Low-cost airlines in America
Airlines have been struggling to survive with the ongoing economic crisis, with many airlines filing for bankruptcy. JetBlue is still raking in profits and its success story can be attributed to strategic flexible planning, re-designing of current key procedures and past objectives, incessant observations of the prevailing market trends and emphasis on customer service and care. JetBlue is administered in a way that allow dynamism within its operations and standardized quality in all aspects of their services is not compromised.This paper seeks to establish how low-cost airlines in America come up with and implement strategies with the current economic crisis. Abstract The fundamental strategy for most airlines is growth assumed to; increasing the profits of the company. The overriding goal for any airline is to improve its earnings, through cost-effective methods while ensuring customer satisfaction, and maximization of current resources. There are critical success factors in the industry according to McCabe (n.d), airlines must be effective in four areas of attracting customers, managing its fleet, managing staff and managing its finances. The first part of attracting customer entails increasing the attractiveness and efficacy of the airlines’s services. This can be achieved through proper handling of courier and luggage and etiquette from the staff and service providers of the airline. It involves provision of services in relation to the ticket price acquired by the customer. The airline’s promotional effectiveness should be enhanced.
Managing of the airline’s assets should be ensured to enable optimal maximization of assets. This is in regard to the number of trips per plane and the occupied seat capacity per trip. Airplane utilization increases the profits of an airline and its growth. Additionally an airline should have policies in place of managing its staff. Productive output per employee should be an important measure of the staff’s productivity and a good labor-management relationship should exist to avoid cases of go-slows, strikes which affect an airline’s operations and reputation.
Staff motivation is also a key to success when it comes to employees and training programs should be implemented in order to equip the staff on how to deal with the clients in the modern world. Lastly managing finances is important in relation to expenditures, revenue and investments. An airline should ensure that the asset-debt ratio is acceptable to avoid liquidity problems and also enough finances should be in store in case of calamities, need for growth occurs and to shield against other drastic market changes (McCabe n.d).
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The airline industry is dynamic and it requires a flexible strategic plan for more effectiveness. For any business to survive, an analysis of the surrounding business environment is vital. JetBlue uses the much acclaimed SWOT analysis which is helpful in creating subsequent plan actions after identifying an organization’s objective. It identifies key factors crucial towards achieving the objective. JetBlue is therefore able to deal with the possible weaknesses and threats and avoids future problems.
Consequently it can be able to take advantage of the opportunities maybe in terms of unventured areas or investments and increase its strength which will give it a more competitive advantage over the others. One of the tactics regards the increase in fuel prices and JetBlue identified it as a threat and is hedging fuel to save on operating costs. Other low-cost airlines like Southwest, founded in 1971 have been struggling to survive especially after deregulation of rules in the industry.
Despite many airlines laying off the staff to save on cost, Southwest is instead basing its strategy on staff management and retaining its current employees. It is instead offering good remuneration to its staff members and ensuring employee commitment and partnership between its management and their unions. Southwest is operating at a profit and the strategy is more than effective. Southwest is one of the few companies that have avoided growth by acquisition, where small especially low-cost companies are targets (Airline Bulletin 2009).
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Mergers and buyouts are on the increase especially if the one airline’s is having financial woes. Peter (2006) uses US Airways and America West airlines as an example. These two corporations consolidated back in 2006 where US Airways’ share price increased dramatically after a merger with America West. Peter states that a merger increases the asset value of the company and they are able to absorb each other’s losses, and expansion of operations can be easy. A buyout of Spirit by US Airways was and still is considered a plausible move towards increasing the ancillary revenue of the company.
Marketing, promotion and branding is necessary and can have a great impact on an airline’s productivity. Utilization of technology to convenience the customer e. g. purchases of online tickets and downloading of online luggage tags is also an important tool. Currently there has been constant pressure towards international integration and the recent battle between American and Delta airlines for partnership with a Japanese airline (JAL) further proves the point. Airlines are aiming for stakes in international airlines as this will provide a more complete intergration.
This is due to increased demand and pressure to ply international routes, and Americans airlines view this as a major milestone towards achieving their economical goals. This integration will increase the travel convenience of customers and will ensure more seamless flights and avoid conflicts with other alliances (Airline Bulletin December 27, 2009) Conclusion JetBlue can implement all of the strategies discussed above because competition is increasing and airlines are finding more productive ways of having competitive advantage over each other.
The issue of merging could be helpful especially if need for development arises, but with constant changes to the industry, securing a monopoly-like stronghold maybe the best option first before engaging in risks like that. JetFuel should however continue with its basic strategy of ensuring a right mix of management customer service, quality and style to stay on top of the pack (JetBlue Airways, press release February 11, 2010)
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JetBlue Airways (February 11, 2010) Jet Airways celebrates its 10th Anniversary
AirLine Bulletin (December 27, 2009) Trends&Predictions 2010: Part I
AirLine Bulletin (December 29, 2009) Trends and predictions 2010: Part II
McCabe R. M (n.d) Airline industries key success factors
PetersW. J (November 16, 2006) New York Times US Airways seeks to become world’s biggest carrier