Alaska Airline; Airline Operations Research Paper

Alaska Airline
Alaska Airline

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Alaska Airline; Airline Operations

Introduction

The airline sector has experienced remarkable development and international expansion in the previous decade. Aviation is important not just national but also international business development and provides vital socioeconomic benefits. The considerable growth is attributable for various factors including; deregulation of aviation laws  and bilateral agreements among governments; growing demand as a result of quality services putting pressure on airfares thus reduce costs of travel.

In addition, there is intense competition between airline and globalization, which has contributed to the growth of the air transport with international business and tourism that has greatly facilitated the aviation flight sector. The 1978 aviation deregulation act presents new opportunities for airline’s leading to expansion of the aviation sector (Suganthlakshmi, 2011). Such expansion has also led to intense competition, in turn contributing in air disputes. The sector has been forced to restructure its operations to remain sustainable while focusing on airlines. The paper evaluates the strategic analysis of the Alaska Airline and the structure of decision making.

Part One

 In the landing slot auctions how much contribution did your airline make?

In the Hong Kong arrival slot auction, Alaska airline was in the 3rd slot, which represented full-service operations. The auction was performed for 3 days while about eight landing slots were auctioned to the highest dealer.  This means that, the airline contributed a total of USD 49,796,250, with investments of approximately $ 1,75,00,00,007 and return on investment (ROI) of 28%. During the auction, a total of USD 6b was invested while Alaska invested USD 1,750,000,007 that earned 1, 4, and 6 landing slots.

The significance of the Contribution

This contribution was of great importance, because, Alaska was successful in low-cost airlines with a ROI OF 28 percent. Owing to the fact that ROI is an indicator for measuring performance, it depicts a high efficiency from not only investments but also provides productive results. The focus was mainly on enhancing RASM for generating high profit margins for Alaska airline. However, based on the load elements, the only chances of enhancing RASM is to increase revenue using pricing strategy.

This is practical in terms of assessing the cost of round trip Alaska airline offer s and breakeven costs. Therefore, bidding for landing slots was performed effectively. Because Alaska airline was in the full-service category, it was in position to get rid of intense competition. As such, this move was important for airline when it comes to generating a higher contribution. Nonetheless, there was intense competition, especially in groups 1 and 2, which led to a low contribut5ion and significant losses in certain areas.

Analyse your performance, what could you have done to make more

 To make more money and performance, Alaska airline could have bided a lower price for its opening bid, then increase it when necessary (Suganthlakshmi, 2011). This attempt could increase Alaska Airline’s opportunity for earning better contribution in the 1stlanding slot at low auction value. By and large, Alaska acted as the basis and supported by its core competencies while taking advantage of its rivals, which was important for increasing profitability.

Part 2

              Alaska Airline was formed in 1985. It is a holding firm whose parent company operates airlines, with a staff base of around 15,000 workers and a fleet of 200 aircrafts. The holding firm and the parent company are both independently branded. The company is the seventh biggest US carrier when it comes to passenger carrier and it is widespread across US. While headquarter in Seattle, the airline has grown significantly to serve several US states.        

Some of the deepening commitments were in form of ensuring optimal and efficient services. In this it is imperative to understand Michael Porter’s competitive forces, which shape the strategy. In aviation sector, competitive forces are intense and largely affect the profitability of the airline. Generally, some of the operations that would promote change include management and other associated services including catering, handling cargo and baggage (Wilhelm, 2015).

The airline’s decision to move to an all 737 fleet implies an increase in the mainline fleet to approximately 10 aircraft. In addition, a number of upcoming deliveries are likely to replace 737 fleet.

I would not go contract workers instead take into account that the airline in the community and being a good citizen. This is effective when it comes to enhancing not only the bottom line but also recognising front line employees and customers’ input to the bottom line. In short, good management requires balancing all vital competing interests and enhancing the overall revenue.

The airline is known for its dynamic innovation technologically and improvement on customer service. Therefore, senior leadership could have reduced the potential risk by increasing the airline capacity, great craft operation, solitary aircraft type, economical fares, terminus to terminus services, and rapid turnaround time at the airport, predominantly short- to medium haul routes (Hwang, 2011).

While the cost effective model has largely been a preferred model for airline, the gap between the full service carriers and low service carriers is getting smaller each day, as such, the LCCs might take over the market share of FSCs. Being that this market niche is still unexplored a lot of improvements can be done to grow it. It has been ranked highest in client contentment for old-style North American Airlines for 5 successive years.

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XYZ Capital Partners SWOT analysis

Strengths

Domestically, XYZ has a strong market presence; it takes in more commuters across US than any other carrier. The carrier is one of the largest carriers when it comes to passenger traffic. Owing to the remoteness of Alaska, air is the main form of transport. For five years consecutively it has been ranked highest when it comes to customer satisfaction for traditional North American airlines. The company has a strong operational network on its well established domestic market amid all turmoil characterized by international recession and increased terrorism the Airline still continues to grow.

Unlike its competitors, the company has been generating profit for over three decades except six years since it was conceptualized; it has enabled mergers to stay afloat. It has a great public acceptance in both travel safety and fast way of air travel. It has segmented its market by offering different services and different pricing. This model to a greater extent increase organization popularity and visibility because of specialization (Perry, 2012).

The airline staff training is intense and high in terms of quality coupled with experience earns them great customer satisfaction. The airline offer pilots extreme weather training an aspect that enhances the safety of its operations. To help navigate through an impossible terrain, the airline uses modern radar communication technology.

This also enhances the reliability and safety on its services. The company’s operations stretch back to the cold war era, when it offered chartered flights to the Soviet Union. The airline does not have competitors who fear venturing into this harsh terrain marred with extended flights. The airline obtains its greatest revenue overseas; however, it still plays a major role in national transport.                                                 

Alaska Airline has established that computes 50,000 points to enhance real-time performance of data which saves time and money. Approximately, the system saves the firm about $25 to $30 million annually (Blachly, 2012). This is the cutting edge  for XYZ Capital Partners as it enables it to hold down expenses and compete effectively on routes that cost less outside of US. It has received special honors on philanthropy and community involvement this increases its acceptance by the wider community.  

Weakness

            A large workforce that is spread over the vast geographic areas, with inclusion of the international points, requires continual monitoring and communication increasing on the operational costs for XYZ Capital Partners. Airlines demonstrate a high spoilage rate in comparison to other sectors. Immediately flight takes off, a vacant seat is lost and is non-revenue generating. Nothing can salvage such situation that revenue is lost. Aircrafts are very expensive and require huge capital outlays (Ommani, 2011). While the commerce environment can change rapidly, the in aviation sector it is very complex to make speedy schedule and airplane variations due to staff commitments, contracts and other factors.                                                                            

The greatest weakness for XYZ Capital Partners marketing mix is in the promotional strategies. This is an attempt for cost cutting to stay lucrative but might work against them on creating a new customer base or even losing customers to competitors.  XYZ Capital Partners model of business not necessary it depends entirely on one source of revenue and that is passenger revenue in terms of fares. Anything that disrupts it sends the whole business on its knees. It’s absent in the lucrative certain regions market that is growing in terms of tourism and business travel also affects its operations.

Opportunities

Technological advancement can lead to cutting costs, starting with fuel efficient aircrafts to additional computerization in terms of ground operations reducing the cost of man power. Developing a symbiotic relationship with other carriers can increase passenger volume. This can be achieved by harmonizing timetables; carriers can offer services to destination on a code sharing arrangement with a partner carrier. XYZ Capital Partners offers continual opportunities to both business and leisure air travel (Porter, 2008).                                                                                             

The recent growth on international tourism is increasing the air traffic the airline can tap into this growing the market niche, and by so doing; it increases the revenue generating platforms and air space. XYZ Capital Partners has in-flight entertainment player to improve on customer satisfaction, which is a great marketing move that will improve the customer retention.

Threats          

Global economic recession greatly affects leisure, business and optional travel that cut down the market sphere as well as the revenue in it. Fuel cost is the biggest expense for the airline as is the case everywhere; hence an upward approach can threaten the business strategy. With the surge in the insecurity that has been greatly caused by terrorism negatively affects air travel.    

This applies mostly by governments to safeguard national carriers and caution them from external competition (Blake & Wijetilaka, 2015).Fluctuation in air travel in demand by the economy class market segment, which      hurts the business economically. There has been an increase in personnel training costs; this has been characterized by high technological advancements and the global increase in training fee.

Marketing Mix

Price

XYZ Capital Partners has a reputation for being lowly priced in terms of air ticket fare in comparison to the competitor that is majorly delta air. The other attraction on the price cap is that you can cancel your flight and get back your fare back without any penalty. This makes XYZ Capital Partners attractive to its customers because of customer friendly policies.

In this case, there are price changes such as, reduction in price that customers receive in form of a credit for use in future flight (Wilhelm, 2015). XYZ Capital Partners has mileage, which enable one-way redemption for frequent flyers. The airline also introduced program 49 for planning mileage for Alaska residents with various benefits including email notification, fare, discounts and sales

Promotion

XYZ Capital Partners is technologically savvy and recognized for embracing technological changes to improve clients’ experience. The main mode of marketing is customer referrals it endears itself to its passengers thus creating more customers by referrals from its existing customer base. Such a marketing tool is easy to run because it is not expensive to run as compared to mega sponsorship deals with sports clubs, and television adverts that cost millions to run.

This requires working on the personnel and hiring those with a friendly character and attitude and imposing a strict code of character. The customer here is the most important aspect of the business and how you treat them determines their loyalty to your airline.

Internet being the greatest marketing platform, XYZ Capital Partners has earned a reputation as having funny and clever ads, but there is only problem is that these ads are few and far between.  Such an operational philosophy of cutting down expenses though beneficial can work against them. Airline business requires a lot of visibility and constant communication with the public or you might run a risk of losing business to its rivals.

A brand has to be recognised in public at all times, most airlines fail to know that customers as such, they need being  reminded why they have to be in business and the younger prospects want a visible airline, it has to do that if it has to tap into these market sphere. Therefore, XYZ Capital Partners has to look for ways of understanding such issues.

On time delivery, nobody likes delay and XYZ Capital Partners to ensure that services are delivered timely as well as performance. It has a reputation of prompt service delivery and keeping their schedules. Such a kind of reputation is a morale booster for the existing customers and new customers. Again, this less intensive marketing strategy that stirs the XYZ Capital Partners a head by generating greater customer confidence is the brand for such a dynamic market.

The airline is devoted to its clients and this is one of the leading strategies as far as the company is concern. XYZ Capital Partners should invest in Alaska Airline as services are offered through way of technology, process, and customer relations they share passion. While this is what the organisation aims to do, this is exactly what XYZ Capital Partners intends to carry forth, before investing so as to share on the same network.

Place

Since the XYZ Capital Partners is strategically located, air travel is the main mode of transport. On most occasions, residents use their services to buy goods and services. Patients are also flown for emergency services. Recently, Alaska airline expanded to other regions, particularly, Hawaii and non-airline centre so as to increase the revenue streams, an important element that should convince XYZ Capital Partners to invest.

There are plans to exit underperforming routes and cut the capacity of other routes this is to enable it fully concentrate on the more profitable routes. This is a short term strategy to due to increased competition from established airline. However, with good marketing strategies, XYZ Capital Partners can be at the top.

In business there is no jack of all trades, a company has to specialize on its core activities that way it enable it to retain your existing customer base before thinking of a new market. Furthermore, Alaska airline has developed new branding strategies for affiliate regional as well as independently owned flights that it collaborates with, hence good venture for XYZ Capital Partners. Among the companies it has subcontracted to do additional flying for the group are; Canadair CRJ-700 regional jet, SkyWest Airlines they are dedicated to serve the group and are painted in a similar manner as Alaska horizon’s.

Product

The major product it offers is low cost passengers who travel frequently to either shop or seek medical help. It offers alternatives for customers who do not have time sensitive shipment and can wait for space available services. Moreover, XYZ Capital Partners operate a wide range of flights connecting small towns to main transport centers and carry many customers in comparison to other airlines across Unites States.

On the course to increase its market share, XYZ Capital Partners can invest in other airlines such as Alaska airlines. In such collaborations, XYZ Capital Partners can sell tickets on Alaska flights, which will promote its services on global networks and connection with frequent flyers. This symbiotic kind of relationship rides on the already existing market of the two giant airlines, these minimizes the spoilage rates and in return improves profitability while keeping the operational costs low.

There is an onboard offer of beverages from a fellow US company that produces coffee. It also features on board entertainment; it is regarded as the first airline to introduce in-flight entrainments in 2003. When the sun and the moon aligned on March 2016 the Alaska airline decided to delay the flight for 25 minutes to catch this rare spectacle. In addition, Alaska airline has an accommodating gesture; it gets individuals from one point to another while offering them quality service delivery. It is not only the airline to talks to its people but also listens to them, hence offering customer service at its very best.

Analysis

Alaska Airline operates in a growing market niche where so much can be done to improve its profitability by increasing its revenue. In 2014, for instance, the airline carried over 21 million passengers with a fleet whose average age is 9.7 years. It had a reported net profit for the 4th quarter of USD148 million despite the heightened competition on that year alone it was reported to have a net profit of $571 Million excluding special items. The operating margins for 2014 expanded YOY to 17.7%. Furthermore, full year pretax margin came in at 17.2%. As its giant competitors went into restructuring, Alaska Airline turned itself into a high quality industrial company. Most of the gains that year were attributable to the price o fuel, but even without this the profit margin was substantial.                                                                                     

The airline is still much in growth phase, it can improve further by targeting new markets such as the lucrative Asian market and the African market as a tourism edge. The strength of the local economy especially, in the Pacific Northwest has helped keep the demand afloat, but the rise in Alaska’s margin was characterized more by the reduction in fuel cost. Its competitive capacity rose by 7% and the percentage of its market by 8% in the same year. It has launched 16 new North American markets in Seattle where Seattle signifies 55% market share.                                      

With the recent decision to add more Q400 to grow the E175 sub fleet is interesting, this is a statement even if the fuel prices rises these means that operation margins won’t suffer too deeply, with such kind of management ideas investing in this company is profitable, there is no better time to invest in such a fast growing company but now. With the recent acquisition of virgin America it shows great growth prospective for the airline this will boost its capitalization increase revenue and then in return more profits this in return rewards shareholders with increased returns to investment.

If I were to take a personal stand, I would therefore recommend any prospective investor to put their money in this company because it has proven sustainable over the years, generation profit for 33 years for a business operation than span close to 39 years. 

Conclusion

Based on the discussion and SWOT analysis, it is clear that Alaska airline is in the transformation stage, whereby it is focusing on its strengths while capitalizing on potential opportunities.  The very objective of Alaska airline may be achieved if it puts emphasis to fulfill the demand of users; implement appropriate marketing strategies;  and improve services offered particularly dewing inflight and post-flight.

References

Blachly, Linda ( 2012). “Alaska Airlines places $5 billion 737, MAX order”. Air Transport World. Archived from the original on October 11, 2012. Retrieved 1/5/2016

Blake, Martin & Wijetilaka, Shehan (2015). “5 tips to grow your start-up using SWOT analysis”. Sydney. Retrieved 1/5/2016.

Hwang, Inyoung (2011). “Alaska Air to Replace AMR in Dow Jones Transportation Average”. Bloomberg BusinessWeek. Archived from the original on May 9, 2012. Retrieved 1/5/2016

Ommani, Ahmad (2011). “SWOT analysis for business management” 5 (22). African Journal of Business Management: 9448–9454.

Perry, Dominic (2012). “Alaska orders 50 Boeing 737s in $5 billion deal”. London: Flight global. Archived from the original on October 11, 2012. Retrieved (1st May, 2016).

Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy [online] available from <http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1> (1st May, 2016).

Suganthlakshmi, T. (2011). ‘Challenges And Strategies For Successful Airline Operation’ ZENITH International Journal of Multidisciplinary Research[online] 1 (3), 139-150. available from<http://www.zenithresearch.org.in/images/stories/pdf/2011/July/12%20T.Suganthlakshmi.pdf>(1st May, 2016).

Wilhelm, Steve (2015). “Alaska Airlines logs big boost in passengers as it combats rival Delta”. Puget Sound Business Journal. Retrieved (1st May, 2016).

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