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Introduction - Global Issues in the Airline Industry
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Merger is a corporate strategy in which two companies are come closer for making a joint venture and seen as a single enterprise at marketplace in order to improve their financial situations or to enhance operational strength (Grosbois, 2012). Now-a-days this policy is adopted by 'n' number of association due to various reasons such as; to reduce their business risk, maximization in profit, financial support etc. Therefore, it has been observed that in airline industry numerous of mergers are taking place for overcoming challenges or threats which is faced by them. British airways is a second largest airline company in UK and later on it merged with Iberia, creating “international airlines group (IAG)”. Hence, this assignment is going to identify various challenges and threats encountered by aviation industry while operating their business.
1. Strategies adopted by airport planners to deal with increasing dynamic airline network
Overview of industry:- Aviation sector of UK is consider as a fourth largest national airline industry across the globe as well as third largest in European market by having almost 6.4% global market share in 2016 (Belobaba, Odoni and Barnhart, 2015). In fact number of domestic airline companies are emerges in British aerospace industry for example; Hybrid Air vehicles, Rolls Royce (Worlds second largest innovator of defence aero engines) , Britten-Norman, Cobham, GKN, British airways etc. Basically, UK aircraft sector has made many more significant contributions in the chronicle stories because they are solely liable for growth and introduction of first plane by having enclosed cabin.
Thus it has been identified that its not easy to survive in this competitive world due to increment in complex airline network; thus to deal with these kind of problems entrepreneur of aerospace companies requires to adopt effective strategies. Thus, two major schemes which is utilized by British companies of aerospace sector are explained as follows:-
Low carrier model:- In the starting of this era, aircraft companies are trying to identify different concept of flying and techniques for capturing attention of customers. Therefore, in order to adopt something new, managers of an organization go for “low cost carrier” (LCC) in which there is absence of foods, frills, drinks, spacious seats but charge a very minimum fare. After introduction of this tool, competition increases between full services aircraft and LCC and later on it become a major issue in this industry as well as have a greater impact on a entire sector or European market. However, not every low cost carriers get succeeded in bringing benefits, only few of leading operators are capable in earning consistent level of returns on their investment due to their effective planning.
Origin of LCC:- Initially, this technique is used in around 1949 at United states and after that “Pacific south-west airlines” became a benchmark in aerospace industry. In today's world “south-west airline operating” which was started with small “Texas airline” named when it was established but later on this organization developed to become one of best aviation company in united stated by having almost 3100 regular flights in almost 62 cities and registers nearly 80 millions customers in a single year (Cowper-Smith and de Grosbois, 2011).
Significant features of LCC model :- This strategy is growing in a fastest way due to its simplex process with full of additional facilities on extra charges. Most of the successful and well settled companies are using this technique for increasing their sales in a minimum time period as well as trying to gain customer trust. Therefore, useful or different features of LCC model are expressed as follows:-
- Simple products:- According to this element, passengers may demand extra facilities by paying charges as per their requirement for example; food is served on immediate order, planes with flexible seating without having any other services instead of basic needs.
- Positioning:- As per this component every persons haver their services according to their
- Minimum operating prices.
After analysing all the essential facts or figures about this model it has been identified that, company using this tool have to face few challenges which have a greater impact on their success or return (David, 2011). Therefore, Doganis had observed four different issues of low cost carrier which are described below:-
- Problem regarding capacity.
- Minimization in average price. #BBD0E0 »