Management Information System In Jet Airlines

Data analysis plays vital role in determining which resources to use in order to achieve the mission of an organization. The world is developing an increasingly global market and economy.
The basic management information system measures inputs and/or outputs, allowing managers to analyse the relationship between them and make decisions based on the outcomes they desire.Day to day example can be a speedometer, a speed-measuring system
Types of Management Information Systems
The different types of MIS can be classified into the following:
Transaction-Processing Systems:
With the advent of mainframe computers, Transaction-processing systems were introduced in the 1960s. They are designed for the banks to handle a huge volume of routine, recurring transactions. They record deposits and payments into the accounts, record sales and track inventory..
Operations Information Systems
After transaction-processing systems, operations Information Systems came into existence. It gathers information, organises and summarises it in a useful form. It access data from TPS and moulds it into suitable form. One can obtain sales report or inventory etc from this.
Decision Support Systems (DSS)
DSS is an interactive computer system. It hasthree fundamental components:
database management system (DBMS), model-based management system (MBMS) and dialog generation and management system (DGMS) which can be used for decision making.
Expert Systems and Artificial Intelligence
ESAI use human knowledge encapsulated in a computer to solve various problems that usually requires human expertise. Computer recognizes, formulates and then solves a problem. It also explains the solution and learns from its experience as well.
Introduction to Jet Airways
Jet Airways is a leading Indian airline with its headquarter in Mumbai, Maharashtra. It is the second largest airline in India and the market leader in the domestic sector. It offers over 400 flights daily to 67 destinations worldwide.
Main domestic hubs: Mumbai and Delhi.
International hubs: Brussels Airport, Belgium.
It is owned by the London-based businessman, Mr. Naresh Goyal.
BACKGROUND
Jet Airways emerged with its first flight in 1993. It is one of the fastest expanding airlines in the world, and in future will become the most preferred airline making your journey enjoyable. Jet Airways offers flights to 24 international destinations and 43 destinations in India.
OVERVIEW
Jet Airways was incorporated as an air service operator on 1 April 1992. It commenced Indian commercial airline operations on 5 May 1993. On 4th January 1995, Jet Airways was granted a scheduled airline status.The company is registered on the Bombay Stock Exchange. Although,a major portion (80% of its stock) is controlled by Naresh Goyal.
It has over 10,017 employees (March 2007).Jet Airways has fleet of 90 aircraft.
CORPORATE VISION
Jet Airways will become the most preferred domestic airline in India. Jet Airways will achieve this outstanding position by offering a high quality of service and reliable, comfortable and efficient operations.Jet Airways will uplift the concept of domestic airline travel -to be a world class airline.
It will achieve this objective even while ensuring consistent profitability, achieving long-term returns for its investors and providing its employees with an environment for excellence and growth.
Information Systems in Airlines
Airlines exist to connect people to distant locations very efficiently and safely while making profit for the shareholders. . There has to be a trade-off between the three aspects.
Thus, the designing of information system is very essential and its management helps them reach the organization’s purpose.
Key indicators in management are required to guide the working of the process and making changes in resource allocation. A management information system regularly provides information about the efficient working and function of the organization.
The ultimate aim of the airline industry is to make the passengers’ journey comfortable and convenient. The different procedures in the airport and airplane should be simplified and highest degree of customers’ satisfaction have to maintained in order to succeed in today’s competitive world.
The Current Scenario
The airline industry is constantly evolving and incorporating the latest innovations and technologies all with a common aim to make the journey of the passengers more and more comfortable and convenient.
All the different procedures that the passenger goes through in the airport and airplane have to be simplified and highest quality of satisfaction for customers have to maintained by airlines in order to succeed in today’s competitive scenario.
Flying is nowadays one of the fastest and easiest way to cover large distances. It saves a lot of travelling time compared to other means of transport. For employees, this is a huge bonus as the business can be carried out at a faster speed as they can reach their destinations in a matter of hours. The 4 basic factors that the airline industry has to carefully tackle are as follows:

Efficiency
Speed
Safety
Comfort

Every year more and more people are resorting to airlines as a mode of transportation and hence constant innovation and establishing a unique relationship with the passengers is the need of the hour. Hence, the importance of the technology of integrated systems has become clearer and unavoidable in the airlines for the future as well.
Improving Air Transport Information Systems
It has been seen that many vendor companies are doing constant research and development in the technologies which have a prime aim to improve customer satisfaction and provide better services to the customer. Huge investments are also being made in this area which has a lot of scope of improvement.
Example of such service can be self- checking kiosks, in-flight entertainment and connectivity, check-in via mobile phones, airport and baggage management services.
Currently what can be seen as the prime objective of the airlines is: Optimizing revenues while maximizing customer relationships.
Management Information system in Jet Airlines
VENDOR: IBM
Jet Airways and IBM have announced that the companies have signed a business transformation for 10 years and information technology (IT) services agreement. Valued at 62 million US dollars, the agreement is a major step towards Jet Airways’ journey of technology led business transformation, which will help the airline to achieve significant growth by implementing the company’s IT with business strategies.
Jet Airways aims to use IBM’s domain knowledge of the global airline industry and its leadership in technology to meet the group’s business transformation objectives. As part of the deal, IBM will provide with the latest technological solutions to transform the airline’s various business areas such as airport operations, direct distribution and frequent flier programs.
IBM has provided Jet Airways with cutting edge IT Infrastructure and application to support services including employee transition, data centre operations, help desk support and storage operations, internet security services, network management, SAP and various other operating systems.
Customer Relationship Management
CRM stands for Customer Relationship Management. It is methodology used to learn more about customers’ needs in order to develop stronger relationships with them. CRM has always been a matter of great concern for airlines aspiring to improve relationships with the customers.
Airlines that can effectively target, attract, serve and hold the best customers will definitely experience significant benefits. The better the bonding the airline holds with these customers, the more opportunities will be open for selling additional products and services.
However, as the ‘e-business’ is evolving, the hurdles of establishing customer relationships have become even greater. Airlines must be completely responsible for a customer’s satisfaction whilst the “want it, buy it and use it” experience.
Advantage of CRM In Sales and Marketing
CRM defines marketing processes and satisfy customer requirements using functionality to improve management of resources, segments and lists, campaigns, trade promotions, and marketing analytics. It also enables management of accounts, product configuration, opportunities, quotations, orders, contacts, activities pricing, billing, and contracts.

Make smart business decisions with improved customer relations.
Speedy access to databases so faster marketing.
Improve visibility of your entire marketing process
Increase returns on investments.
Grow profitable relationships
Maintain focus on productive activity
Eliminate barriers to productivity
Improve sales efficiency Service
Transform service into a profitable line of business
Increase customer loyalty
Reduce costs of customer service and field service

CRM in Jet Airways
The figure 5 shows a few special offering from Jet Airlines
The special offerings from it are as follows:

It offers free tickets
Special rates for Students
Special Fares for corporate deals
Jetlite Surprises
The other Customer Relationship Management activities also include:
Rapid Rewards program for all passengers that make all their reservations online.
Incentives include lower rates, express boarding passes, and in-flight bonuses like free snacks & drinks.
Business Rapid Rewards for Business travelers.
Special Benefits and services for Senior Citizens

Vendor For Jet Airways’ CRM: EPSILON
The emerging digital marketing company Epsilon’s email solution will now provide customer and trade communication services to Jet Airways in order to improve their relationship with customers. Jet Airways known for its in-flight services is striving hard to enhance its customer relationship management and loyalty management.
Various surveys were conducted and was found that customers prefer email as the channel for communication. Thus, in order to be forward it selected Epsilon’s email marketing services. Epsilon is a pioneer in email sevices and provides exact view of all the customers.
Such an overview allows the airways to design solutions for targeted customers which also increase its brand equity and nurtures great profits with loyalty.
Epsilon’s email platform speeds up the email delivery. Ithas an intense tracking and report forming features as well as optimisation tools that enable Jet Airways to enjoy the benefits of relevancy in communicating with the customers.
It also allows Jet Airways to monitor and track the position and status of specific email communication all the way from booking to enquiry transaction. This allows the airline to improve its profile and transaction behaviour data to ultimately achieve one-to-one relationship with its customers.
Jet Airways currently publishes a monthly email newsletter to Jet Privilege members, all the travel agency partners and corporate clients. The company is planning to introduce transactional e-mailing through the Epsilon platform, such as registration confirmation, welcome messages and purchase confirmations.
Conclusion
In general, the airlines have to ensure that they strike a proper balance between the customer services and operating costs. In the aviation industry, the competition is ever increasing as more players enter each year. Effective management of information systems can definitely help in attaining these goals and also assist to incorporate the innovative solutions as well.
In order to meet to meet these challenges, lot of companies and firm are working on different software and solutions with a common objective in mind to make travel both – easy and convenient
It is important to choose the suitable information that will help managers observe their situation clearly. When airlines observed management information systems that included loss in the revenue due to not selling empty seats or rooms, they managed ways to get some value from latecomers at deep discounts.
A good information system in practice can ensure that the operation is able to run efficiently with clear focus on customers. By incorporating better and better technology systems, we can reach out to demands of more customers and also strengthen vital features like security, avoiding delays, reducing the cost of travel. The scope of improvement is virtually endless and the companies will have to keep on evolving in order to survive in the future as well.
 

Environmental Analysis of Malaysia Airlines

The general environment represents the outer layer of the environment which are international, technological, sociocultural, economic, and the legal-political. The task environment includes all sectors that have a direct working relationship with the organization, customers, competitors, suppliers, and labour.
International element is represents the events originating in foreign countries. Technological element includes scientific and technological advancements in a specific industry and society. Sociocultural element represents the demographic characteristics such as norms, customs, and values of the general populations. Economic element is divided into and socialist. Capitalist means the organization will get the entire profit where else socialist means the production own by state or government. The legal political are about the government law and regulations as well as political activities designed to influence company behaviour.

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Customers are the people who acquire goods and service from the organization. Competitors and client are the other organization from the same industry that provides goods or services to the same set of customers. Supplier is the people who provide raw materials for the organization to provide output. Labour supply is the people in the environment who can be hired to work for the organization and can influence the organization labour markets. Government Agencies are the agency that provide services and monitor compliance through laws and regulations.
 
As mention in the company profile at Hoover’s website, Malaysia Airlines serves about 80 destinations on six continents, some via code-sharing, from its hub in Kuala Lumpur. According to an interview (En-Lai Yeoh, Associated Press Writer 2006), Idris Jala quoted that although MAS have many international competitors, the top competitors are among the regional rivals Singapore Airlines, Cathay Pacific, Thai Airways and Gulf Air. Low cost flight was also launch in Malaysia, few years back and named Air Asia. It became MAS local competitor. At first MAS was not really affected as this low cost flight named, Air Asia, only control the local state destination with a very cheap price. Slowly, Air Asia attract customer to fly using its flight. After sometimes, Air Asia launched its destination to outside Malaysia. MAS were affected not only by Air Asia but also other country low cost flight. MAS will face many difficulties if they were to beat the low cost flight’s pricing range.
Malaysian professional and skillful increased and they tend to travel quite frequent which they will seek for the great service with time efficiency offered, especially the successful businessman. In order for MAS to respond to the customer needs, they have send spies to their rival. This is one of the way that MAS can improve their weakness and at the same time to learn their rival’s weakness part. By receiving quite a number of awards, many customers were attracted.
Idris Jala quoted that the trade secret is MAS must establish the lowest fare, which all international routes will have designated seats matching their competition’s lowest fare. Currently MAS has also introduced their low cost flight called Fire Fly. Ticketing system were upgraded that able to monitor ticket prices to match the lowest offered by its competition on similar routes and possibly review its fuel surcharge, Idris Jala added (En-Lai Yeoh, Associated Press Writer 2006).
Malaysia Airlines has provided a very friendly website for its own respective customer which is providing the full controlling of the ticket booking system with all the details such as number of passengers, destination and so on to the very specific details.
Malaysia Airlines has some such as partners with Malaysia-based Maxis Communications Berhad and UK-based AeroMobile Limited to offer in-flight mobile services such as voice calls, SMS, emails services to Maxis post-paid customers. The rest of the facilities and services are the same as the other airlines like for in cabin services like providing the international meals as well as local food for Malaysians or Entertainment systems for watching Movie or playing games and also checking the status of the flight.
The airline provided the customers insurance during the flight hours in case if anything happened to the customers they will be responsible for it . And passengers can only carrying 30 KG for their luggage. Malaysia airline has been provided such a facility that if the customers accidently miss the flight they can just simple take the next possible flight. But sometimes customers need to pay some amounts to join the next flight and it’s all depends on the type of tickets that they purchased.
Sometimes for Malaysia Airlines ticket discounts will be. those few months before your travel tickets are purchased. And discounts for students that is considered. such as GRADS – the frequent flyer card for students. This card has local and international students. That students can use this card costs less to have their flights.
In the recent years, Malaysian Airlines (MAS) has been continuously improving their services with accordance to the rise in social network as well as smartphone users. New applications such as MHmobile, MHdeals, and MHbuddy complement each other to draw better publicity along with a good flow of business. A user-friendlier navigation following the website’s makeover has served no less. Existing yet innovative technology such as the Select in-flight entertainment system has also given MAS an extra edge over their competitors.
REFERENCES
1. Malaysian Airlines (2011) ‘Malaysia Airlines Launches Going Places iPad App’ Investor Relations: News. http://malaysiaairlines.listedcompany.com/newsroom.html [Accessed 23 February 2011]
2. Malaysian Airlines (2011) ‘Refreshed Mas Website To Enhance Customer Experience’ Investor Relations: News. http://malaysiaairlines.listedcompany.com/newsroom.html [Accessed 23 February 2011]
3. SITA (2011) ‘Malaysia Airlines adopts SITA reservations system as turnaround enters new phase’ SITA: Specialists in air transport communications and IT solutions. http://www.sita.aero/news-events/press-room/press-releases [Accessed 23 February 2011]
4. Luxury Travel Source (2011) ‘Malaysian Airline Airfares from Luxury Travel Source’ Luxury Travel Source: Discount Travel Company offering Business Class Airfare tickets for Destinations worldwide. http://www.luxurytravelsource.com/airlines/malaysia_airlines.html [Accessed 24 March 2011]
5. Malaysian Airline System Berhad (10601-W) (2009). 2009 Annual Report: Investing in Growth. Subang Jaya, KL: Malaysia Airlines System.
6.
 

Emirates Airlines: Key Performance Indicator Analysis

In this simulation you chose a sector to operate in (budget, mid-range or luxury). What have you learned about these sectors as a result of your experience in this simulation? What would you have done differently at the beginning of the simulation and why? What would you have done differently to be more successful during the simulation and why?”
In this sector we operated as Emirates Airlines in mid-range as a view that there is a huge population in the sector and even if circumstances favours even budget and luxury passengers would opt for mid-range. In this sense during the start we sold 3 flights which we had as it doesn’t had head room and toilets and leased three flights for the operation. We started 1st quarter selling tickets for 35 cents and it’s a mistake that we changed to luxury airline selling for 48 cents right after the 1st quarter. As this would have changed our target customer and all the operation should also been changed accordingly. We incurred heavy expenses on Promotion and advertisement which hadn’t created any impact. There were complaints from customer for poor food services which we realised and started allocating cost for quality and services. High concentration would have been made on maintenance and market research which is the important factor in competitive industry like Airline.
There are certain factors which can be focused and done differently at the beginning of the stimulation:
Strategic Approach: we did not have any strategic approach when we started our simulation. And that is the reason we had made unreasonable decisions like shift to luxury and sales of aircraft. if we had a strategic approach we would have sold the flights when there is huge profit and avoided lease payment to be added in the expenses. Also we would have shifted to luxury at least after the 4th quarter when we had a good customer base and market. Hence instead of having a single strategy, it would have been better if we had followed a mixture of strategies in terms of pricing, marketing and services.

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Systematic Approach: there is no systematic approach at the beginning of the simulation. We blindly sold the flights without ascertaining the financial position and brought new flights during 6th quarter which we wrongly numbered and resulted in the purchase of another 3 flights when the company is already in a loss and thereby realised and sold a flight at 7th quarter. The fuel, flight operation and maintenance cost got drastic increase and because of the increase in the number of passengers we did not suffer huge loss. Hence if we had a systematic approach from the beginning we would have reached a good profit.
Pricing: A price cue is defined as any marketing tactic used to persuade customers that prices offer good value compared to competitors’ prices, past prices or future prices (Rao, 2010: 150); at first we sold the tickets for 35 cents as mid-range airline and suddenly hiked the price to 48cents as luxury airline. We did not have idea about the impact and did not take steps to offer service according rather invested in promotion and advertisement. We realised it as mistake and felt that the pricing is an important factor in attracting customers only during 5th quarter and reduce the price to 40 cents and only after that we were about to increase the number of customer. Hence if the pricing factor has given significant importance on the start of the simulation, the company would have escaped from losses.
Actions would have been taken during the stimulation for success:

Proper maintenance of aircraft in order to avoid fine from FAA.
Good system for customer reservation system to be flexible, fast and user-friendly.
Strong investment in market research to enable sales forecast and market situation analysis.
Proper training and quality to make the customer feel satisfied and get the luxury in food and other services.
Good systematic maintenance of accounts in loan interest repayment, lease payment, depreciation in order to have a clear view of the actual profit.
Strategic allocation of expenses on promotion and advertisement, sales forecast and social performance
Strategic approach on pricing and increasing the number of sales person according the number of flights operated.

What were the KPI’s you used in running your airline and did they change? Critically appraise the value of the information you had available to you in the results packs during the simulation. How did you use this to affect your decision making?”
The below are the Key Performance Indicator we as a team of Emirates Airlines believed at the beginning of the simulation which we tried following throughout the quarters but some were forced to reframe it due to company’s situation and response. Thus once an organization has analyzed its mission, identified all its stakeholders and defined its goals, it needs a way to measure progress toward those goals. Key performance indicators are those measurements which help to define and measure progress towards organizational goals (Geoff, 2009: 419)
Flight Operation: The important KPI we followed is in terms of flight operation. We believed that achieving 80% of maximum mileage per day would definitely yield a profit. As flights can be flew only with the maximum passenger and also includes the number of flights used. Hence it can achieve all in one KPI. We achieved this until quarter5 reaching 70% in each but it got changed due to purchase of 3 more flights without knowledge which made the company to focus on the reduction of expenses and deviated from the miles operating.
Promotional and sales forecast: Emirates Airline team believed that high investment in promotion, advertisement and sales forecast can lead company’s success. In terms of sales forecast, our KPI was in a correct way. But in terms of promotion and advertisement we changed and reduced the level of expense as the company started to incur loss.
Financial Perspective: we thought revenue is an important factor for an airline company to be successful as there will arise uncertain circumstances due to weather or fuel price, hence had a KPI to increase the revenue through Fares. We started a s mid-range and attracted maximum customers and shifted to luxury charging huge fare as a KPI of increasing the revenue. We are badly affected till 5th quarter because of this factor and then reduced the pricing.
The information we got through the value packs and incident feedback was very helpful in refining our performance and take corrective measures. Not only in terms of finance but also in terms of flight operation and service, the index feedback gave us the measures for improvement. The company was in a tough situation after the shift to luxury airline, where the incident feedback helped us to identify what was going wrong. The below are the some changes we effected from the information we got through the value packs,
Increased the number of flights and number of flight routes.
Decreased the ticket fares in order to increase the number of passengers.
Concentrated on cabin services to increase the quality service to the passengers and reduce complaints.
Taken measures and allotted funds on aircraft maintenance to avoid accidents and escape from fine.
Got knowledge that the huge loss of the company is due to the purchase of 3 additional flights resulted from mistake in numbering in the software.
Came to know that a flight was unused hence sold the flight to avoid maintenance expenses.
We felt the importance of passenger service and allotted more fund towards it.
Giving due consideration to theory, evaluate how a merger or acquisition might have changed your outcomes and the way you operated during the simulation? What additional implications would there have been for your company?”
Merger and Acquisition are often used inter-changeable concepts while merger is the combination of two companies in order to form a new company and Acquisition is a company’s purchase of another company where there is no formation of new company (Scott C. Whitaker, 2012). Merger and acquisition have a common goal of attaining synergy.
There are certain factors that should be taken care while going in for merger or acquisition as it results in cultural risk, business, employees and customer retention risk. These risks may not be applicable if Emirates would have planned the merger or acquisition in the initial stage that is before 4th quarter but if it is after that the above said risks should be taken care of. Hence it is evident that the nature of company to which going to be merged or acquired should be taken into account that it should be similar in business and should be stronger in operation as emirates are operating in a tough situation.
There are many advantages for company to go in for a merger or acquisition. We as a emirates airlines can merge or acquire a financially strong airline whereby we become economically strong and can reduce the cost of capital (Donald M. DePamphills, 2009). In emirates during 5th quarter, we had a NIL balance of cash flow after the overdraft loan hence during such situation merging with company with good cash flow will be a potential decision. Also there will be a positive impact on the stock price especially for companies like emirates where we had our stock price in negative numbers. Not only in financial terms, merger and acquisition also helps in terms of operation synergy. For e.g., if we Emirates team go for a merger during our mid-quarter with a company which is technologically strong we would have had a chance for competitive advantage and fast growth platform (Scott C. Whitaker, ). We would have not made a mistake of unsystematic approach in buying a flight during our 6ht quarter by which we suffers a heavy loss. There are major operating cost involved in terms of Airlines they are fuel, maintenance, interest expenses, lease amount, promotional activities, market research, taxes and so on. These costs would have been spread between two companies after merging.
Merger and acquisition are also helpful to use the assets and skills of the other companies merging or acquiring with. We as Emirates team lacked in terms of allocation of expenses and proper maintenance of aircraft. Hence merging with a managerial strong company would have helped us to move in the right path. It helps in improving the operating efficiency with a combined activity of the merging firms thereby can enjoy the market power. This is called market power theory. With this the company can have a control on the pricing and suppliers and also can have customer base.
As a team of Emirates Airlines only in the 1st quarter we were able to make a profit. It may be because of the sudden shift to luxury airlines which made us to suffer from continuous losses till 6th quarter. Our stock price also went on negative price. Hence merger or acquisition during the mid-quarter would be the better decision as it would have reduced the cost and share the total cost. We also had a reduction of pricing on 5th quarter which can be avoided when we had merger with our competitor. We lacked in many operation areas like customer satisfaction, aircraft maintenance and proper allocation of expenses, hence merger and acquisition would have been potential at early stage.
Appraise how successful your company was in your industry. Were your relative success / failure due primarily to your analysis and diagnosis or the choices and decisions you made? Which models and theory did you consider when participating in the game and how did this help you?”
Planning, executing and monitoring are the key aspects for a company to be successful. And in industry like Airline where there are ample numbers of risks, it is important that the firm follows a strategic approach. We as a team started to operated Emirates airlines as mid-range where in the first quarter we are able to have a good level of passengers and thereby revenue. We did not have a view on the level of risk in shifting to luxury range all of a sudden in the second quarter and increased the fare at a higher rate. Only during fifth quarter we came to know the importance of price factor and reduced the fare. The team did not understand that shifting to luxury range should be accommodated with high quality service to be competitive. We felt its importance from the incident report at the time when the company is already in loss. To my knowledge the company started off well but faced tough situations and failures and also attained the survival stage where it can reach a decent profit in the next quarters. We had a systematic approach to some extent and made many innovative measures like online reservation system which is a success to us, but the decision what we made to buy a flight when we were in deficit lead to failure. Also we are not managerial approach as we wrongly numbered and the software bought additional 3 flights which added to a further loss. We had a clear view in allocating resources for aircraft maintenance, but because of the above mistakes we made during the simulation, we were unable to allot adequate resources for maintenance which lead to engine failure and fine from FAA.
At the beginning of the simulation we used resource dependency theory (Aldrich, 1977) where we believed the company can be affected to some degree with its external environment. Hence we took measure to influence the environment. Our external environments are customers, public and the airline industry. We thought investing heavily in promotion and advertisement would definitely create competitive advantage and a brand image among the customer where a hike in the fare will become a hidden factor. Hence during the second quarter we allotted $40000 on advertisement and shifted to luxury airlines with fare of 48cents. But only during the subsequent simulation we felt that there is no relation between the promotion and competitive advantage in a highly completive airline industry and understood the importance of cost and service factors. Hence we reduced the price and concentrated on quality and training. We also started concentrating on cabin services and passenger services with the rise of customer complaints which came to our knowledge through incident feedback.
We as a team felt the importance of strategic approach during the simulation. During the end of the quarter we were clear about the strategies to be followed and we were sure that our company will make a good profit if it has another two quarters as we could find the changes in stock price with our corrective measures. The simulation gave us a vast experience about the concept of risk management, strategic approach and resource allocation. We also felt the importance of group dynamics in running a successful business.
 

AWS Solution for American Airlines

American Airlines are one of the famous airlines globally. Ever since a long time the airline is facing technical & maintenance issues. The airline adopted IBM cloud solution but is still in trouble due to its legacy system & incapability to analyse huge real time data and draw useful insights over the competitions. AWS provides wide range of solutions and tools not only to solve technical problems but also to improve overall business productivity and performance. AWS provides services which are highly available, scalable, secure and at a low cost. Services like EC2, S3, RDS, Glacier, ELB, Route53 and more will provide better solutions to the problems currently experienced by AA. In this report we provide possible solutions to the problems, information about selection and justification of AWS technologies, cloud environment, VPC structure and few successful stories of existing airlines adopting AWS solution for similar problems.

Table of Content 

Executive Summary

Introduction

Existing Cloud Architecture

Challenges for American Airlines

Infrastructure Issues

Technical Issues

Possible Solutions

Technologies Used

Environment & Availability Zones

Virtual Private Cloud (VPC)

Justification

Successful Stories

Conclusion

Future Scope

References

Table of Figures 

Figure 1 Vmware HCX IBM Architecture

Figure 2 Cloud Global Market Share

Figure 3 american airlines presence in world

Figure 4 number of availability zones per aws region

Figure 5 time for data transfer across region

Figure 6 ec2 latency across region

Figure 7 date from when services are avail in regions

Figure 8 no. of days for service unavailability in a region

Figure 9 vpc environment

American Airlines is a major US airline having their headquarters in Fort Worth, Texas. AMR Corporation, the parent company of American Airlines, merged AA with US Airways in the year 2013 to become the largest airlines globally in terms of revenue-which is over $40Bn as of 2018, destinations served-more than 350 destinations, fleet size-956 mainline flights and scheduled passenger-kilometres flown. AA have 3 different strategic business units: Mainline passenger-operated by the airline’s main operating unit, Regional passenger-operated by regional airline’s operating unit and Cargo segments. Over 6700 flights are operated per day serving more than 350 destinations across 50+ countries. AA has a very large domestic presence which gives the company more than 60% of their revenues and the rest is by international flights and cargo. Passenger business constitutes to the 70% revenue and 87% of this revenue is in the form of airfare.

Earlier American Airlines were always on highlights for its system failures and malfunctions. They started gaining the reputation of not being so technically advance. Thus, American Airlines started assessing cloud providers and decided to move customer site and other applications to cloud.

According to Maya Leibman[1] (Chief Information Officer at AA) said that, “The company aims to revamp portions of the aa.com website so that the customer service and booking site can take advantage of on-demand computing power offered by cloud infrastructure.”

In 2016 American Airline partnered with IBM and started using its VMware HCX solution to deploy legacy systems which include its customer-facing applications to the cloud mainly for booking system and customer service. Researches makes it evident that AA is still facing problems with its IT infrastructure, flight maintenance systems, glitches in reservation systems, website crash and many more applications impacting its reputation & revenue.

Figure 1 Vmware HCX IBM Architecture

Though the company migrated its traditional legacy system to IBM cloud still there are some issues with the existing provider. Firstly, IBM is using third party open-source products to provide PaaS Services. For example, IBM doesn’t have its own serverless feature and is dependent upon Apache OpenWhisk unlike Amazon which had Lambda & EC2 which are closed.

Secondly, IBM have a small community support over social media and Stackoverflow compared to Amazon Web Services.

Thirdly, the global market share of IBM is very small. According to article published by Nodericks Technologies[2], the global market share of AWS cloud is the highest among all the cloud providers.

Figure 2 Cloud Global Market Share

Infrastructure Issues 

One of the main reasons for flight cancellations/delays is problem with infrastructure which could be like lack of resources, security issues, performance, etc. On Thursday (14 June’18) PSA Airlines[3] subsidiary of American Airlines faced huge flight cancellations due to failure in computer systems impacting crew scheduling & tracking systems. Total 700 flights got cancelled on Thursday & Friday. The issue didn’t disappear over weekend and PSA suffered about 1100 flights cancellation by Monday cumulatively. Technical glitches caused American Airlines share to fell
Systems affected:

      Crew Management Systems

      Tracking Systems

Technical Issues 

In April 2015 when the flight was delayed due to an issue in the Jeppesen app. Jeppesen is a digital flight bag or an app used by pilots to observe the activities occurring on the runway. A duplicate airport runway chart occurred in the app which did not sync with the app’s version. Due to this, the app become unresponsive and the pilots could not see the runway which resulted in flight delays for almost 2 days.

One more incident took place in November 2016 with Sabre, the company which handles the airlines reservation system faced temporary outage in check-in systems. This affected not only American Airlines but also other regional carriers associated with it. The company had its backup systems in place, however these systems are connected to a single micro switch.

In February 2017 in Philadelphia, American Airlines had a planned maintenance power outage between 1 to 4 a.m. Even when the power came back on, the internet access remained down. Due to this the airlines were unable to print boarding passes.

Another issue recently faced by AA on July 2018 was when computer outage halted flight operations for about 30 minutes. The main reason behind this was OS failure and brief connectivity issue with one of its datacentres.

Systems affected:

      Maintenance and Engineering System

      Central Reservation System

      Flight Operation System

      Airport Management System

In order to overcome above challenges below solutions can be adopted by American Airlines:

Reliable Backup Systems In order to provide more redundancy in case of hardware failures, we would require reliable backup systems which can be done using AWS Database services like Glacier, Simple Storage Service(S3). With AWS, we can replicate data across multiple Availability Zones & helps in fault isolation. The AZ’s are connected using high speed links.

Business Analytics Service American Airline can move towards more data-driven solution. The sensors of aircraft have massive amount of data. This data can be used for advanced aircraft maintenance methods and improving decision making of operational systems.With the use of Business Intelligence & data analytics we can not only predict about the condition of various aircraft parts but also it helps in making intelligent decisions about what needs to be done at any given time – such as, to repair or replace parts.

Amazon provides business analytics framework through its AmazonQuickSight service. Through this service we get business insights from data rapidly and it helps in performing advanced analytical functions. It also improves dashboards of airlines performance metrics using data visualization.

Disaster Recovery  

A disaster recover site is very necessary for any organization to keep the business activities running in case of any natural calamities, damage or cyber-attacks. Structuring a Disaster Recovery Plan (DRP) for on-premises infrastructures means creating a secondary physical site which is highly expensive. AWS has partnered with companies such as N2WS, Cloudberry lab, Commvault which deliver effective disaster recovery solutions. CPM also known as Cloud Protection manager which is sold as Amazon Machine Image in the AWS marketplace provides efficient backing up solution at much lower cost.

EBS stores incremental backups, so we only pay for the snapshots that have changed after your recent snapshot. Every snapshot contains the information required to restore the data to a new EBS volume. 

Monthly Cost of CPM = Cost of storing EBS snapshots + cost of running service &   CPM instance

Regular healthcheck of systems    

Even with robust backup systems applications tend to fail every time. This can be avoided by practicing real-time analysis and monitoring of systems which provide an integrated view of the system’s performance. Services such as AWS CloudWatch can be used to examine and manage an organization’s applications.

Below technologies will be used in our environment design: – 

     Elastic Compute Cloud (EC2)

     Simple Storage Service

     Relational Database System

     Glacier

     Elastic Block Storage

     Elastic Load Balancer (ELB)

     Amazon Elastic Cache

     Route 53

     Cloud Watch

     Identity Access Management

     Simple Notification Service (SNS)

     Quicksight

Availability Zones (AZ): AZ’s are geographic regions where the AWS have their data centres. Each AZ has 2 or more data centres which are independent but are located close to each other. The main function of AZ is redundancy and data replication.

American Airlines have a large customer base spread across the world. Even though their presence is worldwide, the frequency of flights operating in and around the US is more. North Virginia, Oregon, Ohio, Ireland and Singapore are the regions selected based on factors listed below.

Based on proximity to the customer or the user: AA airlines have a large domestic presence and their headquarters is in Texas, USA. It typically makes sense to have a greater number of regions in the US and few across other continents.

Figure 3 american airlines presence in world

Number of Availability Zones – If we are building applications with strict availability requirements, regions having more than 2 AZs is required because if one AZ is temporarily unavailable there will be two other AZs to process all the transactions which helps in better performance of the application.

Figure 4 number of availability zones per aws region

Regions have different latencies and data transfer speeds – N. Virginia and Ohio have the best inter-region latency with 23ms. For the application deployed in N. Virginia, Ohio is the best failover region.

Figure 5 time for data transfer across region

Figure 6 ec2 latency across region

Availability of services – As of January,2018 N. Virginia is the only region to have all the services available. Ohio, Ireland and Oregon are other regions where the service is available for most of the days.

Figure 7 date from when services are avail in regions

Figure 8 no. of days for service unavailability in a region

Cost of data transfer between AWS regions: The cost of data transfer between the AWS regions costs the same (20$ for 1GB), except for Ohio (10$ for 1GB). Ohio can be a best option for backing up of data.

It is a customer defined, logically isolated section of AWS where the AWS resources are launched on a virtual network. The customer has control over networking environments such as IP address range, creation of subnets and config of route table and network gateways.

      VPC Environment:

It maximises the number of AZ’s to isolate the data centre outage. For disaster recovery and high availability up to 4 AZs are recommended.

There are two separate subnets for routing requirements:

Public subnets for External facing resources

Private subnets for Internal facing resources

Independent routing tables configuration for each subnet to control the flow of traffic within and outside VPC. Allocation of one routing table for all the public subnets is enough as they all use the same internet gateway.

Usageof highly available NAT gateways instead of NAT instances.

Spare capacity for additional subnets for scalability.

NAT Gateway – Public Subnet

American Airlines mostly faced issues related to website crash, system outages and downtime which eventually led to flight delays, customer dissatisfaction, loss of revenue and negative impact on the reputation of the company. Similar kind of problems were faced by Porter airlines, which eventually adopted AWS cloud technologies. Today, the Porter Airlines has overcome a lot of major issues by migrating their Sales and Customer Service Engine on the cloud.

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During peak times, which usually comprise of holidays and festivals, American Airlines experiences a huge amount of traffic on its website. At other times, traffic is moderate and is the lowest from August to October. With such fluctuating volumes of traffic, it is necessary to scale up the resources whenever required and shrink them as well during non-peak times. This can be done using Auto-Scaling.

EC2: The EC2 instances support the airlines internal servers, applications and websites and increases the number of instances based on the incoming requests from users.

S3: S3 is used to store backup data which is already present in the RDS along with static images and files of front-end web applications of the airlines.

DynamoDB: It is used to track the web session data like session_id, user_id, session_data, last updated, created which can be essential in drawing insights from this data.

RDS: The RDS stores large sets of application and transactional data from the website applications which include customer profile information, flight details, booking summary etc.

Glacier: Data which is not being used frequently is usually stored In Glacier. Amazon Glacier is used to store such data for a long term.

ELB: Customers carry out various activities such as searching and tracking of flights, submitting form for user profile creation, updating their flight selection preferences and making payments and cancellations. All these tasks create multiple requests which are sent to the company’s server and may sometimes result into excess traffic. The Elastic Load Balancer distributes this traffic to several EC2 instances in one or more Availability Zones.

EBS: It is used along with EC2 instances to store the persistent data on the cloud. The infrequent data of airline like the history of last few years travellers, and other infrequent access data will be stored in EBS. The snapshot EBS is taken on a regular basis and it helps in disaster recovery.
Elastic Cache: It stores real time data such as flight tracking, baggage details, notifications about delayed /cancelled flights to provide ultrafast response.

Route53: It allows user to connect to Americanairlines.com and perform health checks of website

CloudWatch:  Every system application used by American Airlines is continuously producing large sets of data. This data is converted by CloudWatch into useful information and could be used in the form of statistics to measure the performance of the system. During peak hours, if the EC2 instance’s CPU utilization starts crossing its threshold, CloudWatch notifies the system. Also, if customer data is not getting retrieved, connectivity issue occurs within customer reservation systems, metrics are developed. These logs/metrics are then stored as a backup in S3 and can be accessed by different system users.

SNS: Simple Notification Service is used to deliver important updates or notifications to the end users. These may include flight schedule and status, PNR numbers, confirmation of booking/cancellations, delay in flights or security related messages.

Identity Access Management(IAM): It provides access to backend systems running on AWS resources to employees of AA, groups according to their roles.
Quicksight: It is the business analytical feature which helps in getting real insights of the data and perform business intelligence operations on it.

Porter Airlines:Porter Airline is the fastest growing regional airline with headquarter in Toronto. It operates mainly in Canada and USA.As per AWS Porter Airline casetudy, the major challenge faced by the airline company was to overcome the downtime issues and to improve disaster recovery system & make it more effective. So, the company adopted cloud solution for high availability & reliability for its website. It used Amazon EC2, S3, Glacier, RDS majorly for its environment. This way the company improved on its disaster recovery strategy and site performance without worrying about downtime.

Airlines such as AirAsia, FlyDubai, Qantas had the similar successful stories of moving to AWS cloud. 

Based upon above success stories of Airlines using AWS and Stephan Treacy’s lecture notes we have used technologies like EC2, S3, DynamoDB, EBS, ELB, RDS, Glacier, CloudWatch, SNS, Route53, Elastic Cache, IAM, Quick sight in developing environment for American Airline.

Financial History of the American Airlines

American Airways was incorporated in 1930, becoming American Airlines in 1934. Operating as a passenger and cargo carrier, they also offer freight and mail services. With 9 hubs functioning throughout the country, they average around $522 million a month. In 1939, they began trading stock on the New York Stock Exchange (NYSE) under the symbol AAL. (Yahoo Finance, November 2013) American Airlines began trading stock publicly on December 9, 2013.

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In 1970, American Airlines gained its first Caribbean routes, merging with Trans Caribbean Airways. The agreements of the merger were that American Airlines would aid Trans Caribbean in obtaining a total of $10 million in financing. Also, for 100 shares of Trans Caribbean, American Airlines exchanged 17 shares. This merger would make for airlines first merger under its current name. (NY Times Archives, 1970.)
January 10, 2001, it became public that American Airlines had acquired bankrupt Trans World Airlines (TWA) for $4.2 billion. This transaction made American Airlines the world’s largest airline carrier. American acquired all of TWA’s assets, as well as saved the jobs of thousands of TWA’s employees by integrating them into their family. (Biz Journals, 2001)
In 2003, talks of possible bankruptcy arose for American. Labor unions eventually approved economizing contracts to avoid the bankruptcy, in which employees agreed to accept intense pay cuts in attempts to save the airline. Joy came in 2007, when American reported an annual profit of $231 million for fiscal 2006, its first reporting since around 2000. But, the glory didn’t last long, as shareholders announced at their annual meeting that due to soaring jet fuel costs, they would have to lay off thousands of workers, park at least 85 aircraft, cut domestic capacity by 25%, and increase baggage fees and other service offered to customers.
An official bankruptcy protection was filed November 29, 2011, after the airline reported a net loss of $471 billion, bringing their total losses to exceed $10 billion since 2001. American had acquired $29.6 billion in debt. Required to run all their future financial decisions across a judge’s desk, they were permitted to purchase fuel, pay for labor, and other expenditures, to maintain business. In July 2011, they received approval to place the largest plane order in history, buying 460 aircraft from Boeing and Airbus, replacing older planes. The newer models would cut down on fuel and maintenance costs. (Yahoo Finance, 2011)
The year of 2012 introduced talks of a merger with US Airways. Agreements were made to exchange financial information so that the companies can research the potential merger. The merger eventually passed February 2013, officially announced on the 14th day of the month, thus the creation of the world’s biggest airline. (Yahoo Finance, 2013)
As of December 31, 2015, American Airlines gross profit was approximately $29 billion, with a net operating income of $6.2 billion and a net income of $7.6 billion, all driven by lower fuel costs, American could benefit from the decline on fuel prices. (2015 Form 10-K, AA.com)
References
American Airlines Investor Information, 2015 Form 10-K. http://phx.corporate-ir.net/phoenix.zhtml?c=117098&p=irol-reportsannual
History of American Airlines. https://www.aa.com/i18n/customer-service/about-us/history-of-american-airlines.jsp
A timeline of events in American Airlines’ history, November 12, 2013. The Associated Press. http://finance.yahoo.com/news/timeline-events-american-airlines-history-011902886.html
American Airlines acquires TWA. December 23, 2001. Biz Journals. http://www.bizjournals.com/stlouis/stories/2001/12/24/focus3.html
Koenig, David. November 29, 2011. American Airlines files for bankruptcy protection. https://www.yahoo.com/news/american-airlines-files-bankruptcy-protection-121438848.html

Southwest Airlines Competitive Analysis

Government regulations and directives that were passedforced Southwest to adjust and even totally revamp their original strategies drastically which proved difficult for them. Regulations on baggage handling, for example, required Southwest to add crews simply to meet its turnaround requirements and abandon its cost-savvy plastic boarding passes for purposes of tracking customers which ultimately goes against their strategy of free seating.
These changes affected the way the airline operates in a way that management was left with alternatives which would, in one way or another,force Southwest to drift away from its hallmark strategies and/or core competencies (e.g. open seating, late arrivals by passengers, etc.).
On a more positive note, the Wright Amendment, one of those deregulation measures which politically restricted interstate flights out of Love Field, Dallas to states adjacent to Texas, has recently been repealed in 2006. This made possible a nationwide service for Southwest.
How is Southwest Airlines compared to competition (especially to imitators and like airlines)?
Southwest Airlines did fairly well as compared to competition. The 30 consecutive years of sustained profitability is a proof of this.
The airlines’ low turnaround in 2001 was at a competitive edge at 24 minutes-30 minutes faster than the entire industry. This turnaround time enabled Southwest’s aircrafts to fly more trips, and more trips meant more revenues.
How profits were targeted is also a major point of comparison with the competition. People Express, an imitator, though it grew rapidly, failed to meet its profit targets and were not able to cope up. Major airlines that came up with their low-cost brands also failed at this as they inherited management and cultural problems which their full-service airline faced.
Economically and socially, the customers to whom Southwest catered to were price-sensitive-mostly business and pleasure fliers and Southwest catered to them exceptionally well.
Why has Southwest been so much more successful than its competitors?
Southwest offered unique alternatives in response to competitors who clearly wanted to engage in price wars. Southwest did engage in price wars (e.g. with Braniff International with its $13 offer), but it competed not merely on the basis of price but also of value proposition (e.g. giving incentive in the form of gifts to customers who paid $26 instead of $13). These alternatives were embraced by Southwest passengers.

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The things Southwest did not do proved to be one of their most significant key success factors. For instance, it did not adopt the hub-and-spoke route system (which almost every airline adopted)since it would be inconvenient for their passengers who preferred point-to-point flying.Their also refrained from connecting with other airlines, using interline baggage checking as these do not support their low-cost strategy, and implementing the conventional assignment of seatsto provide further convenience to passengers.
Southwest was very successful at cost reduction measures whilst competitors struggled to make their own measures as effective. The reduction of turnaround timeand innovation in other operational processes (e.g.automated ticketing) also paid off for Southwest in this regard. More notably, Southwest negotiated the price of its fuel to suppliers, thereby saving several more millions.
Innovations were not limited to operational processes. They implemented promotional programs (e.g. frequent-flier program which was the world’s first) that entice customers and give them more reasons to keep coming back.
As Michael Porter himself said, Southwest’s strategy involves a whole system of activities and not merely a connection of parts. The airline’s processes are closely-knit together such that they complement each other making it systematic and more importantly very hard to imitate. Competitors clearly could not expect to win on the basis of imitation.
Internally, Southwest employees contribute to its competitive advantage as they are not merely employees, but employees satisfied with their job and have attitude.
What kinds of things over which Southwest’s management has some control could go wrong, and what should be done to make sure that it doesn’t?
Management would have greatest control over its workforce and failure to address critical employment concerns could pose serious threats.
Through the leadership of Barret, Southwest has evolved into a culture-rich workplace where the core philosophies are inculcated deeply into the minds of the employees. Management could endanger this favourable status-quo by appointing less qualified top managers such as CEO, etc. Therefore, decisions regarding succession must be made carefully and not hastily.
Politically, laborunions were proliferating in the industry.While Southwest values its employees greatly, management could also go wrong in dealing with them regarding compensation they receive especially since they belong to such unions. Also, Southwest employees are paid less than those of other airlines despite sustained profitability; therefore favourable contracts must be negotiated by management to keep them satisfied and motivated.
How should management respond to the fact that Southwest Airlines has fallen to next-to-last
place among major airlines in on-time performance as of September, 2002?
Since new regulations and directives were implemented particularly from baggage inspection to security searches, delays would naturally occur especially because Southwest passengers are accustomed to coming in last minute.
Therefore, management should respond constructively to this statistic by proposing a new policy to its passengers regarding arrival. They could impose that they (especially those with heavy luggage) be at the airport ahead of time (e.g. an hour) before departure given the lengthy procedures on security. This could be easily justified to passengers as having implications on their own safety as well.
Of course, Southwest could also use a technological solution to this problem which they have recently done-an electronic check-in system via Southwest.com which would save passengers’ time by allowing them to board without having to check with an agent.
Once operations are fully stabilized, would you recommend to the management of the airline that it resume its historic growth rate of from 10% to 15% per year? Why?
I recommend a resumption of previous growth rates but it should be achieved by maintaining its current network and developing it from there as opposed to expanding to a greater proportion of long-haul flights.
I take the same stand as the Wall Street analyst who concluded that Southwest could maintain, even double, its size even without opening a new station.
Even if it does not take the opportunity to expand this way, Southwest is not left without opportunity. It must be noted that there are more than 100 cities wanting to experience the “Southwest effect” and nothing could be more opportunistic for Southwest as of the moment. It would be more “prudent” of Southwest to stick to their core competencies of point-to-point, low-cost, no-frills, high frequency flights for which they are most known for. Otherwise, they might as well join the sea of airlines out there that are neither unique nor differentiated.
Lastly, if growth is the objective, then Southwest better achieve it in a slowly-but-surely manner, as opposed the investing highly in an expansions whose effectiveness is not even guaranteed.
What are the implications for Southwest of the actual or threatened bankruptcies of other major U.S. airlines?
Actual or threatened bankruptcies are most likely going to favour Southwest in that it would decrease rivalry among competing firms-the most powerful of the five competitive forces.
As bankruptcies, actual or threatened, increase, Southwest is presented with opportunities of expansion. The cookie-cutter way of expanding is through acquisition of a struggling competitor. However, it can simply be just Southwest expanding its routes to an entirely new set of states where competitors halts services.
However, firms threatened with bankruptcies do not simply discontinue their operations. They could easily seek for government bailout just like all other firms in other industries resort to when threatened. Southwest, being profitable, clearly did not qualify for this benefit from the government, save for a certain $278 million from the amount allocated for aviation providers based on seat miles.
Moreover, since the government, in a way, is extending service to the airline industry (e.g. bailouts, added government security to airports, it would have a right to tax airlines. This would not be fair to Southwest since it received only minimal government support but will be subjected to same taxation policies as that of its struggling competitors.
 

Investment Report on Qantas Airlines

Introduction

Qantas main international hubs are at Sydney and Melbourne airport, as well as operates a significant number of international flights. Qantas owns Jetstar Airways and when it became privatised in 1993, became one of the most profitable airlines in the world.
Qantas has a total of 299 aircrafts and 29,350 employees as of 2015, and its closest competitor is Singapore Airlines (SIA). Qantas goal is to be the world’s best airline, providing travel experiences and putting safety first at all times. Since 2006, Qantas has saved over 2.5 million tonnes of carbon emission through its Qantas Future Planet Program. This is Qantas’s program for their sustainability, environmental and social initiatives.
In 2008, Qantas ordered 20 A380s, and using Required Navigation Performance and air traffic management, helped to save thousands of kilograms of carbon emission. In 2012, Qantas won an award for setting the standard for large organisations and has won another 3 awards till date.

Financial/Economic Performance

Table 1.0 General Information on Qantas
Financial Information and Analysis of Qantas
This portion of the report aims to provide relevant financial information, analysis and the profitability of Qantas. This report also compares between Qantas and SIA to provide a more in depth evaluation on the profitability of Qantas.

Profitability Analysis of Qantas

As seen in Table 1.0, Qantas had a negative return on assets (ROA), return on equity (ROE), as well as profit margin. According to Max Mason (2014), the statutory loss does not represent a cash loss to the company, rather it is a paper loss in the value of its assets. However, in 2015, Qantas made a comeback and made an increase of 26%. Moreover, Qantas made an 83% increase in return on equity (ROE) and their profit margin increased by 31%. This shows that Qantas’s negative ratios were most probably caused by lack of customers wanting to travel.
ROA measures the return earned by management through operations as well as reflects the result of the entity’s ability to convert sales revenue into profit.
ROE measures the rate of return on the capital invested by shareholders. A sustained high ROE attracts new competitors to the industry and eventually erodes excess ROE.
Profit margin is a measure of profitability. It is used to calculate the net profit as a percentage of the revenue.

Liquidity Analysis

Table 1.1 Liquidity Analysis of Qantas
When calculating current ratio, it is best if the ratio is 1 or more than 1. Most people regard a current ratio that is less than 1, as a company that is facing insolvency. While Qantas in this case has a ratio of less than 1, it is still comforting to know that their assets still contain enough cash and receivables, and one of the non-current liabilities contains revenue received in advance. Although it is unearned, when the amount received is earned, it will be credited accordingly.
2.3 Profitability Ratios Between Qantas and SIA

Table 1.3 Profitability Ratios between Qantas and SIA

Table 1.4 Qantas and SIA Financial Statement 2015
2.3.1 ROA Comparison Between Qantas and SIA
Earnings Before Interest and Tax (EBIT) shows the earnings generated by the company, ignoring tax and debt. A high EBIT would mean that the company is either earning a high revenue or have low expenses. As seen in Table 1.4, although the revenue earned is about the same, SIA’s expenditure is higher, thus resulting in a lower EBIT. Adding on to that, SIA’s asset is higher than Qantas, thus resulting in a lower ROA.
The ROA shows that Qantas is able to convert sales revenue into profit better than SIA as well as better at generating income from its asset investments. Moreover, this translates into efficiency in using its resources so as to generate a good return for investors.
2.3.2 ROE Comparison Between Qantas and SIA
As seen from Table 1.4, Qantas NPAT is higher than SIA, which translates into Qantas being better at earning a return on the equity provided to them. That can be seen from the amount of equity both companies have. For SIA, this is what we call a capital funded company. A capital funded company relies on investment from shareholders to operate and for SIA, it is shown that they are not making full use of their investments to enable a good return to their investors.
2.3.3 Profit Margin Comparison Between Qantas and SIA
Profit margin is a ratio used to calculate a company’s financial performance. Commonly, a low profit margin would indicate lower sales than other companies in the industry. As seen from Table 1.3 and 1.4, Qantas has almost the same revenue, but a higher profit margin than SIA, which could indicate that they are cost conscious, therefore have less expenditure.
Social Performance of Qantas
Corporate Social Responsibility (CSR), is a form of self-regulation that companies engage in, to provide some social good, beyond the interests of the firm, regulators and environmental protection groups. By undertaking CSR, companies are able to reach out to consumer’s trust through positive public relations and encourage the company to make an impact on the environment and stakeholders. Qantas partners with organisations such as Make-A-Wish, e-motion21, Mardi Gras and UNICEF to promote a positive change.
3.1 Make-A-Wish Australia
Qantas is the official airline of Make-A-Wish Australia, an organisation that grants wishes to children with life threatening illnesses. Since 1985, over 8000 wishes had been granted and since 2008, the Qantas Foundation has donated over $5.7 million for charitable causes in Australia. Qantas also helped fulfil the wish of a boy, with stage 4 Wilms tumour, who wanted to be a pilot by bringing him to a plane simulator as well as showed him around the workings of a plane.
3.2 E.motion21
E.motion21 is a non-profit organisation that aims to improve the lives of people with down syndrome through dance, fitness and performance. As a corporate partner, Qantas supported the organisation by sending 18 dancers and their families to South Africa for the World Down Syndrome Congress and even gave Lauren Potter a surprise serenade when she touched down in Australia.
3.3 Mardi Gras
Also known as the Sydney Gay and Lesbian Mardi Gras in Australia, it’s a parade to celebrate Lesbian, Gay, Bisexual and Transgender (LGBT) pride. As a major partner of the parade, Qantas celebrates the spirit of diversity by having their own “Gay 380” float. Qantas is also a “Gay-Friendly” airline, with non-stop flights to Australia and New Zealand, countries with a thriving LGBT community.
3.4 UNICEF
Providing humanitarian assistance to children and mothers in developing countries, UNICEF is a non-profit organisation that relies on government and private funding. UNICEF partnered with Qantas to create the Change for Good program, where Qantas passengers unwanted spare change were collected and donated to UNICEF for the purpose of providing textbooks for education or protecting children from diseases. This concept has helped raise at least $28 million over the past 23 years.

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Environmental Performance of Qantas
Qantas takes initiative in protecting the environment on both land and air, and has partnerships that promote sustainability and conservation. The most important initiative would be in the air, where planes are frequently releasing emissions that slowly harms the ozone layer. Since 2007, Qantas has been reducing harmful emissions, making them one of the industry leaders in environmental protection. As of 2014, Qantas managed to reduce electricity consumption by 9%, water consumption by 11% and landfill by 20%. To reach their 2020 target, Qantas has been using Sustainable Aviation Fuel (SAF), investing in fuel efficiency, flying carbon neutral, and recycling. On the ground, Qantas protects the environment indirectly by using natural gas for their headquarters as well as a reduction in utilities used.
4.1 In the Air
4.1.1 Sustainable Aviation Fuel
SAF is now in its second generation and currently, 2% of global emissions come from aviation and is expected to rise to 3% by 2050. Although solar, electric and hydrogen aircrafts are being researched on now, it is still more feasible to use SAF due to aviation’s need for high power-to-weight ratio.
In 2012, Qantas was the first Australian airline to use SAF to operate a commercial flight and have partnered with Shell Australia and the government to explore the production of SAF in Australia. In a study conducted with industry partners, findings have shown that SAF can result in the creation of 12,000 clean energy jobs, a 17% reduction in emissions and a $2 billion reduction in the reliance of oil imports.
4.1.2 Fuel Efficiency Program
In recent years, Qantas has phased out old airplanes and purchased newer ones that are equipped with the latest technology and engines. Some of the airplanes include the Airbus A380, Boeing 787 Dreamliner and Airbus A320 neo. Other methods of fuel efficiency would include weight reduction by investing in lighter equipment or adjusting the amount of portable water the plane carries based on passenger needs and sector length.
4.1.3 Flying Carbon Neutral
Since the launch of the Fly Carbon Neutral program in 2007, Qantas has managed to offset over 1.8 million tonnes of carbon. Carbon offsetting in business terms, is the purchasing of carbon credits to enable businesses to compensate for their carbon emissions. For Qantas, not only do they offset their employee’s carbon footprint, but each time a customer flies on Qantas, they can choose to offset their share of carbon emissions. In other words, you contribute a sum of money equivalent to your carbon footprint and Qantas will use that contribution to fund carbon offset projects that provides genuine, lasting environmental and social benefits.
Qantas does not earn from the contribution and Fly Carbon Neutral is the largest airline offset program in the world. Qantas’s carbon offset projects include, protecting the Tasmania’s wilderness, empowering rainforest communities, improving Cambodian air quality and protectingallow the Peruvian amazon.
4.1.4 Recycling
Qantas was the first Australian airline to introduce inflight recycling and has since recycled 390 tonnes of paper and 200 tonnes of bottle per year. Qantas takes recycling very seriously and pushes their suppliers to produce more sustainable products and less packaging. For example, currently, all the paper cups provided on board are made from 35% recycled paper.
Qantas also tries to get their customers to join in to save the environment by assisting the cabin crew to separate the recyclable items for collection.
4.2 On the Ground
4.2.1 Tri Generation Projects and Campus Redevelopment
Qantas reconstructed their headquarters by building Australia’s largest tri-generation project in Sydney. The system allows cooling, heating and electricity by using natural gas as the fuel so as to produce more efficient, lower carbon energy for the headquarters, catering centre, jet base and domestic terminal.
The end result would be a reduction of 23,000 tonnes of carbon dioxide emissions per year, an equivalent of taking 7,000 cars off the road. It will also raise the energy efficiency rating from a NABERS 1.5 star to NABERS 5 star.
4.2.2 Utilities Reduction
In order to achieve their water and electricity targets, Qantas purchased LED lights to improve lighting efficiency as well as procuring energy efficient appliances. Rectification of water leaks and installing water efficient fixtures was done as well.
Conclusion
Although low current ratio was seen, I would recommend anyone to invest in Qantas as the profitability ratios show a more than significant improvement between 2014 and 2015. This is much more evident when compared to SIA, another top leading airline in the world. Moreover, Qantas engages in various environmental and social aspects to make sure they are a well-recognised company.
Reference list

Financial Analysis At Emirates Airlines

Emirates Airlines is one of the large airlines of the world. It is also considered i most luxurious airlines. This is Dubai’s national airlines. It was found in 1985. It serves almost 2400 flights per week. All these figures clearly depict its glory. (Emirates Airlines, 2010)
The financial analysis is done by using the financial statements of Emirates Airlines, the largest airline in the Middle East. In the analysis we deal with the following determinants:
Liquidity Ratios
Profitability Ratios
Turnover Ratios
Leverage Ratios
Liquidity Ratios:
These are the ratios that determine the capability of a firm to meet its short term obligations. It includes:
Current Ratio
It describes the ability of a company to meet its short term liabilities with its short term assets.
=Current Assets/Current Liabilities
2009
2010
Current Ratio = 31,919/17,753
Current Ratio = 36,870/19,552
Current Ratio = 1.797
Current Ratio = 1.8857
In 2009 Current ratio was 1.797 while in 2010 it is 1.8857. By above analysis it is clear that company has more liquidity in year 2010. Company has more short term assets to meet its short term liabilities.
Quick Ratio
Slightly tougher test than above it depicts it eliminates those assets that may be difficult to convert into cash like inventory etc.
= (Cash + Short-Term or Marketable Securities+ Accounts Receivable) / Current Liabilities
2009
2010
Quick Ratio = 2619+4549+7109/17,753
Quick Ratio = 1176+9335+7008/19,552
Quick Ratio = .804
Quick Ratio = .8960
Quick ratio was .804 in 2009 while it increased to .8960 in year 2010. Strengthening of quick ratio clearly shows that company has strong liquidity position in year 2010.
Cash Ratio
It measures the capability of a firm’s cash, along with other investments that can be easily converted into cash in order to pay its short term liabilities.
= (Cash + Short-Term) / (Current Liabilities)
2009
2010
Cash Ratio = 2619+4549/17,753
Cash Ratio = 1176+9335/19,552
Cash Ratio = .403
Cash Ratio = .5375
Cash ratio analysis is also depicting the same result as quick and current ratio as company’s cash ratio is also increased in year 2010.
Profitability Ratios:
They include:
Gross Margin
= Gross Profit / Sales
2009
2010
Gross Margin= 489/3159
Gross Margin= 598/3121
Gross Margin= .1547
Gross Margin= .1910
Gross profit margin was .1547 in 2009 while it increased to .1910. This clearly shows that company has increased its gross profit margin and profitability increased by significant amount. Gross profit individually can not comment on net profitability of company.
Operating margin
= Operating Income or Loss / Sales
2009
2010
Operating Margin= 467/3159
Operating Margin= 559/3121
Operating Margin= .1478
Operating Margin= .1791
Emirate’s operating margin was .1478 in 2009 and .1791 in 2010. Operating margin is also increased in 2010. This ratio is supporting the fact of increased profitability of Emirates Airlines.
Net Margin
= Net Income or Loss / Sales
2009
2010
Net Margin= 507/3159
Net Margin= 613/3121
Net Margin= .1604
Net Margin= .1964
Net profit margin can be considered as most accurate ratio for evaluating profitability of any organization. Company’s net margin increased from .1604 to .1964 in year 2010. This clearly shows that company is moving strongly towards profitability. Difference in ratio is also very significant which shows that company is getting success in its operations.
Return on Assets
= Net Income + After-tax Interest Expense)/ Average Total Assets
2009
2010
ROA= 507+20/3947
ROA= 613+14/4638
ROA= .1335
ROA= .1351
Return on Assets shows any organizations total return over their assets which tells that how good organization is in utilizing its assets. Company’s ROA increased from .1335 to 1.1351 in year 2010. But change in value is not significant.
Return on Equities
= Net Income / Average Shareholders’ Equity
2009
2010
ROE= 507/15571
ROE= 613/17475
ROE= .0325
ROE= .0350
Return on Equities shows total return over shareholder’s equity. ROE was .0325 in year 2009 while it increased to .0350 in year 2010. This shows that company has created more worth for its shareholders in year 2010.
Leverage Ratios:
The ratios are used to depict that more the debt more are the risks associated with the company since the company’s assets are the first right of its debt-holders. They include:
Debt/Equity Ratio:
= (Short + Long-Term Debt-Term Debt) / Total Equity
2009
2010
D/E Ratio= (2852+16753)/17475
D/E Ratio= (1372+15140)/15571
D/E Ratio=1.121888
D/E Ratio= 1.060433
Debt to equity ratio shows total debt over total equity of any company for a given period. Here total debt consists of total long term and short term debt which when divided by the total shareholders’ equity for that period gives the Debt to equity ratio. D/E ratio was 1.121 in year 2009 and decreased to 1.06 showing that the total debt coverage of the company decreased in the period.
Interest Coverage:
= Operating Income / Interest Expense
2009
2010
Interest Coverage= 559/14
Interest Coverage= 467/20
Interest Coverage = 39.9285
Interest Coverage= 23.35
Interest Coverage calculates as operating income over interest expense of the company. This ratio tells the interest covering capacity of the operating income for a given period for the company. Cleary the reduction in the interest coverage shows the reduction in the interest paying capacity of the company in the given period.
Turnover Ratios:
Receivables Turnover Ratio = Total Sales/ Average Receivables
2009
2010
Receivables Turnover Ratio = 3121/697
Receivables Turnover Ratio = 3159/590
Receivables Turnover Ratio = 4.4777
Receivables Turnover Ratio = 5.3542
Turnover ratio calculates as total sales for a given period over average receivables for the same given period. This has increased for the company from 2009 to 2010 from 4.477 to 5.352. This increase clearly shows that total sales have increased significantly over credit sales and thus the current assets in the form of cash must have improved.
Average Collection Period = 365/ Receivables Turnover
2009
2010
Average Collection Period = 365/4.4777
Average Collection Period = 365/ 5.3542
Average Collection Period = 81.515
Average Collection Period = 68.1707
Average collection period is the average period in which the cash for the company will be collected. This is calculated as average receivables over a division of total sales over 365. Average collection period for the company have reduced from 81.515 to 68.17 indicating that collection has improved.
Benefits of Analysis
Financial analysis diagnoses company’s current condition. It also tells about company’s past records and its future prediction. Company’s financial strength and weakness can be known by analysis of its financial statements. Analysis is profitable for both: Company insiders and outsiders. Company’s management can know about success and failure for their strategies in monetary terms while outside investor can sense his investment risk with respect to size of investment and type of investment. In this particular example, financial analysis of Emirates Airlines shows that profitability of this company has increased in year 2010. This judgement came through analysis of several profitability ratios. So it is clear that Company management can rely on their strategies as these were proved successful. Liquidity ratio also increased from 2009 to 2010 which shows that company has increased its liquidity to meet its short term liabilities. An investor can find this as a good sign. Leverage ratio has declined in year 2010 which shows that company is less risky in year 2010. This is another good sign for an investor. Receivable turnover ratio tells about company’s credit policies. (Financial Ratios)
Conclusion
By above analysis it can be concluded that company has increased its profitability by significant amount in year 2010. Liquidity ratio tells that company has strengthened its liquidity in 2010.
After calculating the leverage and turnover ratios we can conclude saying that the cash collection of Emirates Airlines has improved for the year 2010 as compared to 2009. The reduction in the collection period is a clear indication of this. Also the debt ratio of the company has reduced indicating that the company is in the better and strong financial condition as compared to 2009.
 

Theoretical And Conceptual Framework Of Airlines

In the past of few decades ago, airline industry is being control very tightly with lots of regulations. For example, United State (US) air transportation industry is being control tightly by the Civil Aeronautics Board (CAB) on price, route and schedule of flight. After that in 1978, domestic air transportation market of US is having a free competition among airlines which allowed by the Airline Deregulation Acts of 1978. Through this act, every airline is allowed to set their own price, how frequent they are flying and the destination they want to fly to (Thomas, O.G., 2004).

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After the deregulation of American airline market, European air transport also experienced deregulation in the middle of 1980. The result of regulation is an increase competition of airlines and to open new entry to new airlines. The airline structure has changed due to deregulations. The airline industry becomes more competitive with numbers of competition. Changes of pricing strategy, marketing strategy and airlines networks such as hubs and spokes had made.
There are lots of changes from deregulation such as service patterns, pricing, computerized of the management systems and industry structure. Deregulation and air transport liberalization make a turning point of airlines structure and marketing strategies. Travelers are rational and not willing to pay for a level of service which is not necessary (Pourat, H., 1994). Technological development had improved the management system of airline where they are now having seats inventory system and reservation system had been improved.
During that time, lots of existing regulated airlines meet failure and left the airline industry. There are numbers of new entry airlines joined the airline industry as well. (Kaplan, D.P., 1995 cited in Thomas, O.G., 2004) report that, 19 jet operator formerly regulated by the Civil Aeronautics Board (CAB), only 7 survived until 1995. The most famous survivor, Southwest Airlines (created in 1971) remains a prosperous carrier today. Deregulation of airline market also brings in another form of new business model which is the low cost business model into the airlines industry as well. This will be further discussing in the next section.
1.2 Problem Statement
The new idea of low cost business model was first brought up by Southwest Airlines in the 1970. It took 15 years for the US airline industry and 20 years for the EU airline industry to take up the challenges of the emergence of low cost airline business model.
After the deregulation, in 1978, there are huge numbers of new entry of low cost airlines into the airline industry. Initially these new entry airlines was doing quite success but due to by having only low fare would not be able to sustain their business. They are lack of financial support to compete in the competitive airline industry during that time. There are new entries of airlines and airlines which faced failure and left the industry (Natthida Taweelertkunthon, 2006).
There is another new generation of low cost business model emerged in the airline industry in 1990. They startup their business with a strong financial support and with a better and younger aircraft used. This new generation of low cost airline has rewritten the business model to compete in the US competitive airline business environment and also with the commercial airlines market. They had also shifted from their business strategy from product differentiation into low cost. They become more cost advantages through efficiency where their operational efficient help to bring down the cost.
The emergence of low cost airline manage to “steal” customer from the commercial airlines especially price sensitive customer and served with wide range of services. Even those high end customers are not longer willing to pay such a high fare on air transport where this bring benefit toward the low cost airlines. Air transport is not a luxurious thing anymore. At this point of time, traditional airlines faced challenges from low cost airlines where they find difficulty on sustaining their business.
In Asia, low cost airline business model is still a new idea and just started in year 2000. Nevertheless, this new business model do faced problem of restrictive of two countries involved. Problem had been solved through the agreement among Southeast Asia (SEA) countries. Air Asia the successful pioneer established in the year 2001 and took the sky in November 2002. The success of Air Asia with low cost business model is the reason of the growth of low cost airlines rapidly in Southeast Asia. There are numbers of new entries of low cost airlines such as Tiger Airways, Nok Air and etc.
“The fact that Southeast Asia has a massive population is crucial, more than 50 million people with a rising middle class and a growing propensity for travel. The geographical location of surrounding islands without viable and competitive alternatives modes of transportation in Southeast Asia will enhances LCCs an enormous competitive advantage over surface and ground modes.”
(Natthida Taweelertkunthon, 2006)
Low cost business model of low cost airlines is different in between of SEA and US and EU. The application of low cost principle is different. For example, in US and EU, they could have a lower fare on landing at secondary airports. But in SEA, they couldn’t be able to avoid air traffic congestion at the core airport easily. Therefore, SEA low cost airlines cannot be able to save and lower fare on landing fees and etc.
Besides that, the competition faced by SEA low cost airlines is much competitive as compare to US and EU low cost airlines. This is because of there are lots of competitor in SEA country with low cost airlines. Therefore, the marketing strategy that being implement by the low cost airlines to stay and being competitive is important. This research proposal is focusing on the marketing strategy that implement by low cost airlines to gain competitive advantages in the competitive environment.
1.3 Research Question
From the problem statement above, it brings to several research questions where the researcher need to collect information for the purpose of this proposal.
What are the marketing strategies implementing by Air Asia?
How does marketing strategies influence the sales of Air Asia?
What are the objectives, benefits and cost of the marketing strategies implementing?
Are there any differences in between of traditional and low cost airlines’ marketing strategies?
How Air Asia’s marketing strategies make Air Asia to be competitive among other low cost airlines?
1.4 Research Objective
Research objectives have been listed down at below to guide the researcher in getting and answering the research questions which had stated above.
Identify the marketing strategies that being use by Air Asia.
Analyze on the marketing strategies that had being used.
Analyze the sales trend of Air Asia.
Compare the sales trend and marketing strategies that had implemented.
Evaluate the objectives, benefits and cost of the marketing strategies implemented.
Compare the marketing strategies of traditional and low cost airline.
Evaluate the competitive advantages of Air Asia.
1.5 Theoretical and Conceptual Framework
1.5.1 Conceptual Framework
1.5.2 Theoretical Framework
The process of this research proposal is shown in the diagram above. First of all, the problem statement would be discussing that the emergence of low cost airlines in the airline industry.
1.6 Scope and Limitation
1.6.1 Scope
In the business world, there are plenty of strategies that are implementing by different company to stay competitive in the business environment. The strategies implemented by company are such as marketing strategy, financial strategy, research and development (R&D), management information system (MIS) and etc. in this research proposal, the strategy that is being focus on is marketing strategy of an airline. It is to research on the ways of an airline manage their marketing strategy well to gain competitive advantage.
Airlines industry is a huge industry which consist of full service airlines and no frills airlines. This research proposal has limited the research topic into a small scope which is focusing on analyzing the marketing strategy of no frills airlines. Besides that, there are numbers of no frills airlines in the world as well. Therefore, the researcher has further scope the topic down to low cost no frills airline of Malaysia which is Air Asia.
1.6.2 Limitation
In every research proposal, there would have some limitations which limit the researcher to collect better information or result for the presentation of proposal. There is limitation which face by the researcher when doing research for this research proposal. AirAsia.com (2010), Air Asia is the only low cost airline available based in Malaysia (which not consist of low cost airline (FireFly) with subsidiaries of Malaysia Airline System Berhad). There do not have choice to researcher where Air Asia is the only available choice to be included as the scope of the topic.
Besides that, there are limited journals available about the marketing strategy of a low cost airline. Therefore, it is a limitation for the researcher to collect journals for review the literature. In addition, the marketing strategy of low cost airlines differs from airline to airline. It is difficult to finalize the main marketing strategy that is implementing by low cost airlines.
1.7 Significance of the Study
This research proposal is important to YBhg. Dato’ Tony Fernandes, the CEO of Air Asia and the marketing manager of Air Asia. This is because the research proposal has a summary of the effectiveness of the marketing strategies that being implementing by Air Asia where it makes them to be competitive advantage and a head above other low cost airlines. They would have the opportunity to have an outlook on a different angel of view in order to further improve on their current marketing strategy by advancing the current strategic planning model.
Besides that, another targeted reader of this research proposal is the marketing managers of other airlines (such as low cost or full service airlines). This is because they could have the idea of how Air Asia is having such an excellent marketing strategy which brings it to where it is right now as the World’s Best Low Cost Airline. They could use the strategic that Air Asia is implementing as the role model to market their airlines to be more competitive as well.
In addition, this research proposal is useful to students who are majoring in marketing strategic management. This is because it would be a good and appropriate case study to read and learn from on the ways of a company could be able to manage their strategic planning model so well and gain competitive advantages over other competitors. Student would have the opportunity to have an in-depth understanding on the ways of a low cost airline planning the marketing strategy model to suit the business model which to keep cost low and being successful.
1.8 Definition of Term
ASK = Available seat kilometer
ASK is to measure the carrying capacity of airlines’ passenger.
The formula is seat available x distance flown = carrying capacity per plane
Chapter 2: Literature Review
According to Natthida Taweelertkunthon (2006), there are two types of low cost carrier which are low cost no frills carrier and low cost low frills carrier. Low cost no frills carrier is those low cost airlines which do not provide any other extra services like on board meals. Tiger Airways and Air Asia are the example of low cost no frills carrier. On another hand, low cost low frills carrier refers to low cost airline which provide some extra service like on-board drinks or snacks. The fare of air ticket is slightly higher than low cost no frills carrier. The example of low cost low frills carrier are Nok Air, One-Two-Go and Jetstar Asia.
2.1 Key Features of Low Cost Airline Business Model
Figure 2.1: LCCs Business Model
Source: (Jiang, H., 2007)
The figure above shows the low cost airline business model which is build up three main key features which are simple product, low operating cost and positioning.
2.1.1 Simple Product / No Frills
A low cost airline would keep service and product simple to maintain cost advantages to offer product which is value for money to the customers. A simple product which also means no frills or no extra service such as meals on board provided on board to cut down cost. Besides that, meal on board could also be provided with a mean of good quality with extra charges. The seats are narrow to have a large capacity on plane and maximize seat density. This is to have a large volume of sales to cover the cost on the single journey to the destination. There is an only one class seat on aboard available with no seats arrangement allows (Jiang, H., 2007).
2.1.2 Low Operating Cost
In addition, a low operating cost is one of the low cost airlines’ features. Low cost airlines will only land on secondary airports where the landing fee is much lower as compare to core airports. Secondary airports also have the advantage of less traffic congestion where the flight and stop by and take off again in a shorter time. They would have a shorter turnaround time to avoid paying higher tax charges on parking. Besides that, low cost airline practice direct sales of air ticket or through online reservation and buying. A cost cutting strategy would be implementing by low cost airlines to keep their cost low and to have cost advantages (Dietlin, P., 2004).
2.1.3 Positioning
Lastly, low cost airline will market themselves mainly to non-business passengers. For examples, leisure passengers and price sensitive passengers are non-business passengers. In recent years, low cost airline starts to target business travelers as well. This is to grow their market to a more large perspective. A good and effective marketing strategy of low cost airline plays an important role to position their product to the public and to gain competitive advantage as well. Low cost airline will have a short haul which fly from point to point with high frequency. Moreover, low cost airline would likely to become the number one or two on most routes operated (Jiang, H., 2007).
2.2 Challenges of Low Cost Airlines
In the competitive environment of airline industry, there are several challenges which will be faced by low cost airlines. Explanations on the challengers that face by low cost airlines are explained as below.
2.2.1 Overcapacity
First of all, the airline industry of low cost airline is growing rapidly where there is more new entry of low cost airlines. According to Jiang, H. (2007), the author said that there are over thirty low cost airlines launched in the year of 2002. A sudden increase of a large amount of new entry brings threat to the existing low cost airline. The market is overcrowded and overcapacity where all of the low cost airlines need to compete among airlines to generate revenue for their own.
2.2.2 Pressure on Yield or Average Fares
With a large amount of new entry it creates a competitive competition environment among airlines. According to Dietlin, P. (2004), worldwide airline yield will decrease by 1.1% per year until 2010 and intra-Asia yield will decrease much faster than that. New pricing strategy had been introduced by traditional airline to compete with low cost airline. For example, for some routes, traditional airline introduce a low aggressive fare especially those routes that being fly by low cost airlines. Besides that, there is a price competition among airlines. The new entry airlines are having lower fares to compete with existing low cost airlines. This pulls down the average fares per customer where it does not benefit any side on a long run.
2.2.3 Difficulty on Keeping Cost Advantages
According to Dietlin, P. (2004), Asian airlines are having a significant lower input costs as compare to American airlines and European airlines. This problem of lower input cost is mainly due to labor cost. Dietlin, P. (unpublished, 2004) stated that Airlines in Singapore unit labor costs are USD 0.77 per ASK and airlines in American is having US 2.92 per ASK which is 279% more. Asian airlines are trying to solve the problem by hiring labor from low-income countries where they could have low wages for their labor to increase unit costs.
2.2.4 Product Differentiation
With numbers of low cost airlines in the market push every single low cost airline to differentiate their product to gain as much market share as possible. This simple mean more cost will incur. Airlines are coming up with more aggressive and low fares which it would pull down the average revenue of airlines. Low fare of air ticket is no longer enough to be differentiating from other competitor. They are trying to brand themselves to differentiate from others to gain competitive advantages.
2.3 Marketing Strategy that Implemented by Low Cost Airlines
There are several marketing strategies that being implement by low cost airlines to market or position their product to their customer. There are some marketing strategies that being practicing by low cost airline are stated as below.
2.3.1 Frequent Flyer Program
Frequent flyer program is one of the marketing strategies of Southwest Airline but it is not adopting by most of the low cost airlines. This program gives out frequent flyer point when customers purchase air ticket each time. By using the accumulate points, it could be redeem for free ticket or upgrade class seat which depend on the company policy (Lederman, M., 2003). As a marketing tool FFPs have proved highly successful (Bennett, M.M., 1996).
2.3.2 Point-to-Point
Gutstafsson, L. (2005) says that point-to-point could be included as a cost leadership strategy as well as a marketing strategy as well. Point-to-point refers to the air traffic movement system where the flights fly directly to the final destination without going through the hub. This would be able to help airline to save up cost. At the same time, it could be able to attract customer where they do not need to waste time on transiting at the hub. Customer could be able to have a flight directly to the final destination that they wish to be just with a low fare air ticket.
2.3.3 Branding / Image
It is difficult for airlines to differentiate their product from other competitor as the basic product of airlines are the same. Therefore, branding and build up good image or reputation is another option to market their product to the public. Branding is do marketing on a product externally to the public. There is another way round of branding being practicing. As an example, Air Asia do brand their product internally to their staff first before to brand it externally to the public (Marketing-interactive.com, 2008). This is to let the staff of Air Asia knows well on the function and attractive of the product where they could sell it more better externally to the public.
2.3.4 Pricing (Low Fares)
Low cost airlines are marketing their products with low fare to compete with traditional full service airlines. Low fare is the main attractiveness of low cost airline as compare to full service airline. Low cost airlines keep on introduce low fare ticket to customer and having promotion sales on air ticket. Fare of air ticket is getting cheap as time goes. Fare of air ticket is the main strategy that plays around by low cost airlines.
Chapter 3: Research Design and Methodology
3.1 General Nature of Research
The general nature of the research proposal is qualitative methodology. Saunders, M. et. al (1998) defines qualitative research as an array of interpretive techniques which seek to describe, decode, translate and otherwise come to terms with the meaning, not the frequency of certain more or less naturally occurring phenomena in the social world.
A deeper insight of the ways of Air Asia managing their marketing strategy would be able to gain from doing qualitative research. A research which is base on the meaning which express through words is qualitative research (Saunders, M. et. al, 1998).
3.2 Research Philosophy
Interpretive or phenomenology is the research philosophy that selected by researcher on this research proposal. This philosophy is suitable for research which is on qualitative methodology. Interpretive would help to gain new insight about the reality and deeper understanding on the question of how and why. Researcher is more flexible to adapt with changes during the research process. It is more appropriate to study on a small sample for interpretive philosophy. There are threats by using this philosophy. First of all, it will be time consuming when collecting qualitative data. In addition, analyzing of qualitative data would be difficult especially for inexperience researcher to analyze and generate new theory.
3.2 Research Method and Research Design
3.2.1 Research Method
The research method that is being use by the researcher in this research proposal is interview research method. According to Saunders, M. et. al (1998), there are several types of interview such as structured interview, semi-structured interview and unstructured interview.
The choice of interview selected is semi-structured interview which would have a list of topics to be cover during the section of interview. Semi-structured interview would be able to cover in depth and exploratory study. It would benefit to gain new insight on the particular topic as well (Saunders, M. et. al, 1998).
3.2.2 Research Design
3.2.2.1 General Research Design
General research design is known as research strategy. The three main research strategies are experiment, case study and survey. The research strategy that would be use in the research proposal is case study strategy. Case study would have a detail and intensive knowledge on the single case study that is being studied. Case study is very useful in conducting exploratory of the theory and challenging with come up with a new theory. Besides that, case study would provide a very rich understanding on the case that is being studied (Saunders, M. et. al, 1998).
3.2.2.2 Research Approach
Besides that, the research approach that being used is inductive approaches. Inductive approach is building theory which is more for case study research strategy. This approach would get the research to involve in the case study as well. The general idea of the problem would be understand well when inductive approach is being use. This approaches would more likely to use up interview data. It would be able to formulate theory by using the result of data analysis but at the same time it would also end up with the same theory as the existing theory (Saunders, M. et. al, 1998).
3.3 Sources of Data
3.3.1 Primary Research
There are several primary researches available such as observation, interview and questionnaire. The primary research which is being use in this research proposal is through interview. A semi-structured and in-depth interview would be conduct in order to have an exploratory study on Air Asia’s marketing strategy to gain new insight. An open-ended interview questionnaire would be design and use to interview the potential interviewee to collect qualitative data. A face-to-face interview would be held where it allow researcher to have more control and strengthen open-ended question (Mona, C., et. al, 2001).
3.3.2 Secondary Research
In this research proposal, the secondary research used is through online database to collect useful journals which are relating to the topic. The main online database is being use is DSpace@MIT which is an online database of the Massachusetts Institute of Technology. The information that found through this online database is highly reliable where there is lots of PhD or master’s unpublished thesis available on the database.
Besides online database as secondary research, websites are being used as well. Official website of Air Asia is being used as the secondary research tool to get information regarding on Air Asia. Newsletters of Air Asia’s would frequently update the researcher on current news about Air Asia. Besides that, Air Asia’s blog is one of the secondary research tools where it provides new updates of Air Asia from time to time when latest news of Air Asia could be known from there as well.
3.5 Data Analysis Procedures
There is several methods data analysis on qualitative research. The method of data analysis selected for this research proposal is the grounded theory data analysis. This data analysis method uses the inductive research where it collects data from the source of interview. Through interview, data would be able to collect and at the point of time, the data is being grouped accordingly into respective main concept (Gutstafsson, L., 2005).
After the grouping of data into different concepts is done, the data could further categories into different supporting theory structure. By doing so, it enable researcher to have a better outlook of the data displayed in the structure. Therefore, researcher could interpret and analyze the data easily. A new theory would be able to generate by using the result of data analysis (Gutstafsson, L., 2005).
 

Singapore Airlines: Business, Marketing and Operations

This paper study is based on Singapore Airlines (SIA), in this case study the project has discuss about the SIA’s Business, Marketing and operational strategy, what are the changes is the SIA’s facing in future, how this airline company has changed its strategy and how this airline from a small country-state with a population of about three million people, on an island no larger than the Isle of Man, earn a reputation for being ‘the most constant money-making airline in the world, in spite of the various world-wide recessions.
The paper study also discuss about, how the Singapore Airline retained employees and the customers.
QUESTION 1: Evaluate SIA’s Business, Marketing and Operational Strategies and assess their effectiveness in relation to the competition?
Over the last decade Singapore Airline has grown from a local airline into one of the world’s leading passenger and cargo carriers. In an attempt to survive, many of the organization which is working in the same business tried to observe and investigate the approaches or strategy which are using by Singapore Airlines (SIA, 2007). Finally it became clear and understandable that SIA are more competitive because of its business and operations strategy.
The long term growth of a business design to provide and maintain shareholder value is called the business strategy.
So, this part of the paper contains the business, market and operation strategy of Singapore Airlines.
As we all know the SIA’s has developed a status for being an industry innovator as well as doing things in a different way than its competitors who are in the same industry line, for example, As the study says SIA was the first airline to introduce free drinks, a choice of meals and free headsets back in the 1970s. Not only this, the Singapore airlines are the first who start a two year programme to install ‘Kris World’, that is a new in-flight entertainment scheme, for passengers in all three classes of its Megatop B747s. KrisWorld provides around 22 channels of video entertainment, around twelve digital audio channels, around ten Nintendo video games (Nintendo was best known for console industry and famous for home video game), and always alert the destination information and provides a telephone at each seat. By using this innovative ideas and creativity techniques the SIA’s has done wonder in this airline business and earn a reputation for being the most consistent money-making airline in the world.
Not only this, SIA’s has done many changes in the history of airline and they provide numerous innovative ideas and doing things differently than its competitors.
SIA’s is the one who spend lot of millions in order to install KrisWorld movies; by doing this they had given an amazing entertainment to their customers while traveling and this lead to make them a different from their competitors and by adding this KrisWorld they are the first one to do so and this types of strategy help them a lot in becoming a number one in these business.
SIA is the first in the market for discoverer and performer of the mostly innovative live teletext news service (KrisNews) and also for an interactive in-flight shopping service for its aircrafts. These creative and innovative developments by SIA, eventually won numerous awards for the best air lines.
SIA was the first airline which bought a collection of finest chefs from all over the world to serve best in-flight cooking for its passengers as well as it was the first airline which tried to accomplish the wants of individual passengers by launch the special meal service with lighter and better options plus the unique in-flight meal service which is specially introduced for young flyers and enabled them to choose their desired meals up to 24 hours before the flight departure. Besides that, SIA started to update its menus monthly and even weekly to create an impression among its frequent travelers and also to keep track of flyers tastes. These were the main line of attack for SIA to compete among its competitors in the market and also to shore up its business strategy1.
The main success of SIA’s is Singapore’s Changi airport, Changi is situated in eastern end of the Singapore. Changi airport is one of the world busiest airport
QUESTION 2: Using change management models evaluate how the company has changed; in strategic terms.
QUESTION 3: What challenges is SIA facing in the future. What should SIAs business and operations strategies be for the future and why? Provide justification for your recommendations.
As we know that SIA’s is the one of the leading airport in the world but due to the large number of competitors in the world. SIA’s have to maintain their top ranking in the future by maintaining their operations and business strategy and by developing more innovative ideas.
The challenges which a SIA facing in future is mainly due to their competitors, as we all know in airline business the profit is very less and its mainly because of growing airline industry, passengers have many choices to select the low fare flight, so they must provide the better facility in a lower price that may affect their capital turnover.
Recession is also the one of the factor for affecting then in future. Like in recession, there is a reduction in number of fliers.
In future there is my advance airplanes/crew because of the competition and so the availability of the best crew is very important.
There are more challenges that airline industry is facing like escalating costs and stiff competitions.
As this part of the paper contains that which type of business as well as operations strategies should SIA’s makes for their future and which makes them different from there competitor’s.
Before going to this we must know about the operations strategy, operations strategy is the total guide of decision made the management which leads to the long-term growth for any type of operations, it is the long term process. Basically operations strategy is the method or tools that help us producing goods and services to the consumer’s. Operations basically deal with the producing or delivering of goods.
This paper study discuss the competitive strategies of Porter, In 1980’s Porter has argued that there is two types of competitive advantages which can be shared with either a broad or narrow competitive scope to create four well known business strategies: 2
Cost leadership,
Differentiation,
Focused low-cost, and
Focused differentiation
The Porter’s four competitive strategies are shown in table below:-
Competitive Advantage
Lower Cost Differentiation
Cost leadership
Differentiation
 broad target
Low cost focused
Focused
differentiation
 narrow target
Cost leadership technique or strategy is normally used by the companies for generally generating the profit even though the low price of the product or the services offered.
In this strategy company mainly focused on the decreasing of price and retaining their old customer and generating the new one, so by applying this rule to the airline business SIA’s have to take some initiative for lowing there prices in spite of that providing the full facility to their passengers. By doing this the SIA is always be a head from its competitor in present as well in future because doing this the high, medium and even low class passenger get attractive towards it and SIA’s will make even more profit than earlier.
Differentiation strategy, in this strategy a company’s offers a service that consumer’s perceived it as a different and ready to pay a high amount or cost for that.
So, SAI have to innovate some new facilities like new entertainment programs while travelling and some advance technology features with some extra cost, and it must be different as well as a new thing for passengers so that they are ready to pay a high amount for it. Or do offering the old facilities but offered it in that manner that passengers are ready to pay a high amount. This type of innovation or creativity make them different from there competitor and good for future also.
Focus Differentiation strategy focus on a narrow sector and within that sector, they are attempting to achieve either a price advantage or differentiation. The principle is that the sector which is focusing must be better served by entirely focusing on it.
So, SIA’s must use this strategy for be a top in their business by focusing in a small – small sector and offered better services to the passengers and then they will definitely be a head in the airline business.