/percentage retained

Confidential ©2009 Network Solutions, LLC Channel Objectives • Dealers – total, by number/percentage new, by number/percentage retained • Order Processing and Delivery – on-time rate, shrinkage rate, correct order rate Promotional Objectives • Level of brand/company awareness • Traffic building (e. g. store traffic, web site traffic) • Product Trials (e. g. sales promotions, product demonstrations) • Sales Force (e. g. cycle time, cost per call, closing rate, customer visits, etc. Continuing our breakdown and outline of how you might want to structure the objectives section.

Please note, some of this outline may or may not apply to your business so use this as a suggestion and not a list of requirements. Market Research Objectives • Studies Initiated • Studies Completed R&D Objectives • Product Development Other Objectives • Partnerships Developed • Rate of Purchases, size/volume of purchases • Purchases Advice on Setting Your Objectives Remember these are objectives that you expect to meet so keep in mind that these should be achievable. I have used the SMART approach to setting objectives and that stands for Specific, Measurable, Achievable, Realistic and Time-based.

Section 3: Strategy and Action Part 11: Setting Your Marketing Strategy Once you have completed writing your Marketing Objectives, as discussed previously in Mapping Out Your Objectives, you need to write your marketing strategy. The marketing strategy section of your plan outlines your game plan to achieve your marketing objectives. There is no other way to say it but this section which is in the center, is essentially the heart of the marketing plan. Confidential ©2009 Network Solutions, LLC The marketing strategy section should then include information that revolves around the “4Ps of Marketing”.

Don’t know what they are? Let’s do a quick refresher: The “4Ps of Marketing” are a few decades old but are the most basic and classic way of slicing up your marketing strategy. They are broken down as follows: • Product – your product(s) and services • Price – what you will charge customers for products and services • Promotion – how you will promote or create awareness of your product in the marketplace • Place (distribution) – how you will bring your product(s) together with your customers. Product Describe in detail your products or services in terms of the features and benefits they offer customers.

Describe what you need to have or do to provide your product or service (how it’s produced). Pricing List the price of your products and describe your pricing strategy. List price ranges for product lines. For example, if your product is a line of cosmetics, include information in this strategy section about your lipsticks “ranging in price from $5. 00 to $15. 00 per item” rather than a detailed product price list. (You should, however, consider including a detailed price list in the Supporting Documents section. ) Describe any price flexibility or negotiating room, as is common with large purchases such as houses or cars.

Outline any discounts you offer for long-term customers, bulk purchases or prompt payment. Also, include the terms of sale, such as “net due in 30 days,” extended payment plans, and whether you accept credit cards Promotion Plan A promotion plan describes the tools or tactics used to accomplish your marketing objectives. In your Action Programs section, you will describe the steps that need to be taken in detail, when they should be done, who will do them, and so on. If your marketing objective is to: Create awareness of baby care products among mothers of newborns.

Increase sales of potato chips to teens. Then tools or tactics might be: • Advertise in baby care or motherhood magazines. • Distribute product samples to obstetricians. • Offer free baby care seminars to expectant mothers. • Distribute free samples or discount coupons at high school football games. • Sponsor an event attended by teens. Confidential ©2009 Network Solutions, LLC Placement (Sales and Distribution) In this section, describe how your products and customers “meet” or come together through sales and distribution. Describe your sales philosophies and methods.

Do you employ an aggressive sales method for a large number of quick sales, or a relaxed method where the emphasis is on having customers feel comfortable to come back another time even if they don’t buy now? Do you use contract sales people or employees? Explain your approach to sales issues. Describe your distribution system. (Where will your product be placed so customers have access to it? ) A few points about distribution to address in your marketing plan are: Is the exchange of the product made in a store? Through the mail? Through a direct sales representative?

What are your production and inventory capacities? (How quickly can you make products and how many can you store? ) Are there cyclical fluctuations or seasonal demands for your products? For example, if you produce Christmas decorations, how will you manage peak production and sales periods as well as slow periods? Do you sell to individuals or to re-sellers? Your company may use more than one method. For example, you may sell directly to customers who place large orders but also sell to customers who buy small quantities of your product through retail outlets. Part 12: Action Plans

The Action Plan covers the “Who, Where and How Much” of your plan. You should look at this section as the “to do list with budget numbers” and separate it into sub-sections or “miniplans” that are involved in your marketing efforts. They can include but are not limited to the following: Publicity Marketing Plan – How do you pitch? I am not talking fastballs, but rather using the media to spread the word about your business. You could also call this mini-plan your media plan and it includes the costs and tasks involved in pitching stories to the press and writing press releases on a consistent basis.

Customer Marketing Plan – No small business can survive without customers and smart business know that it is FAR cheaper to keep the customers you have than always working to replace them with new ones. This mini-plan talks about what activities you will undertake with your current customers and the types of targeted offers you will be making to retain them. Confidential ©2009 Network Solutions, LLC Advertising Plan – Now we all know that most traditional advertising is hit or miss and it is hard to track results.

However, there are more and more promotional programs that provide you with a way to measure results that you can create a mini-plan of where you are going to advertise and how much of it you will be doing. Internet Marketing Plan – Every one these days has a web site. If you don’t and you are small business, then that is another matter. If you are a small business that is actively engaged on the web to promote your products or services then you need to include a separate mini-plan on Internet marketing that could include search engine optimization, pay-per-click advertising and any other online campaigns.

Promotional Event Plan – Related to advertising and Internet marketing the promotional event plan includes different promotional activities such as, having sales, sponsoring contests, awards, or events. Referral Marketing Plan – All small businesses need referral business. In fact, it is how many survive and even thrive. Here is where you need to identify specific programs that will add incentive for those that value your work enough to tell others about you. Budgeting AKA “The Bottom Line”

We all wish we could do awesome and cool marketing campaigns but we are quickly brought back to reality when the limitations of our budgets are staring us in the face. Small Business Notes provides some great advice on putting together your budget. Estimate the cost of the marketing activities you’ve described in the marketing plan so you will have a budget to keep everyone on track over the course of the year. Typical marketing expense categories are marketing communications, market research, promotions, advertising, events and public relations.

Because marketing needs and costs vary widely, there are no simple rules for determining what your marketing budget should be. A popular method with small business owners is to allocate a small percentage of gross sales for the most recent year. This usually amounts to about two percent for an existing business. However, if you are planning on launching a new product or business, you may want to increase your marketing budget figure, to as much as 10 percent of your expected gross sales. Another method used by small business owners is to analyze and estimate the competition’s budget and either match or exceed it.

Confidential ©2009 Network Solutions, LLC Section 3: Strategy and Action Part 13: Sales Projections in Plain English What Are Components of Sales Projections? Projection of sales is an important part of the marketing plan. Part of the sales projection work is planning for a better performance in the future and correcting past performance with which you are not satisfied. You do this by finding out what profit contribution each sales representative makes. One goal of measuring a sales representative’s performance is improvement assistance. This is done in the marketing personnel section of the marketing plan.

Cost of Goods per Unit Worksheet This is the first preliminary worksheet you must complete. The reason you have to start here is because these are the basic costs of raw materials, production labor and other costs that, once added up, give you the cost of goods per unit number you will need to get the “Estimated Sales Table” completed. Estimated Sales Table Worksheet This is a preliminary worksheet that helps you figure out what the total sales and cost of goods sold are for each product year by year. You need to include the units, or number of things, sold by each product line. Take each number times the elling price of each product and you will get the actual sales for each product. Tally that number up and create a column called % of sales and divide each number by the total and you can see how much each product brings in as a share of the entire sales projection. You should already have the “Cost of Goods Sold” per unit from the previous section. Put that number in after the “% of sales” and then multiply that number times the units and put the result into a new column called “Cost of Goods sold total”. Once that is done, do the same thing we did with “% of sales” and create a “% of Cost of Goods Sold”.

Confidential ©2009 Network Solutions, LLC Sales Projections Worksheet This is where all the hard work comes into focus and you break things down by months that give you the total amount you put together in the estimated sales table. You will use a concept called “weighing” which is basically splitting 100% across 12 months as to when you think that total amount will be met each month. Think of busy periods where sales are way up and slow periods where it is way down. A good example is retail with busy holiday periods and slow winters and then busy back to school sales. You will also include he cost of goods sold numbers and percentages that breakdown according to the “weighing” you set up for each month overall. These projections are also used on the business plan financials as revenue projections in the way they organize the business. You should also be aware how important this is not only from running your marketing division but when investors want to dive a layer deeper in the business plan and your numbers are what will back things up. It will also be used in other business plan financials but we will get into that in the next two sections. Part 14: The Break Even Analysis in Plain English

We continue talking plain English with you in this fun and crazy world of marketing plan financials and move on to the all important Breakeven Analysis. The Breakeven Analysis is especially useful when you’re developing a pricing strategy, either as part of a marketing plan or a business plan. The Breakeven Analysis is actually pretty straightforward and asks one question – when do you break even and turn a profit? Simple…. Not quite… but I will explain in plain English. You mean there is a formula for this thing? Yes, you knew I would eventually get to a formula, but fear not math haters, it is straightforward.

Fixed Costs divided by (Revenue per unit – Variable costs per unit) Confidential ©2009 Network Solutions, LLC Fixed Costs – Fixed costs are costs that must be paid whether or not any units are produced. Things like rent and equipment fall into this category. These costs are fixed only over a specified period of time or range of production. Variable Costs – Variable costs are the things that make it fun and go up and down based on your production levels. Things like materials, labor, overhead are in this category. Let’s give you a real example:

If your total fixed costs were $500,000, the price tag of your product (unit) was $25, and your variable Costs were $15, the equation would look like this: 500,000/25-15 = 500,000/10 = 50,000 You would need to sell 50,000 units to break even. Everything over that is profit and you dancing to the bank. Still, this not a perfect equation: Bplans. com points out that this equation, while important, can be misread or misinterpreted. Here are some key things they point out: • It is frequently mistaken for the payback period, the time it takes to recover an investment. There are variations on break even that make some people think we have it wrong.

The one we do use is the most common, the most universally accepted, but not the only one possible. • It depends on the concept of fixed costs, a hard idea to swallow. Technically, a break-even analysis defines fixed costs as those costs that would continue even if you went broke. Instead, you may want to use your regular running fixed costs, including payroll and normal expenses. This will give you a better insight on financial realities. We call that “burn rate” these post-Internet days. • It depends on averaging your per-unit variable cost and per-unit revenue over the whole business.

However, whether we like it or not, this equation is a cornerstone of financial analysis. You may choose to leave it out, but really, a business or marketing plan would not be complete without it. Part 15: Sales Cash Flow Statements in Plain English As important as when you will break even, you must be able to show how, on a monthly basis, you will manage the cash flow to support the business and not sink it from an overly ambitious strategy and action plan. Confidential ©2009 Network Solutions, LLC Similar to the Cash Flow Statement in a Business Plan

The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company. For example, the heading may state “For the Three Months Ended December 31, 2007? or “The Fiscal Year Ended September 30, 2008?. For many, looking at a cash flow statement it looks a bit weird but it provides a different, yet critically important view of the business. For the marketing plan, you need to create a subset of this that eventually rolls up into the business plan to support it and give detailed projections.

Three Sections of a Marketing Plan Case Flow Statement For the purpose of the marketing plan cash flow statement that flows up and reports to the master cash flow statement, there are three sections that must be created – Operating Activities, Investing Activities, Financing Activities. We explain these on the next few pages. SECTION 1: Operating Activities This section converts the items reported on the income statement from the accrual (you book the sale but you might not have the money yet) basis of accounting and includes the following: • • • • • • Cash receipts from sales or for the performance of services

Payroll and other payments to employees Payments to suppliers and contractors Rent payments Payments for utilities Tax payments SECTION 2: Investing Activities Investing activities include capital expenditures – disbursements that are not charged to expense but rather are capitalized as assets on the balance sheet. Investing activities also include investments (other than cash equivalents as indicated below) that are not part of your normal line of business. These cash flows could include: • • • • Purchases of property, plant and equipment Proceeds from the sale of property, plant and equipment

Purchases of stock or other securities (other than cash equivalents) Proceeds from the sale or redemption of investments Confidential ©2009 Network Solutions, LLC SECTION 3: Financing Activities Financing activities include cash flows relating to the business’s debt or equity financing: • • • • Proceeds from loans, notes, and other debt instruments Installment payments on loans or other repayment of debts Cash received from the issuance of stock or equity in the business Dividend payments, purchases of treasury stock, or returns of capital IMPORTANT: Don’t Forget to Include an Expense Budget

Because you will be estimating cash inflows for various product lines you must account for the expenses that are incurred related to them. This must include enough detail to track expenses month by month and follow up on plan-vs. -actual analysis. That’s a Wrap! Well, this concludes our 15-part series on writing a marketing plan. We hope you have learned new things and relearned things forgotten long ago. The following pages include extra resource for this Guide to Writing a Killer Marketing. We hope you have enjoyed this series and visit GrowSmartBusiness. com for more great content to help you grow your business.

Additional Resources Small Business Administration http://www. sba. gov SCORE http://score. org American Marketing Association http://www. marketingpower. com/ Microsoft Small Business Center http://www. microsoft. com/smallbu siness/hub. mspx Microsoft Startup Center http://www. microsoft. com/smallbusiness/startu p-toolkit/default. aspx How to do a Competitive Analysis http://www. ehow. com/how_5220467_writecompetitive-analysis. html Writing a Marketing Plan http://www. knowthis. com/principles-ofmarketing-tutorials/how-to-write-a-marketingplan/ http://www. entrepreneur. com/marketing/marke ingbasics/marketingplan/article43018. html http://www. marketingforsuccess. com/MFSmarketingplan. html Confidential ©2009 Network Solutions, LLC About the Author Steve Fisher Blogs: http://stevefisher. me http://rulesforbusiness. com http://shootyourshow. com Connect with him on Facebook, Twitter, LinkedIn, Plaxo or Flickr. Steve has been actively writing about small business and innovation since the late 90s on how small business could leverage the Web and stellar customer experiences to innovate their business and compete with the largest of competitors. He was among the arly thought leaders on the intersection of user experience, customer service and innovation. Steve currently is Managing Principal of AppSolve. In its 10th year, Appsolve specializes in user experience design, enterprise web development and online community management. Through AppSolve, he works with Network Solutions to manage its online small business community. Prior to that he was founder and CEO of Slipstream Air, a software provider to the private air travel industry. It was sold in 2008 to JIT Airline Resources, which rebranded as Slipstream Aviation Software. Steve has also held key leadership ositions at Global Network Solutions, OnSite Technologies, IKON, USConnect, Ryland and Wells Fargo. He has published several e-books on Small Business Management, User Experience, Online Marketing and Innovation. Currently, he is working on his first book, “101 Rules for Entrepreneurs” slated for a Spring 2010 release. He holds a Bachelor of Science in Business from University of Baltimore and on a personal note he is a great airplane pilot, a horribly slow 5K runner, a fairly talented musician and a budding concert photographer. He currently resides in Columbia, MD, USA. Confidential ©2009 Network Solutions, LLC

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Middle Eastern airline Emirates has appointed Chemistry

Middle Eastern airline Emirates has appointed Chemistry Communications to handle its direct marketing account. The agency replaces DDA and is tasked with developing customer management strategies, as well as other direct activities. Emirates has appointed VCCP and sales promotion agency Gasoline to its roster to work on as-yet unspecified projects. The appointment follows the Dubai airline’s decision to hire Grey London to create a global advertising campaign for its business-class service. Emirates will offer daily non-stop flights between Los Angeles and Dubai on September 1.

The new flight runs a distance of 8,339 miles, taking 16 hours and 35 minutes from Dubai to California; the duration of the return flight will be slightly shorter at just under 16 hours.

Emirates currently flies twice daily to New York and once daily to Houston. Emirates is to promote its new Dubai-Sao Paulo service through a digital campaign that will include the longest ad ever. The advert will also air on cable TV, allowing it to be recognised as the longest ever by Guinness World Records. Emirates has ended its management contract with Sri Lankan Airlines, fuelling speculation that it may sell its 43.6% stake in the Dubai-based carrier.

Emirates has valued its share at $150 million, with Mr Clark saying its purchase would be one “hell of an opportunity” for a regional carrier The Emirates Group has posted a 23.5% rise in group net profits to £500 million backed by a record £424 million profit at its airline. The government-owned airline added 3 million passengers over the financial year ending 31 March, 2007. During the 2006-07 financial year Emirates added 12 new Boeing 777-300ER aircraft and launched new services to Nagoya, Tunis, Bangalore and Beijing, while increasing frequency to existing destinations like Dusseldorf and Zurich

Emirates Airline, the government-owned Dubai carrier, has reported a 29% increase in year-on-year net profit to AED1.2 billion (£171.6 million) for the fiscal first half ended 30 September 2006. Passenger revenue rose 31% for the period, with the number of passengers increasing 20% to 8.39 million. Emirates announced that it has launched service to 10 cities since January 2006, with its total network now standing at 87 destinations.

Almost four months after its initial announcement that the new A380 superjumbo would suffer launch delays in June 2006, after which point several further postponements have been tabled, Airbus parent company EADS has issued a €4.8 billion profit warning, more than double that mooted when the first problems occurred. The figure works against EADS’ “baseline plan” for the period between 2006 and 2010, and will be recorded as a shortfall in operating profits.

Separately, the A380’s biggest advance order customer, Emirates, which has requested 45 of the total 159 ordered aircraft, has said that as a result of the latest delays, which put the A380’s release at no earlier than August 2008, it is “reviewing its options.”

On 25th October 1985, Emirates flew its first routes out of Dubai with just two aircraft—a leased Boeing 737 and Airbus 300 B4. Then as now, our goal was quality, not quantity, and in the years since taking those first small steps onto the regional travel scene, Emirates has evolved into a globally influential travel and tourism conglomerate known the world over for our commitment to the highest standards of quality in every aspect of our business.

Though wholly owned by the Government of Dubai, Emirates has grown in scale and stature not through protectionism but through competition—competition with the ever-growing number of international carriers that take advantage of Dubai’s open-skies policy. Not only do we support that policy, but we see it as vital to maintaining our identity and our competitiveness. After making its initial start-up investment, the Government of Dubai saw fit to treat Emirates as a wholly independent business entity, and today we are thriving because of it. Our growth has never been lower than 20 per cent annually, and the airline has recorded an annual profit in every year since its third in operation.

Continuing our explosive growth while continually striving to provide the best service in the industry is the secret of Emirates’ success. The Emirates Group announced record net profits of Dhs 3.5 billion (US$ 942 million) for the financial year ended 31st March 2007. The 28.8 per cent increase in profits versus the previous year speaks of a promising future of an airline we feel is greater than the sum of its many parts, which now include:

·         An award winning international cargo division

·         A full-fledged destination management and leisure division

·         An international ground-handler

·         An airline IT developer.

With a fleet of 113 aircraft, we currently fly to over 100 destinations in 62 countries around the world, and our network is expanding constantly. Nearly 800 Emirates flights depart Dubai each week on their way to destinations on six continents. In fact, Emirates’ flights account for nearly 40 per cent of all flight movements in and out of Dubai International Airport, and our aim is to increase this market-share to 70 per cent by 2010 without compromising our reputation for quality. Toward this end, Emirates has made numerous significant announcements regarding the future of its already state-of-the-art fleet.

In 2001, Emirates demonstrated its confidence in the industry’s future growth by announcing the largest order in aviation history, valued at US$15 billion. A staggering 58 new aircraft, a mix of Airbus and Boeing, were to join the rapidly expanding fleet. In 2005, Emirates announced the largest-ever order for the Boeing 777 family of aircraft – 42 in all – in a deal worth Dhs 35.7 billion (US$ 9.7 billion).

At the 2006 Farnborough Air Show, Emirates signed a Heads of Agreement for 10 of Boeing’s new 747-8F aircraft, to be powered by General Electric’s GEnx jet engines, in a deal worth US$ 3.3 billion. At the Dubai Airshow in November 2007, Emirates announced a historic civil aviation aircraft order when it signed contracts for a 120 Airbus A350s, 11 A380s, and 12 Boeing 777-300ERs, worth an estimated US$34.9 billion in list prices. The agreement with Airbus comprises firm orders for 50 A350-900s and 20 A350-1000s, plus 50 options for the A350-900s. The first A350 will be delivered to Emirates in 2014.

Emirates also firmed up orders on the eight A380s for which it had signed letters of intent earlier this year, and placed firm orders for an additional three of the double-decker aircraft, bringing its total firm order for the A380s to 58.

References: [Cited 14 March2008]……..[Cited 14 March2008] [Cited 14 March2008]
Stephen J. Porth (2003) Strategic Management: A cross- Functional Approach.
Second edition
Hamel, G. (2002). Leading the revolution: How to thrive in a turbulent time by making innovation a way of life

Free Essays

Delta Airline Case

Delta Airline Case 1-During the 1990’s, none of the five largest air carriers in the United States earned its cost of capital. Why do such low rates of return on investment persist in the airline industry? That’s correct, airline companies margins were below the average for US industries for a long time, especially after the 1978 deregulation. For 40 years, prior to 1978, the airline companies had operated under the regulation of the CAB (Civil Aeronautics Board), which was responsible for managing routes and fares, and thus protected companies revenues and, more important, profitability.

Protected by cost-plus pricing, airlines regularly assented to labor union demands and in fact didn’t care too much by the costs incurred by the union deals. Due to the market environment during regulation, the airline companies used to overcharge for tickets, to compensate the costs. After deregulation, airline companies found themselves with high fixed costs and expensive labor. The companies started then running to gain productivity, customer loyalty, explore other routes, decrease costs (using alternative airports, etc… and focus on how to develop a system that would ensure high load factors; the companies started to pursue the returns/ yields. Together with all the costs problems, the big legacy carriers had to fight the Low Cost Carriers that appeared after deregulation, and were gaining market share rapidly. 2-Despite the challenging industry environment, airlines like Southwest and Jetblue earn enviable returns. How? Southwest and Jetblue are part of the LCC that appeared after 1978 deregulation. These companies remained profitable despite all the markets ups and downs, and even after Sept 11/ 2001.

Basically, the LCC operated differently from legacy carriers using secondary airports, short turn times, high load factors and different labor costs (flexible work rules vs. profit sharing plans) helping the companies have a much more enthusiastic workforce. All this combined with a different mission and vision, so a different strategic planning is what makes them profitable. LCC don’t use legacy carriers as benchmarks, they don’t even look at them as competitors, because their competitors are cars, buses and other ways of travelling.

Even the way tickets are issued is different, and also focused on modern way of life, less burocratic, more self-service and, of course, cheaper. This companies have essential competencies: Values (they created a new way of flying, from the ticket purchasing to to the flying experience), Rare characteristics (they are not regular carriers, they created a whole new market), Hard to copy strategies and operational competency. They launched a new substitute product in an existing market, ending in the creation of a new market, where they have so much competitive advantages that others can’t compete. -Why have all the low-cost subsidiaries of legacy airlines, including Delta express, failed? All big legacy carriers launched low-cost subsidiaries, but none obtained success. Some reasons are written below: -They launched substitute products in their existing market, but they should have entered the new market, with a new company -The subsidiaries shared employees with the legacy carriers -They shared burocracy -They didn’t have a clear market and also marketing strategy, different from the legacy carriers -They carried the same costs to operate

In summary, LCC is a total different business than legacy carriers, and can’t be integrated in other business. It has to have its own market strategy, labor agreements, administration, ratios, etc… The only path to success is treating low-cost subsidiaries as a whole different business, inserted in a whole different market. 4-What will happen to Delta if it continues to respond to the low-cost airlines in the way it has in the past? Delta Express was created as Delta’s response for the growth of LCC’s, primarily in Florida. Express used to operate older Boeings and offer less in-flight services.

In the beginning, Express could negotiate with the pilot’s union, resulted in some pay cut. but this agreements were falling apart. More important, all decisions concerning its operations were made centrally, as part of mainline Delta, and even ground services were shared. In fact, they were committing the same mistakes as the other legacy companies when operating their low cost subsidiaries and the only logical path, if Delta continues to operate Express as part of its flying business is the fail path. Low cost is not the core business of Delta and operating a low cost airline is not the core competency of its executives.

That combined together cannot lead to success. 5-What are the options available to Delta? Based on the information available to you in the case, what course of action would you recommend? Based on the case, and most important on the experiences of success and fail of low cost carriers, I would recommend that Delta would restructure its operational and administrative office to support Express as if was a total different business: -Totally different staff (another business unit, independent from Delta) -Different business results statements Different cost and capital structure -Different flight equipments (new aircrafts, that would have fewer maintenance needs and high flying hours) -Different services provided in and out-flight -Easier ticket issuing -No Frequent flyer program -Stronger agreements with regulatory institutions over time-table -Different mission, vision and values (“new company”) -Different routing, pricing, pilots and flight attendance payments program, etc… -A clear target of being the number one low cost carrier in USA and not only diminish the market share of other LCC’s.

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Classic Airlines Marketing Concepts

Classic Airlines Classic Airlines is facing many monumental challenges. The key word is monumental as immediate future decisions will determine the fate of Classic Airlines in terms of surviving in the airline industry, filing for bankruptcy, or bought out by the competition. Classic Airlines is at a fork in the road. As the airline industry shares the pain with rising costs, particularly in fuel and labor, Classic Airlines is struggling internally. They are bleeding in regard to customer retention, which is decreasing by approximately 20%.

Classic has one of the highest labor costs per seat-mile as they pay top salaries to pilots and other employees, even while competitors are cutting in those professions. To counter any further financial crisis, the board of directors recently mandated a 15% across-the-board cost reduction over the next 18 months. The deepest wound to keep from hemorrhaging is the internal strife between Senior Management. The entire management group needs to work cohesively and fast before the company flat lines.

How will Classic Airlines find a way to survive these pressures? First and foremost, Senior Management at Classic Airlines needs to embrace the marketing concept. According to Kotler and Keller (2006), the marketing function needs to be seen as one of several equally important functions in a check-and-balance relationship (p. 16). As seen with Amanda Miller, CEO of Classic Airlines is described as, “Her pragmatic approach to operational excellence often leaves her little patience for “soft” business disciplines such as marketing. This does not sound good and to make matters worse, Catherine Simpson, who is CFO is described as, “Catherine is “driven by numbers,” and her practical philosophies about business are frequently in line with Amanda’s. ” This says potential disaster in flashing lights. Luckily, Classic Airlines is showing some glimmers of hope with other department heads. Kevin Boyle, who is Chief Marketing Officer, believes that marketing is critical to the company’s ability to move forward profitably.

Renee Epson, who is Senior Vice President of Customer Service, is described as, “As the top management’s view of customer service becomes more operations-based, Renee has frequently found herself battling for the customer. ” John Hartman, Senior Vice President of Human Resources, believes frontline employees represent the organization’s face to the customer and are critical to customer service and marketing effectiveness. These three individuals sound like the bright, shiny stars of the company. The second strategy that would be helpful to Classic Airlines to boost additional revenue is a marketing concept called strategic alliance.

Strategic alliance allows a company to form an alliance with domestic or multinational companies that complement or leverage their capabilities and resources to obtain greater sales impact at less cost (Kotler and Keller, p. 57,  2006). In the case of Classic Airlines, it would be in their best interest to form an alliance with the top Latin American airline as Kevin and Josef are trying to negotiate. It looks like Classic Airlines is already engaging in this strategy with their frequent flier program as a member can earn miles and take advantage of hotel stays or car rentals with partnering companies.

With the Classic Airlines scenario, Kevin Boyle has notes from customer conversations. This is an example of collecting marketing research. According to Kotler and Keller (2007), marketing research is defined as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company (p. 42). In the case of Classic Airlines, the leaders of the company need to discover why the customers are unhappy and shopping elsewhere. Conclusion The vitality of Classic Airlines resides with the decisions and attitudes of Senior Management.

Classic Airlines has talented, intelligent, decision makers that can pull the airline through the tough times. Profit maximization and shareholder wealth will come from executing sound marketing practices as discussed. If those goals can be achieved, Classic Airlines could rise to be an industry leader. References Kotler, P. , & Keller, K. (2007). A Framework for marketing management (3rd ed. ). Retrieved from The University of Phoenix eBook Collection database. Kotler, P. , & Keller, K. (2006). Marketing management (12th ed. ). Retrieved from The University of Phoenix eBook Collection database.

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Regional Airlines Case Study

Case 2: Regional Airlines Case 2: Regional Airlines Case Introduction A+ for effort, Customer Service Pays for Itself In an extremely regulated and thus relatively uniform industry such as the commercial airline industry, the successful airline is the organization which sets itself apart from the competition. Within an industry that requires customer planning to interface with flight schedules and security measures, a major operational aspect which can aid an airline in gaining an edge on the competition is customer service.

The effective consumption of air travel (finding flights, buying tickets, getting through the airport, boarding a plane, and finally reaching the final destination) is not the same simple consumer –supplier relationship that the consumer experiences in a trip through the Wal-Mart checkout counter; the nature of air travel makes the interaction between the airline and the customer very complex.

Almost every facet of the complex relationship between the airline and customer can generate a large amount of stress for the consumer; consumers find poor customer service in the face of tight travel deadlines and paid for travel plans that did not necessarily go as intended extremely frustrating. Analysis Investigating Salient Case Issues To capitalize on offering a high level of effective customer service, an investment must be made.

The airline must ensure their customer service department not only understands that customer service is highly valued in the organizational environment but also must ensure that the customer service department has the tools and resources to offer effective customer service (Graham, 2012). Like any business investment, the organization must make smart decisions when providing customer service resources; for instance a call center of fifty employees which only answers two calls an hour is a humongous waste of resources that would be better allocated towards another goal.

The problem of understand that an investment towards more effective customer service is needed, but at what cost to make that investment, is the problem which faces Regional Airlines in the case study on page 539 of the 2012 Anderson, et al, text: An Introduction to Management Science Regional Airlines is expanding its customer service operation by setting up a new phone system for the purpose of providing ticketing services and customer assistance over the phone.

The airline is going ahead with the new phone system; however, two major decision points exist, how many agents to allocate to the line (one or two) and what complexity of system in which to invest (a system that provides a holding function versus one that does not). The expected call load for the new operation is one call every 3. 75 minutes, available metrics indicate that on each call a ticket agent spends 3 minutes with a customer; effectively this results that for every customer attended to, there will be 45 seconds of downtime (Anderson, et al, 2012).

Unfortunately for Regional Air, those figures are only averages, there will be an indeterminate amount of calls which meet or exceed the 3. 75 minute span in between calls. The decision between systems which provides a hold function versus the one that does not will determine will determine if that customer is placed on hold or if the call is just dropped. Placing an unanswered call on hold provides a buffer for the agent to end the call and then service the holding customer; however, for a customer that stays on hold for an inordinate amount of time will begin to feel less and less like a well-served customer.

The expected call load versus the time it takes for an agent to deal with each call is the basis of allocating only one agent to man the call system. The second option of allocating two or more agents is in effect, insurance that each call will be answered in a timely fashion and callers will not have to wait for extended periods of time. The decision of how many agents to allocate to the phone system is based upon the apparent cost for an extra agent sitting around not actively engaged in a call; however this view is relatively short sighted because it does not take into account the revenue lost from dropped calls and dissatisfied customers.

The salient issue of the case is determining what the appropriate level of investiture to make for the phone system to provide an expected (and beneficial) level of customer service Group Discussion Exploring Simulations Simulation is a quantitative technique developed for studying alternative courses of action by building a model of that system and then conducting a series of repeated trial and error experiments to predict the behavior of the system over a period of time (Srivastava, Shenoy, & Sharma, 1989, p. 753). Of all the simulations waiting line simulations are of the most important to the customer service industry.

In the airline industry long waiting times can lead to poor customer service scores and diminished sales. Regional Airlines is establishing a new telephone system for handling flight reservations (Anderson, Sweeney, Williams, Camm, & Martin, 2012). The airlines main goal is to decrease the wait time at its call centers and increase sales. Regional’s management team agrees that its goal should be to answer 85% of its incoming calls immediately. The following analyzes Regional Airline’s (RA) current reservation system and ways to improve it. Analysis of Current System

Currently RA is answering one call every 3. 75 minutes during 10:00 a. m. to 11:00 a. m. time period (? (average arrival time) = 60 minutes / 3. 75 minutes = 16 calls per hour). The average service time is 3 minutes per customer (µ (service rate) = 60 minutes / 3 minutes = 20 calls per hour). With only one reservation agent, the probability that a caller will be blocked because of a busy signal is P1 = . 4444 ? o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! = . 5556 ?1 = ( ? / ? ) 1/0! i=1k ? /? 1 /i! = ( 16 / 20 ) 1/0! (16/20)o / 0! + (16/20)1 /1! = . 444 With two reservation agents, the probability that a caller will be blocked because of a busy signal is P2 = . 1509. ?o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 4717 ? 1 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /1! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 3774 ? 2 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /2! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 1509 Regional Airlines’ current phone reservation system will answer an approximate of 85% of phone calls with two employed reservation agents.

However, the other 15% will be blocked because of a busy signal. Customers who do not get a hold of an agent may not call back and contribute to negative customer service reaction and adversely affect the business. Analysis of Agents Needed Proposed expanded system will allow callers to wait. Instead of being blocked when all lines are busy, customers can choose to stay on the line and calls will be answered in the order received. With only one reservation agent for Regional Airlines in the expanded system, 80% (Pw) of incoming calls will end up waiting. The average waiting time is also at 12 minutes (Wq).

Cited numbers above show a horrendous system that is both undesirable and a business model doomed for failure. So in order for RA to realize the benefits of the expanded system, it needs to employ two or more reservation agents. Po=1- ? /? = 1-1620=0. 20 Lq = ? 2 ? (? – ? ) = 16 2 20 (20 – 16) = 3. 2 L =Lq + ? / µ= 3. +1620=4 wq+Lq / ? =3. 216=0. 20 hours=12 minutes W = wq + 1/µ = 0. 20 + 1/20 = 0. 25 hours = 15 minutes Pw=?? =1620=0. 80=80% At the planning meeting, Regional Airlines’ management team agreed that answering at least 85% of the calls is an acceptable customer service goal.

This means that the probability of waiting will have to be 15% or less. Pw= 1k! ?? k k? k? – ? Po k = 2 agents Pw= 12! 16202 2 202 20- 16 0. 4286= 0. 2286 k = 3 agents Pw= 13! 16203 3 203 20- 16 0. 4472= 0. 0520 Po=0. 4472 Lq=0. 0189 L=0. 8189 Wq=0. 0012 hours=0. 07 minutes W=0. 0512 hours=3. 97 minutes Using three agents clearly meets the company’s goal. With three reservation agents, only 5% of the calls will be waiting, which is way below the 15% targeted cap in order to meet the goal of 85% answered calls. Average waiting time is also at a minimum, calculated at 0. 012 hours or 0. 07 minutes. System Recommendation The current telephone reservation system design does not allow callers to wait; callers instead must attempt to reach a reservation agent when all agents are not occupied. Should callers reach the service line when all agents are busy they will be met with a busy signal. The management at RA is seeking to switch to an expanded telephone system to combat this problem. Based on the calculations in the previous paragraphs, RA will need approximately 3 reservations agents to run an expanded phone system.

Group 3 recommends that the company employ the multiple channels waiting line which consists of two or more service channels that are assumed to be identical in terms of service capability (Anderson, et. al. , 2012). Regional airlines could support at least a two-channel operation to service the needs of its customers. MANAGERIAL REPORT ASSUMPTIONS: a. One call every 3. 75 minutes during 10:00 a. m. to 11:00 a. m. time period ? (average arrival time) = 60 minutes / 3. 75 minutes = 16 calls per hour b. Average service time of 3 minutes with each customer µ (service rate) = 60 minutes / 3 minutes = 20 calls per hour 1.

An analysis of the current reservation system that does not allow callers to wait. How many reservation agents are needed to meet the service goal? With only one reservation agent, the probability that a caller will be blocked because of a busy signal is P1 = . 4444 ? o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! = . 5556 ?1 = ( ? / ? ) 1/0! i=1k ? /? 1 /i! = ( 16 / 20 ) 1/0! (16/20)o / 0! + (16/20)1 /1! = . 4444 With two reservation agents, the probability that a caller will be blocked because of a busy signal is P2 = . 509. ?o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 4717 ? 1 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /1! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 3774 ? 2 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /2! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 1509 Conclusion: Regional Airlines’ current phone reservation system will answer an approximate of 85% of phone calls with two employed reservation agents. However, the other 15% will be blocked because of a busy signal.

Customers who do not get a hold of an agent may not call back and contribute to negative customer service reaction and adversely affect the business. 2. An analysis of the expanded system proposed by the telephone company. How many agents are needed to meet the service goal? Proposed expanded system will allow callers to wait. Instead of being blocked when all lines are busy, customers can choose to stay on the line and calls will be answered in the order received. With only one reservation agent for Regional Airlines in the expanded system, 80% (Pw) of incoming calls will end up waiting. The average waiting time is also at 12 minutes (Wq).

Cited numbers above show a horrendous system that is both undesirable and a business model doomed for failure. So in order for Regional Airlines to realize the benefits of the expanded system, it needs to employ two or more reservation agents. Po=1- ? /? = 1-1620=0. 20 Lq = ? 2 ? (? – ? ) = 16 2 20 (20 – 16) = 3. 2 L =Lq + ? / µ= 3. +1620=4 wq+Lq / ? =3. 216=0. 20 hours=12 minutes W = wq + 1/µ = 0. 20 + 1/20 = 0. 25 hours = 15 minutes Pw=?? =1620=0. 80=80% At the planning meeting, Regional Airlines’ management team agreed that answering at least 85% of the calls is an acceptable customer service goal.

This means that the probability of waiting will have to be 15% or less. Pw= 1k! ?? k k? k? – ? Po k = 2 agents Pw= 12! 16202 2 202 20- 16 0. 4286= 0. 2286 k = 3 agents Pw= 13! 16203 3 203 20- 16 0. 4472= 0. 0520 Po=0. 4472 Lq=0. 0189 L=0. 8189 Wq=0. 0012 hours=0. 07 minutes W=0. 0512 hours=3. 97 minutes Using three agents clearly meets the company’s goal. With three reservation agents, only 5% of the calls will be waiting, which is way below the 15% targeted cap in order to meet the goal of 85% answered calls. Average waiting time is also at a minimum, calculated at 0. 012 hours or 0. 07 minutes. 3. An analysis of the expanded system proposal by the telephone company. A representative from the telephone company suggested that Regional Airlines consider an expanded system that accommodates waiting. In the expanded system, when a customer calls and all agents are busy, a recorded message tells the customer that the call is being held in the order received and that an agent will be available shortly. The customer can stay on the line and listen to background music while waiting for an agent.

Expanded System with waiting allowed Pw for 1 agent P0= (1-? /? ) 1-16/20=. 20 Lq= ? 2 =16(2)= 3. 2 ?(? – ? ) =20(20-16) L= Lq+( ? /? )=3. 2 +(16/20)=4 Wq =(Lq/ ? )=3. 2/16=. 20 (12 minutes) W=Wq+(1/ ? )=. 20+ (1/20)= . 25 (15 minutes) Pw= ? /? = 16/20=. 80 Expanded System with waiting allowed Pw for 2 agents Pw=1/k! ( ? /? )k k? / k? – ? P0 1/2! (16/20)2 2(20)/2(20)-16 . 4286= . 2286 Expanded System with waiting allowed Pw for 3 agents 1/3! (16/20)3 3(20)/3(20)-16 . 4472= . 520 In order to use this system, Regional Airlines would have to use three agents to keep the customer service of 85% of the calls being answered immediately. The telephone arrival rate of incoming calls is expected to change from hour to hour. Describe how your waiting line analysis could be used to develop a ticket staffing plan that would enable the company to provide different levels of staffing for the ticket reservation system at different times during the day. Indicate the information you would need to develop this staffing plan.

This analysis only covers the 10:00 AM – 11:00 AM time frame. As we have seen with the equations used, we have to have historical data for the other time frames. If the phone lines are open from 08:00AM – 08:00 PM, we could use the data from each hour. Keeping with the 85% rate of phone calls being answered immediately for good customer service and the use of the limited amount of call agents required to save Regional Airlines money, after further analysis, Regional Airlines will have the data need to make the best decisions for their company. 4. Staffing Plan

In order to develop a ticket agent staffing plan that would enable the company to provide different levels of staffing for the ticket reservation system at different times during the day, a similar simulation method and analysis used above are needed. By implementing the same application, the right number of reservation agents each hour can be determined. In addition to the number of agents used, it is also possible to use the same information to determine the full-time and part-time shift schedules that meet the company’s customer service goals.

But in order for RA to do this, it needs the hourly average arrival rate for the whole day. 5. References Anderson, D. , Sweeney, D. , Williams, T. , Camm, J. , & Martin, K. (2012). An Introduction to Management Science Quantitative Approaches to Decision Making. Mason, OH. South-Western Cengage Learning Graham, J. (2012). Think Like the Customer – Or Lose the Sale. American Salesman, 57(4), 18-23. Srivastava, U. K. , Shenoy, G. V. & Sharma, S. C. (2005). Quantitative techniques for managerial decisions (2nd Edition). New Age International Publishers: New Delhi.

Free Essays

History of Indian Airlines

Brief History of Indian Airlines India’s chiefly domestic state-owned carrier, Indian Airlines Ltd. , flies passengers and cargo to 59 domestic and 16 international destinations. Its fleet numbered 52 aircraft in 2000. Indian Airlines has traditionally based its network around the four main hubs of Delhi, Mumbai (formerly Bombay), Calcutta, and Chennai (formerly Madras). The airline carries about six million passengers a year and has a substantial freight operation. Origins The Air Corporations Act of 1953 amalgamated India’s dozen or so airlines, most of them undercapitalized, into two nationalized air carriers: Air-India Ltd. given responsibility for international routes, and Indian Airlines Corporation (IAC), the domestic airline. The eight airlines that were amalgamated into IAC included Air Services of India Ltd. , Airways (India) Ltd. , Bharat Airways Ltd. , Deccan Airways Ltd. (already 70 percent government-owned), Himalayan Aviation Ltd. , Indian National Airways Ltd. , Kalinga Airlines, Ltd. , plus the domestic operations of Air-India Ltd. IAC began operations with a fleet of 74 of the war surplus Douglas DC-3s that had founded its short-lived predecessors. The airline also had three times as many employees as it needed, writes R.

E. G. Davies, a situation that was slow to change due to the government’s refusal to allow layoffs. Davies also writes that the standard of maintenance was low and the airline suffered many accidents in its early years. IAC soon moved to bolster its fleet by ordering a few new de Havilland 114 Herons, retired after only a couple of years of service, and Vickers Viscount 768s, which were assigned to trunk routes. The DC-3s continued to supply feeder traffic; they soon began to be phased out by Fokker F-27s and Avro 748s. IAC began flying short-haul jets–French-made Caravelles–in the mid-1960s.

The Caravelles were so popular that IAC soon needed larger jets to on the routes between Bombay (Mumbai), Delhi, Calcutta, and Madras (Chennai) that formed the India’s domestic trunk network. IAC’s first Boeing 737s entered service in 1971. Between 1962 and 1972, IAC was called upon to support the military in several campaigns, first in skirmishes with China, and later with the wars with Pakistan that ultimately led to the creation of Bangladesh. Confidence and Crisis in the 1970s and 1980s IAC announced a Rs45 million loss for 1972. The next year, the company had several incidents of aircraft damage or loss.

Labor unrest, high fuel costs, political burdens, and built-in inefficiencies added to the company’s problems. However, these were met with such resolve that IAC had the confidence to order its first wide-body jets, Airbus A300s, in 1975. A program to produce ground support equipment in Indian factories was part of the deal. In 1976, new routes stretched across political divisions to Kabul, Afghanistan, in the northwest, and the Maldive Islands in the south. The government allowed the formation of a few new limited service airlines in the 1970s: Air Works India, Huns Air, and Goldensun Aviation.

None of them had long life spans. Around 1979, IAC dropped the word “Corporation” from its name. Another national airline, Vayudoot, was formed in 1981 and tasked with carrying feeder traffic from India’s smaller communities. Indian Airlines’ managing director, Gerry Pais, was Vayudoot’s part-time chairman. Vayudoot was serving more than 100 destinations within India by 1990. The government also set up a helicopter corporation to serve off-shore oil fields. Britain’s Financial Times described Indian Airlines as the world’s third largest domestic carrier in the mid-1980s.

With business growing at better than ten percent a year, it was increasing its capacity. Indian Airlines ordered a dozen of the new Boeing 757s in August 1984. After Rajiv Gandhi, a former Indian Airlines pilot, became prime minister, this order was changed to Airbus A320s due to what were perceived as political reasons. However, the crash of an Indian Airlines A320 in Bangalore on February 14, 1990–the type’s second major crash globally in a two-year period–sorely tested management’s faith in the plane, which featured new fly-by-wire flight controls and electronic cockpit instrumentation.

As part of a plan to merge Indian Airlines with Air-India, the state’s international carrier, two leading young industrialists were appointed to chair the boards of the two companies in autumn 1986. Neither these plans nor the new chairmen lasted very long. In 1987, Indian Airlines carried 10 million passengers and earned a profit of Rs630 million ($48 million). However, the quality of its service was facing criticism, to be heightened by the coming entry of new carriers into the market. India’s chiefly domestic state-owned carrier, Indian Airlines Ltd. flies passengers and cargo to 59 domestic and 16 international destinations. Its fleet numbered 52 aircraft in 2000. Indian Airlines has traditionally based its network around the four main hubs of Delhi, Mumbai (formerly Bombay), Calcutta, and Chennai (formerly Madras). The airline carries about six million passengers a year and has a substantial freight operation. Origins The Air Corporations Act of 1953 amalgamated India’s dozen or so airlines, most of them undercapitalized, into two nationalized air carriers: Air-India Ltd. given responsibility for international routes, and Indian Airlines Corporation (IAC), the domestic airline. The eight airlines that were amalgamated into IAC included Air Services of India Ltd. , Airways (India) Ltd. , Bharat Airways Ltd. , Deccan Airways Ltd. (already 70 percent government-owned), Himalayan Aviation Ltd. , Indian National Airways Ltd. , Kalinga Airlines, Ltd. , plus the domestic operations of Air-India Ltd. IAC began operations with a fleet of 74 of the war surplus Douglas DC-3s that had founded its short-lived predecessors.

The airline also had three times as many employees as it needed, writes R. E. G. Davies, a situation that was slow to change due to the government’s refusal to allow layoffs. Davies also writes that the standard of maintenance was low and the airline suffered many accidents in its early years. IAC soon moved to bolster its fleet by ordering a few new de Havilland 114 Herons, retired after only a couple of years of service, and Vickers Viscount 768s, which were assigned to trunk routes. The DC-3s continued to supply feeder traffic; they soon began to be phased out by Fokker F-27s and Avro 748s.

IAC began flying short-haul jets–French-made Caravelles–in the mid-1960s. The Caravelles were so popular that IAC soon needed larger jets to on the routes between Bombay (Mumbai), Delhi, Calcutta, and Madras (Chennai) that formed the India’s domestic trunk network. IAC’s first Boeing 737s entered service in 1971. Between 1962 and 1972, IAC was called upon to support the military in several campaigns, first in skirmishes with China, and later with the wars with Pakistan that ultimately led to the creation of Bangladesh. Confidence and Crisis in the 1970s and 1980s

IAC announced a Rs45 million loss for 1972. The next year, the company had several incidents of aircraft damage or loss. Labor unrest, high fuel costs, political burdens, and built-in inefficiencies added to the company’s problems. However, these were met with such resolve that IAC had the confidence to order its first wide-body jets, Airbus A300s, in 1975. A program to produce ground support equipment in Indian factories was part of the deal. In 1976, new routes stretched across political divisions to Kabul, Afghanistan, in the northwest, and the Maldive Islands in the south.

The government allowed the formation of a few new limited service airlines in the 1970s: Air Works India, Huns Air, and Goldensun Aviation. None of them had long life spans. Around 1979, IAC dropped the word “Corporation” from its name. Another national airline, Vayudoot, was formed in 1981 and tasked with carrying feeder traffic from India’s smaller communities. Indian Airlines’ managing director, Gerry Pais, was Vayudoot’s part-time chairman. Vayudoot was serving more than 100 destinations within India by 1990.

The government also set up a helicopter corporation to serve off-shore oil fields. Britain’s Financial Times described Indian Airlines as the world’s third largest domestic carrier in the mid-1980s. With business growing at better than ten percent a year, it was increasing its capacity. Indian Airlines ordered a dozen of the new Boeing 757s in August 1984. After Rajiv Gandhi, a former Indian Airlines pilot, became prime minister, this order was changed to Airbus A320s due to what were perceived as political reasons.

However, the crash of an Indian Airlines A320 in Bangalore on February 14, 1990–the type’s second major crash globally in a two-year period–sorely tested management’s faith in the plane, which featured new fly-by-wire flight controls and electronic cockpit instrumentation. As part of a plan to merge Indian Airlines with Air-India, the state’s international carrier, two leading young industrialists were appointed to chair the boards of the two companies in autumn 1986. Neither these plans nor the new chairmen lasted very long.

In 1987, Indian Airlines carried 10 million passengers and earned a profit of Rs630 million ($48 million). However, the quality of its service was facing criticism, to be heightened by the coming entry of new carriers into the market. Chronology * Key Dates: * 1953: Indian Airlines is formed as India’s domestic airline. * 1965: Short-haul Caravelle jets enter the fleet. * 1972: IAC records a rare loss. * 1975: The company orders its first widebody jets. * 1992: India’s domestic air market is deregulated. * 1998: Plans to merge Indian Airlines with Air-India are drawn up but not approved. 2001: The Indian government solicits bidders for partial ownership of Indian Airlines. Additional Details * State-Owned Company * Incorporated: 1953 as Indian Airlines Corporation * Employees: 22,500 * Sales: Rs 3,755 crore ($1 billion) (2001) * NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportationhttp://www. referenceforbusiness. com/history2/65/Indian-Airlines-Ltd. html#ixzz2DAhNxQo5

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Industry Analysis of Airlines Industry

Banking history in Nepal: In the context of Nepal, it is very difficult to trace the correct chorological history of the Banking systems in Nepal because there are no sufficient historical records and data about Banking in Nepal. Nepal bank Ltd. is the first modern bank of Nepal. It is taken as the milestone of modern banking of the country. Nepal bank marks the beginning of a new era in the history of the modern banking in Nepal. This was established in 1937 A. D. Nepal Bank has been inaugurated by King Tribhuvan Bir Bikram Shah Dev on 30th Kartik 1994 B.

S. Nepal bank was established as a semi government bank with the authorized capital of Rs. 10 million and the paid -up capital of Rs. 892 thousand. Until mid-1940s, only metallic coins were used as medium of exchange. So the Nepal Government (His Majesty Government on that time) felt the need of separate institution or body to issue national currencies and promote financial organization in the country. Nepal Bank Ltd. remained the only financial institution of the country until the foundation of Nepal Rastra Bank is 1956 A.

D. Due to the absence of the central bank, Nepal Bank has to play the role of central bank and operate the function of central bank. Hence, the Nepal Rastra Bank Act 1955 was formulated, which was approved by Nepal Government accordingly, the Nepal Rastra Bank was established in 1956 A. D. as the central bank of Nepal. Nepal Rastra Bank makes various guidelines for the banking sector of the country. A sound banking system is important for smooth development of banking system. It can play a key role in the economy.

It gathers savings from all over the country and provides liquidity for industry and trade. In 1957 A. D. Industrial Development Bank was established to promote the industrialization in Nepal, which was later converted into Nepal Industrial Development Corporation (NIDC) in 1959 A. D. Rastriya Banijya Bank was established in 1965 A. D. as the second commercial bank of Nepal. The financial shapes for these two commercial banks have a tremendous impact on the economy. That is the reason why these banks still exist in spite of their bad position.

As the agriculture is the basic occupation of major Nepalese, the development of this sector plays in the prime role in the economy. So, separate Agricultural Development Bank was established in 1968 A. D. This is the first institution in agricultural financing. For more than two decades, no more banks have been established in the country. After declaring free economy and privatization policy, the government of Nepal encouraged the foreign banks for joint venture in Nepal. Today, the banking sector is more liberalized and modernized and systematic managed.

There are various types of bank working in modern banking system in Nepal. It includes central, development, commercial, financial, co-operative and Micro Credit (Grameen) banks. Technology is changing day by day. And changed technology affects the traditional method of the service of bank. Banking software, ATM, E-banking, Mobile Banking, Debit Card, Credit Card, Prepaid Card etc. services are available in banking system in Nepal. It helps both customer and banks to operate and conduct activities more efficiently and effectively.

For the development of banking system in Nepal, NRB refresh and change in financial sector policies, regulations and institutional developments in 1980 A. D. Government emphasized the role of the private sector for the investment in the financial sector. These policies opened the doors for foreigners to enter into banking sector in Nepal under joint venture. Some foreign ventures are also established in Nepal such as Nepal Bangladesh Bank, Standard Chartered Bank, Nepal Arab Bank, State Bank of India, ICICI Bank, Everest Bank, Himalayan Bank, Bank of Kathmandu, Nepal Indo-Suez Bank and Nepal Sri Lanka Merchant Bank etc.

The NRB will classify the institutions into “A” “B” “C” “D” groups on the basis of the minimum paid-up capital and provide the suitable license to the bank or financial institution. Group ‘A’ is for commercial bank, ‘B’ for the development bank, ‘C’ for the financial institution and ‘D’ for the Micro Finance Development Banks. Generally banks in Nepal are opened 9 am to 3 pm Sunday to Thursday and 9 am to 1 am on Friday. But nowadays most of banks in Kathmandu are opened throughout the week.

There are 32 commercial banks, 79 development banks, 79 financial companies, 18 micro credit (Grameen) development banks and 16 saving and credit co-operation(licensed by Nepal Rastra Bank) are established so far in Nepal. The bank with the largest network in Nepal is The Nepal Bank Ltd. These commercial banks and financial institutions have played significant roles in creating banking habit among the people, widening area and business communities and the government in various ways.

Free Essays

Airline Differentiation

Airlines Differentiation In the world of airlines there is a huge market for varies airlines that offer different services to the customers to gain the competitive advantage. In the following article we will outline the differences between airlines like: “Emirates airline”, “Qatar” and “Air Arabia”. Those airlines will mainly differ in following criteria’s: • Price is one of the most important differences that airlines would have among each other. Looking at Emirates that has competitive pricing to the rest of its rivals in similar service quality we can say that services of the airline would affect the difference in price among the airlines.

This example shows us that Qatar Airlines as it is the first Five Star Airline that offers premium services would differ in price compare to Emirates. Customers can choose what quality of service they would receive according to the price they want to pay. That’s why we thing that airlines can be split in to three separate press categories according to the service they offer. Emirates would fit in the middle price category compare to Qatar Airlines which offers superior service for a superior price.

The last category of price range we would consider Air Arabia as it has the minimum possible service but also has the lowest price range for varicose destinations (An example: Emirates offers return flight to Bangalore from 20th December till 23d December for 2640dhs. , Qatar offers the same flight for 2350dhs, Air Arabia offers for 790dhs). • In flight service would show the biggest difference among the three airlines. Looking at Emirates and Qatar airline we can see that inflight service at Qatar would be Five Star class compare to Emirates four star.

For example Qatar would offer its Five Star Award winning wines and champagnes to attract customers with is superior inflight entertainment system while sited in De Luxe seat. Looking at Emirates which service would differ as Emirates sets out lower standards for its guests compare to Qatar. However Emirates still can compete with is good dinning quality on board that offers maximum possible value for money accommodated by friendliness from the inflight crew well established entertainment system. One of the main differences of Emirates compared to the rest of the airlines is that Emirates has on board inflight shower system which none of ther airlines have in the world. Looking at the basic service that is offered by Air Arabia we can see that this Airline mainly offers flight to the final destination without any extra in price services. There is no entertainment system on board seats are very small and food has to be paid extra if wanted. So as we can see Air Arabia would fit in to the lowest service range as it offers it services to economic class passengers. • Looking at convenience we can say that Emirates and Qatar airlines try to offer maximum possible comfort for its passengers that includes pick up and drop service for its premium passengers.

Emirates airline has a slight advantage in convenient offering worldwide lounges for its premium class travelers which Qatar Airways doesn’t. For the convenience of the passenger airlines like Emirates and Qatar offer online check in that allows the customer to print out its boarding pass and just hand in the luggage in the airport. Compare to the big airlines Air Arabia has to offer its availability for smaller destination types that are not served by the big airlines (Example: Destination range of Emirates over 100 destinations same as Qatar, however Air Arabia currently fly to 65 destinations only). Safety plays an important role for all three airlines as all of those airlines above want to create a good reputation with high safety standards for its travellers. There is minimum any safety regulations among the three airlines as they don’t spare any cost when it comes to keeping its customers safe. Only Emirates has additional insurance policy which provides 1 million dollars in case of death. Reference: http://www. airarabia. com/crp_1/pr-faqs&stitle=pr-faqs&pid=127 http://www. emirates. com/ae/english/destinations_offers/route_maps/route_map. aspx http://www. qatarairways. com/ae/en/ceo-message. page