Being a company inside another, EmQuest deals with GDS and currently has a ten- year contract with Saber where it acquires a 70 per cent commission on distributions. EmQuest has four classifications of travel (A-B-C-D) derived from quantity of segments sold with the mass of sales and greater concentration lying in groups C-D. EmQuest has a number of departments with each playing a key role in its operations.
Additionally, the products of EmQuest are numerous and competitive. Dubai is the most fruitful revenue source for EmQuest, Northern Emirates comes second, Dnata, Abu Dhabi, and lastly Africa as it is a new market. Ridiculously, EmQuest obtains high income on cancelled sections.
Introduction
Being a company inside another, EmQuest handles GDS (region where airlines dispense their products). EmQuest currently has a ten- year contract with Saber, a new product (GDS) distributed by EmQuest. At all times, EmQuest always acquires a 70 per cent commission on distributions of Saber.
The departments contained in EmQuest comprise of technical support, vendor support, customer support, business development, as well as sales and products. Each of these departments plays a key role in the operations of EmQuest. Additionally, EmQuest associates with a third party to enable them to acquire tools such as booking builder, which is a program that operates as a GDS. Low cost carrier uses booking builder for supply to travel agents.
Revenue that is generated by per passenger segment in EmQuest is for instance DXB > LHR >LHR > DXB representing two segments through which EmQuest makes money. There are four classifications of travel derived from quantity of segments sold. These classifications are A-B-C-D with the mass of sales lying in groups C-D. As a result, incentives are generally given to those groups. The product group has a tendency of demoing out every new programme in addition to testing it up to when it enters in its target market.
Products of EmQuest
Saber
Saber is a certified EmQuest product that is the only distributors of the United Arab Emirates (UAE), the Indian Ocean Islands, and Africa. There are four sections of Sabre namely:
Sabre efficiency suite
Sabre revenue suite
Sabre service suite
Sabre value suite
From the above four programs, the most useful ones are efficiency, service, and value. Some of the finished products of Sabre include the following:
Sabre Red Workspace- finished product for the travel agent.
Sabre mobile application- used by travel agents for sending email customers allowing them to inquire about the booking via the mobile.
Tripcase- a website that illustrates client bookings done on Saber
In the UAE, the market share is 50 per cent of Saber and AMADEUS and Galileo utilize the rest. Sabre as well offers outstanding reporting systems for comprehending amount and kind of tickets and other reporting types. Sabre permits travel agents to make one-way bookings only.
Booking Builder
Booking Builder connects Sabre to low cost carriers. Booking Builder offers back office resolutions, with regard to generating reports on Passenger Name Records (PNR) daily, thus saving time and money. In general, Booking Builder can be modified and interconnected with Sabre.
Sabre Web Booking Engine
This is an online booking engine supported by EmQuest to let travel agents offer aid to customers by allowing them to make their bookings, generate a PNR, and ultimately ticket at a travel agency. For this programme, the requesting price is $250 a once paid fee, and afterwards $200 on a monthly basis with forty bookings at no cost. For every booking in excess of forty, there is a fee of $1.25. For low cost carrier, every booking in excess of forty is charged $4.
Get There
Get there concentrates on corporate, and alters flights as per the corporate regulations and directives. Get there also permits booking of hotels and car, and ultimately the bought booking will generate a PNR, send for endorsement inside the corporation, and finally to the travel agent via a queue system that permits the travel agent to collect the PNR and provide the ticket.
Agency Sales and Support Enterprise Tool (Asset)
ASSET is created solely for Sabre. It looks at agencies making use of Sabre, considers the kind of calls received by the client support, finance computations for inducements given to agents, and section productivity. The generation of this report takes place monthly. This is a superb and thorough report.
Back Office Sales System (BOSS)
BOSS enables agents to publish reports, record ticketing and portal transactions, document payment vouchers, and produce balance sheets. Statements are given to suppliers (The Emirates Airline) as well as corporate clients. Invoices are provided to the end customer. Fascinatingly, customers are able to book and buy tickets on credit.
Videcom Reservation System (VRS)
VRS includes several systems like reservation systems and CRIS just to mention but a few. The VRS permits companies that approve it to be seen on a GDS and travel agents can subsequently book flights via VRS adopting airline. Additionally, VRS has a small cargo system that holds small cargo enquiries and operations. EmQuest obtains revenue in two methods, viz. by vending the system or on each section the adopting airline vends where Emirates obtains about thirty cents on each section every month following a sale of the first 12,000 segments.
Operations of EmQuest
Dubai is the most productive income source for EmQuest, Northern Emirates follows, Dnata, Abu Dhabi, and lastly Africa since it is a new market. Amusingly, EmQuest creates income even on cancelled sections. Sabre share 65 per cent of the cancellation profits per section.
The target for the current financial year is 105 million UAE Dirham (DHS); however, 90 million DHS is predicted including total sections. Problems being encountered are a lot, but the ones generally happening are ticket reissuance revalidation. The client support team uses phone calls and emails. However, email service does not serve the U.A.E market, and just serves some African nations like Nigeria, South Africa, and Kenya.
Conclusion
Being a company inside another, EmQuest deals with GDS and currently has a ten- year contract with Saber where it acquires a 70 per cent commission on distributions. EmQuest has four classifications of travel (A-B-C-D) derived from quantity of segments sold with the mass of sales and greater concentration lying in groups C-D. There is no doubt that due to its outstanding products and services, EmQuest holds a competitive advantage in its markets.
Recommendations
With regard to marketing, Sabre should tackle class A and B agencies instead of D and C only so that their reputation and the operations remain ahead.
EmQuest should boost its operations in Africa and in the cancelled sections in bid to maintain a competitive advantage, since even without major focus these areas generate considerable revenue.
EmQuest should ensure that the email service serves its entire market instead of just a few nations in Africa. This aspect will go a long way in easing the means of addressing complaints and needs of customers and thus yield customer satisfaction.
The Emirates airline has experienced a lot of challenges in its operations, which has resulted in companys poor financial performance. Several issues in the aviation industry have had a negative impact on the companys financial results. The difficult economic environment in global aviation market has reduced the amount of revenues earned by airlines.
The global aviation industry has experienced a slump in performance, and many airlines are currently struggling to stay afloat. This paper will discuss the macro- environmental economic trends which affect the demand for airline services in the global market (Bundhun, 2011).
High fuel costs have had a severe impact on the performance of Emirates Airline. These increased costs resulted in the losses in the companys profitability in 2011 which made its revenues reduce. The company spent more than 1 billion dollars on fuel expenses; the amount is higher as compared to that spent on the same in the same period of the previous year. The global aviation industry has become more vulnerable to instability in fuel prices than it was before.
This situation has made many airlines around the world experience significant financial losses in their operations. (Bundhun, 2012). The International Air Travel Association has projected the global aviation industry profitability levels to reduce because of high fuel costs. The IATA has stated that profits in the industry would dip from 16 billion dollars in 2011 to 6.9 billion dollars in 2012.
Emirates has had to contend with reduced traveller numbers as a result of the recession in Europe and other parts of the globe. The occupancy rates of passengers in the carrier have reduced, and this has had an effect on the airlines revenues in the short term. The airline has managed to become elastic to the changes in the market in a difficult period (Black, 2012).
However, despite all these challenges, the company has managed to register good financial results in 2012. The groups fiscal results for the financial year ending September 30, 2012, were 575 million dollars. This performance is positive as compared to the revenue of 343 million dollars the group gained during the same period in 2011.
The Middle East has seen an increase in the number of airlines. These airlines seek to benefit from the increase in the number of travellers in the region. Airlines in the area registered profits amounting to 900 million dollars in 2011, which shows the regions aviation industry has experienced rapid growth.
Emirates financial performance is beyond expectations because there are several airlines in the Middle East with good financial results. Etihad and Qatar airlines are Emirates main competitors. These airlines have made their operations more efficient in order to take advantage of high passenger traffic in the gulf (Black, 2012). The Emirates Group has changed its market strategy to meet the existing market realities.
Emirates airline has acquired new fleet which is in line with the carriers ambitions to stay ahead in the global market. The new aircraft will be used for long haul destinations with high passenger numbers to help the firm take advantage of new market opportunities. The airline has acquired Airbus A380 aircraft to enable it to transport more passengers on long distance routes.
This shift in market strategy is intended to connect the airlines passengers with other major global hubs (Black, 2012). However, its competitors have also placed orders for new airbus and Boeing aircraft. They are competing with Emirates to dominate the global aviation industry. Qatar and Etihad airlines are giving Emirates a run for its money. Emirates will continue to experience more competition in the aviation industry from the two airlines.
Emirates Airline has acquired fuel efficient Boeing 777-300ER aircraft. This is a long term strategy which is meant to reduce the challenges the company has experienced as a result of unstable oil prices. Middle Eastern airlines have become more active in global air transport. Thus the airline companies are targeting to expand their global reach to take advantages of new opportunities.
The global air industry has experienced a slump in the number of passengers, yet Middle Eastern airlines continue to expand their operations (Baker, 2012). The market trends in the region show that in the past year, passenger traffic has not reduced by a large margin as compared to that of Europe, North America and the Far East.
The Emirates airline is well placed to take advantage of various opportunities in the market. The airlines Dubai hubs location is strategic which makes it benefit from high passenger traffic. The city is also popular with shoppers and tourists who are attracted to it. Many travellers have to transit through Dubai to other destinations in the Far East, Europe, Africa and the Middle East.
This gives the Emirates Airline an opportunity to structure its operations to meet the needs of such travellers (Baker, 2012). The acquisition of new aircraft by the company is intended to give it a stronger foothold in lucrative passenger markets.
In conclusion, the Emirates airline has experienced various challenges which have had an impact on its performance. Its new market strategy which focuses on long haul operations and fuel efficiency is likely to improve its performance. This will make it keep its dominant position in the global aviation industry.
References
Baker, L. (2012). Emirates flagship A380 network expands east and west. UK Zambians. Web.
Black, D. (2012). Aircraft demand to soar in Middle East as orders expected to hit $470bn. The National. Web.
There is no secret that companies strive to make as much money out a their clients as possible, resorting to all sorts of marketing tricks. One of the most widespread and definitely the most notorious one is the policy of hidden charges; defined as the supplementary services which are not included into the ticket price, such issues as Booking fees, baggage charges and a host of optional service fares (Macguire, 2012, para. 1) are nowadays considered a common practice among a number of airlines, which raises the question whether airline companies infringe the customers rights by making them pay for the services which should quite honestly be included into the list of free services.
Despite the fact that hidden charges might seem not quite fair to the clients, there are strong reasons to resort to charging the clients for the services which are generally considered free, mostly because of the fact that free services should be considered as a gift from the airline company, not a duty.
In the light of the heated arguments which have recently been raised concerning the issue, the article by Macguire should be mentioned. Offering a brief overview of the current situation, Macguire makes it obvious that at present, a number of airlines are practicing the hidden charges approach is quite reasonable.
To prove the above-mentioned, Macguire states that the airline companies have actually all the reasons to charge people for additional services: Additional fees for things like baggage allowance and seat selection can be above and beyond what it costs the airline (to offer these services) (Macguire, 2012, para. 3).
In addition, the author of the article explains in details what exactly makes the companies make their clients pay more: This enables them to streamline their costs and offer customers greater value for money in an increasingly competitive marketplace (Macguire, 2012, para. 7). Therefore, it is evident that the prices for additional services have not been raised just of nothing on the contrary, airline companies seem to have no other choice than to charge their clients for certain services.
However, it is worth admitting that Macguire also makes an attempt to consider the viewpoint of the opponents of hidden charges: Many people have told us they distrust the airlines weighing systems (Macguire, 2012, para. 14). All in all, the idea that companies need money to resume providing the services of the same high quality to their clientele pretty much sums up Macguires idea in a nutshell.
The given article, however, relates directly to the issues discussed in the given course. Macguire not only makes a legitimate point, but also touches upon a peculiar issue concerning the relationships between the people who offer certain services and the ones who use these services.
Regarding the economical issues, the article written by Macguire allows to see the basic principles of economics in action, i.e., the interaction between the company and the customers, the arguments which occur in the course of this interaction and the ways in which these arguments can be solved.
In addition, the article teaches the readers an important lesson, which is that companies do not raise prices for no reason; on the contrary, with all the rivals that these companies have to oppose to, there are sufficient reasons to make the charges even lower. Hence, the true factors which make companies raise prices are finally revealed, which contributes to building trustworthy relationships between the customers and the companies.
Nevertheless, the moral aspect of the issue still has to be considered. It is not the fact that the services which used to be free became paid that bothers; it is the fact that these charges are hidden that raises concerns. It would be much more reasonable if the airline companies offered their clients an honest-to-God description of all the services which are free as well as those which the customers have to pay for.
While the given approach might work against the companies once clients see all the changes which have been made to once free services, it will save the time and effort to calm down the people who did not expect certain services to cost money.
Hence, it can be considered that charging the customers for using any other facilities than a booked flight from the point A to the destination is fully the right of the airline companies, and the latter can exercise it on a regular basis. While it is reasonable to take into account the wishes of the clients, it is still necessary to make sure that the airline companies do not bear significant losses, which can happen once certain services become free.
Airline companies have to maintain high-quality standards and provide the clients with maximum security, which requires a lot of financial resources; hence, certain services cost money. Once considering payment for supplementary services as the way to get even better ones next time, the customers will be able to put up with the hidden airline charges.
The merger of companies has become one of the most desirable competitive strategies that are used by companies in the international business industry today. The case of mergers as a competitive strategy also applies to the US Airlines industry. The airlines industry in the United States provides transportation for people and cargo. Airline companies provide transportation services on regular schedules over given specified routes.
The industry is classified into two: network carriers and regional carriers. Network carriers make use of at least a single hub to operate a given portion of their flights. Connection of flights is done on a spoke system. On the other hand, regional carriers offer transportation services from the smaller cities and towns within the United States. They use smaller planes and jets. The main aim of the regional carriers is to feed the network carriers with passengers.
They also give support to the spoke systems. There are also airline companies that deal with the transportation of the mails within the United States. Such companies are classified under the regional carriers. There are also a number of international airline companies in the United States. The international airline companies are quite competitive and deal with the transportation of passage from the US into other regions of the world and back (Samadi, 2010).
Industry analysis
The US airlines industry is one of the most dynamic industries in the United States. The industry has a wide number of commercial airline companies. The number of major airline companies that operate in the industry makes the industry tenser in terms of competition and rivalry amongst these companies.
The pace at which the commercial airline industry in the United States has evolved is quite high. The industry is capital intensive, labor intensive and is usually affected by the changes in the business cycles. The industry is also subjected to regulation, as well as the deregulation of business activities.
The industry plays an expanded role in connecting the US to the global economy (Global Airline Industry Program, n.d.). The deregulation of the industry in the later years of the 20th century has been behind the increase in the number of airline companies in the United States. The regulation of the industry is done by the federal government. The regulation is meant to ensure that there is adherence to high standards of operation in the company, as well as the assurance of passenger safety.
Mergers and acquisition is one of the common tendencies in the industry, with most companies in the industry struggling to ensure that they gain a competitive ground on which to compete. With globalization, the number of travels has increased, denoting an increase in the opportunities that prevail in the US airlines industry (Samadi, 2010).
Political factors and their interplay in the US Airlines Industry
The main shift in the approach of management in the US airlines industry was witnessed in the year 2001, when a terrorist attack was executed through the hijacked planes. The event was critical to the airline business inside and outside the United States. It denoted a significant drop in business, as well as a significant drop in airline travels due to the fear of security.
However, it is important to note that a significant number of political decisions have been developed and enforced in order to ensure that there is sustainability in the airlines industry (Borenstein, 1992). The last one decade saw the rise in the airlines security across the globe with no major incidents of terrorism or attack being reported in the industry. This has been a positive sign in the industry and has been patterned with the developments in the global political economy, thus promoting business in the industry.
This is supported by the fact that the airlines industry is the major enhancer of business in the United States. It promotes the flow of people and goods from the country and into the country. The important question that can be asked at this point concerns the nature of political developments in the contemporary times and how they shape business advancements in the US Airlines industry (Vedder, 2008).
Recent times have seen the enforcement of deregulation policies, which have aided in opening up the industry. This implies that the number of airlines companies has gone up in the recent years. The main political factor that has an impact on the performance of the Airlines industry in the United States is the regulation and deregulation of the industry by the government. Federal and local taxes on the industry have been demeaning firms in the US airlines industry from maximizing profits.
A higher tax on air transport is a discouraging factor in the industry. When the taxes are high due to higher rates of taxation, most people shun from the air travel since they cannot meet the cost of air travel. This results in the drop in demand for air travel. Thus, the current governments proposal to raise airline taxes is not a welcome move in the industry (Jenkins, Marks & Miller 2011).
Over the past two decades, the politics surrounding the sustenance of the airline industry in the world have been shaped by the demand for the liberalization of the industry and the concern over the security of the flights. The issue of security has come into play because of the political developments in the Middle East, as well as the Near East region.
While the establishment of the CEAA, which is an international body that is supposed to oversee the issues that play out in the airline industry has not aided in liberalizing the airlines industry in the world, it can be noted that the United States Government has done well in terms of embracing liberalizing the industry.
This is attributed to the Open Skies policy that was developed by the government. This policy has aided in opening up the international airline and increasing the competitive scale of the industry (Vedder, 2008).
The open skies policy is an agreement that was made by the United States Government in collaboration with the European Union in the year 2007. It was meant to open up flight routes between the United States and members of the European Union, thus allowing most United States carriers to operate flights in the European Unions and the European Union carriers to operate flights in the United States.
Whether the policy bears the required fruits is a question that can only be answered by evaluating the economic trends of the airlines industry in the United States and the European Union. However, it can be said that the policy has triggered the pace of operation in the industry by opening up opportunities for US airline companies in the broader Europe region (Vedder, 2008).
With the increase in the number of companies that operate in the airlines industry, the regulation of labor has become a necessary factor. Issues of labor regulation in the international airlines industry comes from the standards of labor operations that were set by the International Civil Aviation Organization. The United States has set comparative wages and labor standards that ought to be adhered to by the companies that play out in the industry. This aids in shaping the stature of the workforce in the industry.
According to Truxal (2012), the growth in the trend of competition in the airlines industry in the United States is also affected by the development of foreign rules of ownership in the industry. Having noted the trend in the industry, it is evident that most companies are merging their operations to raise the competitive scale of the industry as a way of raising their competitive scale.
The rules of ownership that have been embraced by the United States Government have often been subjected to criticisms. The government has highly restricted the ownership of US airlines companies by foreigners. This is a setback in the era in which the international trading environment has been opened up and mergers and acquisitions are being done in other sectors of the economy.
However, it is argued that the restriction of ownership is attributed to the need for the sustenance of the labor and the security issues in the industry. The increase in the number of foreign operators is bound to bring about differences in terms of the standards of operations, thus affecting issues of security and labor rules enforcement as embraced by the government rules (Truxal, 2012).
Economic Factors
As noted earlier, the September 11 attack has been the main shaper of the contemporary operations in the airlines industry in the world. In the recent years, there have been a lot of developments in as far as the stability of the United States economy is concerned. Forces in the economy have resulted in a shrink in the trading environment in the country.
However, the country seems to be recovering from the economic shocks of the past decade like the global financial crisis and the recession. According to a substantial number of economic commentators, the airlines industry in the United States has been shaped by three key events.
The events include the changes in the economic lifestyle through the emergence of the dot.com bubble, the terrorist attacks of the September 11, 2001 and the economic problems that emerged in the last decade (Vedder, 2008). These events triggered a number of economic actions in the industry, which have promoted the competitive levels in the US airlines industry and its operations across the globe.
There are other factors that shape competition in the US airlines industry in the contemporary time. These factors include the rises in the international fuel prices, the increased globalization and the emergence of new loci of economic power across the world and the mounting pressure within the industry which forces the companies to adopt diverse strategies in order to survive the competition.
Fuel prices keep fluctuating, thereby causing a problem of cost adjustments in the industry. The numbers of commercial airlines companies in the United States have significantly increased over the years. The competition has been further triggered by the presence of foreign multinationals in the in the local economy like the Virgin Airlines (Thomas, 2011).
It is important to note that there is a rise in the rate of competitiveness in the US airlines industry, which is forcing companies in the industry to become proactive in terms of the formulation and enforcement of competitive strategies. The competition in the industry is promoted by the efforts of the government to minimize the regulation of the industry to open competition.
One of the strategies of competition that has been deployed in the industry for an extended period of time and still remains significant in the contemporary times is the merger of operations in the industry. Although surrounded with a lot of external and internal issues, most companies see this as a tool that enables them to raise their competitive levels (United States & United States, 2008).
The latest case of a merger in the United States airlines industry, which has not yet materialized, is the planned merger between the American Airlines company and the US Airways. The most important question to ask is whether mergers have aided in raising the competitive level of companies in the US airlines industry.
This resonates from the fact that mergers are complex exercises. The complexity resonates from the need to harmonize the operations of companies owing to the fact that different companies adapt diverse tactics of operations. Harmonizing events and strategies of companies under the merger exercise is, therefore, quite fragile.
However, the experience of the mergers in the US airlines industry denotes the fact that mergers are highly desirable since they have resulted in increased competition (Ben-Yosef, 2005). However, challenges often persist in as far as the operations of mergers are concerned. This is evident in the contemporary case of a merger; US Airways and American Airlines.
Most merger exercises in the US airlines industry have been centered on the local environment. This implies that most US companies prefer to exercise mergers with internal companies rather than foreign companies. Such a trend is promoted by the existence of an economic policy that regulates merger functions in the industry (Lelieur, 2003).
According to Vedder (2008), the globalization of the international markets is a critical factor in the growth of the international market. Several countries in the world have emerged as strong economies. An example is China, which is one of the most populated countries in the world.
The economy of China has been expanding at an increasing rate. Trade between China and the entire world has risen sharply in the recent times. This means that there is an increase in the movement of people and goods from and into China. This is an opportunity for the US airlines companies.
The rapid development of industry in China has necessitated trade with other countries in the world. This has forced China to craft economic policies that open up the country to international trade. This presents an opportunity to the US airlines in China. Merging companies in the industry strengthens the operational capacity of companies, making them to thrive in the market by exploring the opportunities in the market.
The presence of a lot of competition in the United States has forced companies in the industry to expand their operations in other regions of the world like the South East Asian region, which has exhibited positive prospects of economic development in the recent times. There is an upward trend in international air travel in the region due to the significance of the region in the contemporary global economy.
Focus on this region by any airline company can, therefore, result in desirable economic payoffs. China has promoted economic dialogue with the United States, which has opened the country to trade with the United States. One of the main agreements concern the opening up of China for the US airline (Etats-Unis, 2006).
Social factors
The growth of the global population forms the core of a lot of social and economic debates. The most critical factor in as far as the population growth is concerned is the accompaniment of the population growth with economic growth. This is what can promote the airlines industry. Though leisure trends are highly shaped by the economic conditions, there has not been a significant change in the trend in the leisure trend in the recent years.
This implies that the need for transportation of people to tourist destinations is a factor that has continued to promote the airlines industry. The global tourism industry continues to exhibit an increase in the number of tourists, with only minimal fluctuation in these numbers. There is also a ray of other social events like sports, which have broadened in the recent times and promoted the global airlines industry.
Examples of sporting events that promote international air travel include the FIFA World Cup and the Olympic Games. These events attract millions of people, who travel from one region to the other in order to witness or take part in the events. With the recent changes in the state of the economy, there has been a shift in the nature of the services that are sourced for by customers in the airlines industry.
The interplay of the economic forces in the world in the recent times has forced most people to cut down their expenditure. This means that most people in the world demand for air travel services that can help them reduce costs of travel, while retaining the utility (Vedder, 2008).
Technological factors
The contemporary economic environment highly embraces the use of technology in advancing the operations of companies. Technology is one of the key drivers of competitiveness in the US airlines industry. Information and communication technology has widely expanded in the United States. Most people in the United States have access to the internet, which is the key driving force in technology. This is also replicated in other developed regions of the world.
This has a positive impact on firms in the airlines industry. It significantly helps most airline industries to reduce costs of operation. Most companies have been able to automate the travel services through the use of technology. Customers can easily engage with the companies without necessarily availing themselves. The future of the operations in the airlines industry will be based on technology (Belobaba, Odoni & Barnhart, 2009).
Companies that will be sharp in terms of technology adoption and manipulation will attain a higher level of competitiveness in the industry. There are other factors that play out in the industry. Aircraft manufacturing companies also compete in terms of the ability to deploy technology in the manufacture of planes. Airline companies are, thus, awake to the emergent technologies in the aircraft manufacturing industry (Ben-Yosef, 2005).
References
Belobaba, P., Odoni, A., & Barnhart, C. (2009). The global airline industry. Chichester: John Wiley & Sons.
Ben-Yosef, E. (2005). The evolution of the US airline industry: Theory, strategy and policy. Dordrecht: Springer.
Borenstein, S. (1992). The evolution of US Airline competition. Journal of Economic Perspectives, 8(2), 45-73.
Etats-Unis. (2006). National trade estimate: Report on foreign trade barriers, 2006. Washington, D.C.: Government Printing Office.
Jenkins, D., Marks, J., & Miller, M. (2011). Consumer regulation and taxation of the U.S. airline industry estimating the burden for airlines and the local impact. Web.
Lelieur, I. (2003). Law and policy of substantial ownership and effective control of airlines: Prospects for change. Aldershot: Ashgate.
Samadi, N. (2010). IBISWorld Industry Report 48111b: Domestic Airlines in the US. Web.
Thomas, A. R. (2011). Soft landing: Airline industry strategy, service, and safety. New York, NY: Apress.
Truxal, S. (2012). Competition and regulation in the Airline industry: Puppets in chaos. New York, NY: Routledge.
United States., & United States. (2008). Airline industry: Potential mergers and acquisitions driven by financial and competitive pressures. Darby, PA: Diane Publishing Co.
Vedder, H. (2008). Strategic alliances in the aviation industry: An analysis of past and current developments. Berlin: GRIN Verlag.
Workable business strategies are necessary for efficient running of any business Company. The kind of strategy employed and implemented determines the level of progress within the Company. Strategies are usually built based on various conditions which may include; the current status of the Company, the Companys policies and ability to focus ahead based on competitive moves and business approaches.
The companys management should have action plan which enables them have competitive advantage over other related companies within the industry. This case study focuses on the strategies Northwest Airline Company took for the purposes of increasing the Companys market share and stabilizing its financial base. The effects and implications of the chosen strategies are explored based on business and marketing principles (QuickMBA).
Analysis
One of the key strengths of Northwest Airlines is its ability to serve large market segmentation across the nation. Being one of the domestic airlines, this has been made possible through its merger with other commuter airlines. They provide easy connection channels for jet services within the country by transporting passengers to their larger counterparts within larger cities.
Formation of inter-airline mergers led to reinforcement of technical and operational services through establishment of common operation and maintenance points. This strategy enabled the airline compete with major airlines due to their up-graded and updated services. The other strength lies within the marketing department whereby the airline has decided to integrate its flights and operations.
The connections between Airlink carriers and Northwest have been shown with clarity as online rather than interline transfers, whereby less time and lower cost on fares are involved to facilitate connections. The strategy has position the company in a better competitive advantage hence commanding good part of the consumer base (QuickMBA).
The prime role of NWA is assisting customers in obtaining updated services that are safe and profitable to the company. The operations could be reinforced through installation of modern computerized system within other Airlink carriers systems, since it supports necessary working system providing customers with efficient customer care services. The various customer needs could be met through installation of computerized technology system which provides customers with variety of choices on the kind of services and products they require.
This could also improve on the availability of aircraft hence helping the company reduce on operating costs and interline transfers. The new technology package, referred to as Air+ contains services such as Flight hour services which could help in providing even faster access to scheduled flights. The technology at the same time makes it easy for customers to link to the services of NWA partners and choose services which meet their personal business objectives (QuickMBA).
Management wrangles amongst individuals between NWA and other Airlink carriers within the partnership affects the necessary changes within general operation mechanisms. Different sections within the company experience effects of leadership struggles through the nature of policies implemented and the kind of leadership put in place. Various subunits within the company including the marketing sections conferred with powers of making decisions have got great influence on the prevailing nature of progress experienced.
According to strategic contingency theory the process of natural selection ensures that those who are most qualified for specific duties within the organization enjoys most influence in decision making process, hence contributing much towards successful adaptation.
Misunderstanding arises between the staff owing to their qualifications and experience. Institutionalization determines the manner in which political tactics are applied by powerful individuals who administer power within organizations; this could be identified in the way through which NWA continues pointing accusing fingers towards their counterparts in case of any problem owing superiority complex.
The procedures applied by NWA in transferring passengers and luggage between carriers seem to take longer than usual. This may be attributed to mismatch between the gates of different carriers which leads to consumption of much time while making transfers. On the other hand little has been done for the purposes of delivering excellent services online despite constant promises to consumers.
This results into lots of difficulties when it comes to connecting passengers with their luggage. The other weak point is airport services offered by Airlink partners which are not always up to date compared to NWA service standards. The new technology adopted NWA has not bee applied by its partners creating difficulties regarding procedures and information flow accorded to customers.
There is poor coordination amongst the employees of the respective partners within the merger. This could be characterized by the presence of heavy unionized workers operating under lots of restrictions, this is contrary to other commuter lines which are beefed up by inexperienced non-unionized employees earning less salaries. This has led to presence of conflicts and blame game with superiority accorded to NWA, pointing fingers at the junior commuters for most mistakes.
There is confusion within the management board concerning better ways of management; this could be attributed to poor communication channels amongst employees and also between respective airlines within the merger. Northwest Airline offers higher labor cost charges than its counterparts within the industry, this has made expansion processes difficult since the company does not have the ability to purchase other smaller airlines within the merger.
The other problem includes threats rising from maintenance and travelling costs within the industry. There is also the problem of how to develop new culture within the industry that could accommodate every performing sector from other Airlink carriers. Theres also threat from other powerful aircraft builders inventing powerful design machines driven by very expensive modernized technology (QuickMBA).
Recommendations
North West Airline should plan to utilize website for the purpose of improving on their services. They should build online services for easy guidance to customers on tips and ideas through which they could operate without travelling long distances.
This would improve on their e-ticket sales to customers which will ultimately offer customers cheaper means since they will not need to travel long distances to obtain air tickets or make hotel reservations. Low priced services would help them counter the wave of other competitors who still value high pricing of services within the market.
The low prices would help attracting most customers especially during difficult financial times. In order to improve its performance, NWA should aspire to establish good brand name recognized within the global market, this helps in maintaining stronger growth required owing to strong market identity amongst clients. Creation of strong brand name should be utilized through the low fares charged by the company.
Employees within other Airlink do not naturally enjoy work and this call for close supervision for perfect work to be done. Therefore, managers at various capacities should develop process breakdown that entails different tasks performed.
Various employees should be equipped through appropriate training methods and equipments that enable them to perform their duties effectively, this initiative should be taken by the corporate company for the purposes of uplifting working standards of other employees from other small carriers.
Payment should be made based on the level of performance and time taken to complete a task. This could be used as means of motivating workers towards maximization of on their potential leading to high productivity at lower costs (QuickMBA).
The company should consider resorting to downsizing whereby bureaucracy should be centralized and at the same time most of the responsibilities accorded to employees reduced. The strategy focuses on installing enlightened leadership while keeping the company at its competitive level. Such a move has great impact on the human resource management since it helps in reducing pressure experienced on costs and margins.
The aviation industry is one of the industries with extremely high start-up costs which guarantees low rate of new entrants. NWA Company should at the same time explicitly utilize their technological know-how and the experiences of staff members. The company has basically based their sales on stable brand name based on viable technology which has made it difficult for the new entrants to penetrate the industry.
In order to avoid wrangles amongst employees, NWA and associate airlines should focus on training and motivating staff workers for the purposes of working smarter. This requires overhaul of the current management system replacing it with new and knowledgeable staff. The process of installing computer terminal within the managers office was aimed at improving on the punctuality level of the flights.
The company should at the same time aspire to purchase modern equipments preferred by the consumers. In order to subsidize on the companys profits, NWA should consider adopting new service concepts including operation of related services such as business hotels and destination services. This could make work easier for the passengers since they could make reservations and organize for other services from a central place through phone calls.
Open, clear and direct communication concerning individual performances within the Company is necessary. This is since it ensures proper adjustments on the process system enhancing service delivery.
The manner through which various forms of failures are managed could be achieved through belief on the success of all the departments within NWA and other Airlink carriers. Other non-project events should be well planned since they have great impact on the various management schedules. These events may include meetings and vacations.
Conclusion
Consumers demand for top service aircrafts which are convenient and professionally managed, this ensures comfort and safety to passengers. The focus should be towards seat designs, availability of luggage area and other sanitary requirements and also the presence of entertainment system. There is also the need to include pressurized cabin which makes the plane all weather, besides all these the overall design should look attractive to the consumers.
The costs involved when switching to other airline services should be considered since this is what determines willful movements of the consumers. The movements are as a result of differences in cost, quality and services provided making the power of buyers to be strong within the aviation industry. Difficulties could only be realized when differentiation is done within the computer operating systems.
Works Cited
QuickMBA. Global Strategic Management. Quick MBA 2010 <http://www.quickmba.com/> 19th April, 2011
Classic Airlines is the worlds fifth largest airline with a fleet of 375 planes that operate in 240 countries around the world. The airline firm posted earnings of more than $10 million on $ 8.7 billion of its total trading in the preceding year. The profitability has however not been enough to save the company from the global challenges that affect the airline industry.
The companys stock prices have been affected by increasing uncertainty in the airline industry especially with increasing fuel, labor costs and the 9/11 terrorist attacks in New York. The uncertainty in the airline industry has also seen the airline face a 10% decrease in its share prices in the previous year. This has led the employees and customers to have low a confidence in Classic Airlines.
January 2005 saw Classics airline reward program having a 19 percent decrease in the number of members in the reward scheme when compared to 2004. The year 2005 also saw the airline experiencing a 21 percent decrease in the number of flights per members in the reward program.
According to the airlines customer loyalty report, 20% of customers who were once loyal Classic airline flyers were now flying with other airlines; the number of customers who used the airline frequently had also gone down. According to the report, the average number of frequent flier customers had also gone down by 20 percent (University of Phoenix, 2010).
The rising fuel and labor costs around the world also compounded the problem making it difficult for the airline to remain competitive. To prevent the company from facing a situation of possible bankruptcy, the Board of Directors came up with a plan that would see the implementation of a 15 percent cost reduction in the companys operations and activities in the coming eighteen months. Each business unit within the airline had to face budget cuts so as to create a financial turnaround.
The board also had to find a way to increase the number of members in its frequent flier program by incorporating techniques that would yield a return on investing in the program. The company is faced with the aspect of bankruptcy or complete financial losses if the cost reduction plan fails. The purpose of the paper will therefore be to look at the internal and external factors that affect the airline as well as look at the marketing departments ability to create a solution that will see the Airline increase its customer base.
Internal and External problems affecting Classic Airlines
Classic Airlines faces some internal pressures and external pressures that affect its performance and cost reduction activities. Internal pressures faced by Classic Airlines include struggles to meet the 15% cost reduction targets in the next 18 months that will see a 15 percent reduction in the marketing departments expenditure.
This would see some marketing activities being eliminated to ensure that money for the marketing activities is enough. Another internal pressure faced by the airline was the need to meet the contract guidelines set out by the airline union as it reinvents its classic rewards scheme (Boyle, 2005).
The airline lacks the proper customer service programs to deal with customers and their complaints. It lacks structures such as service elements to act on customer feedback on how to improve the airlines operations. The current customer relations management system (CRM) is mostly focused on decreasing the amount of time sales representatives spend on the phone talking to customers, thereby forcing the customers to turn to the internet to answer their questions.
This would create a situation that would lead to the downsizing of the representatives who have more knowledge about the airlines customers than the top executives. The Classic Rewards scheme program has also presented an internal challenge to the success of the company in terms of retaining and gaining more fliers to its airline.
Members earn miles when they purchase a domestic or international ticket for one of the many flights Classic operates. The miles allow members to earn flier points which have been set to one point per flight mile. The minimum number of miles a member can fly in a roundtrip is 500 miles while the maximum miles are 2,500 for a roundtrip (University of Phoenix, 2010).
According to customer review results based on the rewards programs most of the customers in the flier program did not see the importance of redeeming their flier points as they were mainly focused on getting to their destinations regardless of the price.
The results also showed that 38 percent of the customers were dissatisfied with the number of miles they earned after flying with Classic Air. 56% were dissatisfied by the reward scheme set by the airline for redeeming their flier points. When asked if they would recommend the rewards program to their friends, 68 % said that they would not, which shows how bad the Classic Rewards Program is performing (UOP, 2010).
The airline also faces high maintenance costs for its planes as they have to undergo maintenance checks and repairs after every ten flights. In the event the planes need extensive repairs, new spare parts have to be purchased which come at an expensive price.
The company is also unable to carryout any expansion plans to its fleet because the cost of buying new jets is very expensive; purchasing a new fleet of planes would be in contradiction to its cost reduction program. Its inability to expand puts an added pressure to its already existing fleet to meet the changing flying demands of its customers (UOP, 2010).
Externally, Classic Airlines faces competition from three airlines which are British Airways, United Airlines and Northwest Airlines. These three airlines have a strong customer base that is loyal and their frequent flier programs are more successful and strong when compared to the Classic Airlines flier program.
The three airlines are also the major predominant players in the airline industry having a longer history than Classic Airlines. They also have a more worldwide recognition, meaning that they have a constant flow of frequent customers booking their flights despite the high fuel costs.
The company also faces external threats from the international oil industry because of the increasing global fuel prices. These increases have seen the airline being forced to increase its ticket fares to remain in business. High government taxes have also been an impediment for the airline to be able to record any profits.
The company faces taxes on ticket sales as well as purchases on plane spare parts. Another challenge that is posed to the airline from the external environment is the seasonality of customer flying. The Christmas holidays in December and January record the highest number of flyers while the months of June to September have the lowest number of recorded fliers (University of Phoenix, 2010).
Objectives and Obstacles of the Marketing Department
The main objective of Classics Airline Marketing department is to lure back its customers to the Airlines reward program as well as get them to fly with Classic Air again. The other objective is to improve the stock prices of the company and improve shareholder, customer and employee confidence in the company.
These objectives can only be achieved if the marketing campaign successfully lures back its frequent fliers. The resources available to the department are in monetary terms. The department will need money to carryout advertising campaigns that are meant to draw customers back to the airline without having to discount ticket prices as the airline cannot afford to have any reductions in its margins (Boyle, 2005).
The department has to undertake its activities with a 15% reduction on its spending budget which has been necessitated by the need to meet the cost reduction efforts employed by the companys Board of Directors. This will present an obstacle to the departments marketing activities. Another obstacle that the department will face is stiff competition from competitors such as British Airways, Global Air and Northwest airlines who have a stronger client base than Classic Air.
Global air presents an eminent threat to the Classics rewards program because of the recent changes Global undertook to its frequent flier programs. The changes saw the company adding value added features to its loyalty programs.
These features are pre-boarding and handling services for Global Airs top level frequent fliers as well as access to concierge services in any one of the hotels operated by Global Air. The Global Air frequent flier program has also undergone modifications to make it simpler to use and easier to understand by its members (Rodgers, 2004).
The department also has to face the obstacle of having a defective customer relations management system which is mostly system oriented instead of people oriented. The department has to fix in its limited budget, a plan that will see this system undergoing some modifications to ensure that it has a more customer service focus. This will involve hiring and retaining customer representatives to deal with customers who have complaints or who need assistance in redeeming flier points (UOP, 2010).
Problem Solving Model
The marketing solution that will be used to increase the number of customers in the rewards program will involve using the nine step marketing problem solving model. This model will be useful for the airline as it identifies the problems being experienced by the company, plans solutions for the problem and monitors the implementation of the solutions and records if there are changes that need to be made.
The first step of the model involves identifying the problem which in this case is the low stock price of the companys shares which has been as a result of the low number of customers using the airline as well as customers in the rewards flier programs. The other problems that the airline faces are high labor costs as well as fuel costs which are affecting the airline industry as a whole.
The airline also has an ineffective customer relations management system. After identifying the problem the next step will involve problem definition where the identified problems are analyzed according to the weight and impact they have to the company.
The loss of customers to other airlines has had an adverse effect on the companys stock prices which have recorded a 10 percent decrease. The number of frequent fliers has also decreased by a 20 percent margin. This reduction in stock prices and customers can mostly be attributed to the loyalty program which has proved to be ineffective and unsuccessful given that a majority of its members, both past and present, do not see its importance.
The loss of customers can also be attributed to the ineffective customer relations management system being used by Classic Airlines which has shifted from providing excellent customer service in the form of human interaction to customers interacting with the airlines website (University of Phoenix, 2010).
The high fuel costs have also made it difficult for the company to meet its expenditures without having to resort to drastic measures such as the cost reduction program. After defining the problems, the next stage will involve developing goals and objectives that will be used to deal with the problems.
The marketing department has been charged with the overall responsibility of winning back Classics customers to the airline and to the airlines customer rewards loyalty program. The department has come up with a goal of winning its customers through the use of intensive advertising and awareness campaigns that are meant to also restore customer and employee confidence in Classic Air (University of Phoenix, 2010).
The next stage of the nine step model will involve identifying alternative solutions to the problems. The airline needs to develop new priorities that will see current consumer needs being highlighted and met. Global Air changed its rewards scheme to meet its customer demands after the top level fliers protested in the media about its flier customer loyalty rewards program.
Classic Air needs to adopt a new change to its rewards system so as to attract more members to the program. The CRM system should be more focused on addressing customer needs as well as retaining the.
The airline needs to explore solutions that will see it identifying new market segments in the airline industry as well as develop customer retention strategies.
The airline also needs to leverage the feedback it gets from its stakeholders to address the issue of its stocks. To deal with the high fuel costs, the company can incorporate a fuel hedging program that will see a reduction of fuel expenses spent by the airline. After identifying alternative solutions, the most feasible of these solutions should be selected to address the problems (University of Phoenix, 2010).
Other alternative cost saving solutions to fuel hedging and cost reduction include reducing the number of reservations made in operation centers; developing an employee buyout program and eliminating the amount of commissions travel agents receive (Boyle, 2005). Step five will involve selecting the most feasible solution.
The fuel hedging program will be a feasible solution to deal with the high costs of fuel that are affecting Classic Air and the other airlines in the industry. The hedging program is meant to reduce the amount of money the airline spends on fuel by 12 percent (Simpson, 2005).
The most feasible solution to making the CRM system to be more effective will involve using the customer retention strategies that will be used to retain customers to the loyalty program. The CRM should not be viewed as system but as a philosophy that puts the customer at the centre.
To increase its customer base without having to offer discounts to its airfare, the airline should enter into an alliance with another airline so as to ensure that there is an integration of customers into the reward program as well as code level sharing features (Boyle, 2005).
After choosing the most feasible alternative to deal with the problem, a risk assessment needs to be performed to determine what risks the solutions will have to the operations of the company. Such assessments will be carried out in the form of follow up interviews and test marketing.
Step seven will entail selecting the best options from the solutions to address the problems identified in the problem identification stage. The solution will then be implemented and undergo evaluation, monitoring exercises to ensure that it functions properly.
References
Boyle, K. (2005) Marketing project team meetings. University of Phoenix: Marketing Department 571
Rodgers, E. (2004) Global Air finally implements changes to frequent flier program. Springfield Business. Springfield, Missouri
Simpson, C. (2005) Report reflecting results of fuel hedging program, Company Email. University of Phoenix: Marketing Department 571
University of Phoenix (2010) Scenario: Classic Airlines. University of Phoenix Material: Marketing Department 571
The mergers and acquisitions are common business practices in highly competitive industries and have both benefits and disadvantages organizations. Essentially, mergers and acquisitions are often perceived as expansionist strategies employed by firms to ensure increased market share and capabilities. Firms merge and acquire others for various reasons.
However, increased competencies and capabilities lead to augmented competitive advantage and market share to form the main basis for mergers and acquisitions. The large firms acquire smaller ones to reduce the intense competition.
Equally, firms merge with other companies of equal sizes to form a formidable force against any form of competition within the industry. The merger between American airlines and US commercial airline was attributed to various reasons particularly countering intense competition and increase capabilities in several fronts.
Introduction
The US Airways and American Airlines officially merged in December 9, 2013 to become an, Inc. The publicly traded holding firm has its headquarters in Fort Worth, Texas. With the combination, the American Airline Group has been touted as the largest airline company with over three hundred destination hubs around the orb with operations in over fifty republics.
The American Airlines Group is one of the most successful, but with mixed reactions concerning the possibilities of creating an airline monopoly. However, the practice has presented opportunities and benefits to both the firms and the airline industry (Shlleifer & Vishny, 2006). The American Airline Group Inc. has increased market share with the improved competencies in finance, management, and technology.
Reasons for the merger
The merger involves acquisition as well as combination of two different firms. In the case of acquisitions, one firm absorbs the other completely. In combinations, the merging firms transfer their operations (Shlleifer & Vishny, 2006).
The American Airlines and US Airways combined to form a larger firm (American Airline Inc.). The main driver for the merger was to cut costs in order to achieve superior market share. Bringing the American Airline out of insolvency necessitated amalgamation.
Reduced costs
Reducing the operational costs marked one of the reasons for a merger between two firms (Holmes, 2006). The cost of operations in the industry is constantly increasing due to the general escalations of global fuel costs. A combination of the firms operations will ensure efficiency in the use of resources. The resultant firm is expected to benefit from increased efficiencies through elimination of duplicate functions.
Cost reduction measures were the motivating factors behind the merger. The beneficiary from amalgamation is the American Airlines after struggling with bankruptcy problems. With the merger, the firm that was almost becoming un-operational revamped its operations due to the availability of finances and increased capabilities.
Increased market share
Consumers of the two airlines are expected to be part of the larger clients base in the new firm. The two airlines assert that the merger will create increased value of services to customers (Perry & Porter, 2005). Equally, the firm is expected to bring the clients of both airlines together. The anticipated changes include improved services delivery, reduced costs, and efficiency in amenities.
The competencies in the new company are expected to increase the competitive advantage due to improved know-hows. Further, travelers would enjoy the required expediency and comfort owing to several expeditions and flight routes.
Though the travelers may pay higher prices, convenience and comfort offered by the Company would be appealing to the customers. Largely, the two airlines combined with the aim of having increased market share for improved revenue.
Impacts of the merger
In most cases, mergers are often criticized to result in monopolies but the combination of the two airline firms had positive effects in the industry. The merger led to improvement in the clients services. For example, the clienteles will have various alternatives due to many flights and traveling or flight routes.
In essence, clients would be offered with the required suitability and comfort. The improved services results from the availability of finances and fresh management expertise (Holmes, 2006). Therefore, improved services remain one of the positive outcomes resulting from the merger.
Conversely, the merger has strengthened the position of American Airlines Group Inc. in the highly competitive global aviation industry. The unification has provided the new firm with a competitive edge to capture the global market share. The new firm is facing stiff competition from larger and well-established global firms within the US market (Holmes, 2006).
Nonetheless, the global market would experience stiff competition due to the availability of more excellent firms like the British Airways. The union has enabled the new corporation to improve products and services.
The improved onboard services and luggage delivery has enabled the new firm to penetrate various markets across the globe. Hence, the increased competitive edge has enabled the firms rapid expansion and capture of the market share in aviation market.
The organization structure of American Airlines Group
A merger takes time before accomplishment as it is not easy to diffuse the operations of the original firms while coming up with new corporate structure. Usually, the merging firms agree on a hybrid structure that results into increased competitive advantage (Gowrisankaran, 2009). The merging companies agreed that American Airlines Group ought to have a hybrid corporate structure in adopting the management styles of both firms.
The management structure involved transfer of assets, liabilities, staffs, and operations. Besides, the clients and stakeholders of the two airlines are also expected to be amalgamated. The manner in which shareholders are to be merged and managed requires a proper outline (Holmes, 2006).
In the structure, the American Airlines Corporation shareholders should be provided with approximately seventy two percent of the shares while the remaining shares are to be given to the U.S Airways Group. The allotment of shareholders meant a different corporate structure.
The novel corporate structure provided that the U.S Airways had most management positions while the U.S Airways Group had the chairperson and chief executive officers positions. In addition, accommodate of a huge number of employees necessitated a number of adjustments in the organizational structures of the original firms (Perry & Porter, 2005).
The modification of HR
Changes in the human resources were necessary to accommodate the new transformations in the management. The merger corporation had to come up with new HR management structure and practices to accommodate new management style, a huge number of employees, and the required goals and strategies. The new HR ensured training and development of employees besides aligning the needs and goals of the organization.
The achievement of the merger required change in management style in order to attaining the desired goals. In accordance to Perry and Porter (2005), modifications in the management of employees were substantial for the accomplishment of horizontal unions.
Conclusion
Mergers involve acquisition and combination of two firms while in acquisitions one firm absorbs the other completely. In combinations, the merging firms transfer Company operations. Firms often merge to reduce costs and gain bigger market share. The America Airways merged with the US Airlines to reduce the operational costs and bring the American Airline out of insolvency.
Merging of the two firms has presented opportunities and benefits to the original firms as well as the airline industry. In general, the American Airline Group Inc. has increased market share and improved competencies for an increased competitive advantage.
References
Gowrisankaran, G. (2009). A dynamic model of endogenous horizontal mergers. Journal of Economics, 30(16), 56-83.
Holmes, T. (2006). Can consumers benefit from the policy limiting the market share of a dominant firm? International Journal of Industrial Organization, 14(2), 365-387.
Perry, M. & Porter, R. (2005). Oligopoly and incentives for horizontal merger. American Economic Review, 75(14), 219-227.
Shlleifer, A. & Vishny, R. (2006). Large shareholders and corporate control. Journal of Political Economy, 94(6), 461-488.
When acquiring an asset, an organization needs to be keen on the likely benefits that will accrue from the transition. In the case of Emirates buying new Airbus A350XWB, the management needs to start with a cost-benefit analysis to determine whether the purchase will be beneficial to the company in short or long term.
The cost of the asset amounts to billions of dollars thus the management needs to be careful that the large outflow of funds will not affect the business negatively. The following are important elements that the company needs to consider when making the purchase.
Futuristic effects of the airbus
Emirate management anticipates an increased traffic of passengers and goods in its destinations; the increase is a futuristic business that the company should tap into. By acquiring the new plane, the company will be preparing to enjoy large business in the future. The move then is a strategic planning move where the company will benefit economies of scale and better services to its customers.
The contact with Airbus seems to suggest that Emirates will be the company launching the plane; with this the deal is expected to be favorable to Emirates. When buying an asset, the buyer needs to consider the buying cost, in the event that the cost can be lowed, then its advisable to get such a deal.
One opportunity that Emirates Airline is having is globalisation; the world is becoming a global village; for this, transport and communication networks are having an increased demand. The company being a player in the industry is likely to enjoy high demand of its services so, when strategic decisions and alliances are made, then the company can tap in the market effectively.
Another opportunity that faces the company is an increase in international trade. Demand for cargo and passenger transport is on the rise, thus the acquisition of the new Airbus A350XWB will be of benefit to the company.
As a cost management policy
Other than the new Airbus A350XWB being larger in capacity, the plane is expected to be fuel efficiency and accustomed to the needs of the customers. The efficiency of the plane is likely to work for the benefit of the company; with the new plane, Emirates will be able to offer high quality services at lower prices.
The airline industry is facing challenges coping with increasing fuel costs, with the new asset; the company will offer quality and still maintain operational costs as low as possible.
For customer service and products/services differentiation
The contract allowed Emirates to negotiate with Airbus regarding the kind of plane that the company would like to have; the nature of the contract thus allows for customization of the plane to suit the needs of Emirates.
The plane will bring the services of emirates a notch higher with customers getting new experience with the plane. As part of the negotiation, Airbus is compelled to give special features to the plane; this further improves customer service at Emirates.
Conclusion
Customers are the backbone of a company, the airline industry customers are rational thus they choose a carrier that suits them; when emirate Airline acquires the new Airbus A350XWB, it will improve its services to customers. The plane will assist the company remain competitive despite price wars among airline companies; it will be able to offer quality services at a low cost.
Publically-traded firms, such as American Airlines, are supposed to have high stock prices when their profitability increases. This often implies that the companys value is increasing; executives and shareholders benefit from a higher value of stock prices, which leads to increased compensation or returns.
Nonetheless, when an organizations stock price increases devoid of any long term implications, then this could present an ethical dilemma to company managers. Managers are under increased pressure to report continual increases in profits as this serves the company investors prime objective, which is to maximize profit.
The ethical dilemma stems from the fact that a manager also has the obligation to make full disclosures on company profits. New shareholders may make investments on the basis of what the manager or employees report, so the truth has adverse implications on this group.
If senior management is obsessed about short term profits, it may be tempted to use unscrupulous methods like pension fund alterations or stock market predictions to achieve their short term goals. In the end, misguided shareholders may loose a lot of money (Rappaport, 2005).
Short-termism in several institutions causes institutions to refrain from necessary long term investments such as research and development, marketing or other forms of improvement. In essence, dwelling on performance in the next quarter will undermine value-maximizing efforts as all the energy and resources go to increases in stock prices. Eventually, these companies will not perform well in the long run. Such senior managers will endanger the survival of the same investors that they were tying to impress.
Differing maintenance is unethical to customers and shareholders
American Airlines was engaging in unethical behavior by avoiding maintenance of its aircrafts. Most customers pay their air fare with the expectation that they will be transported safely. Therefore, prices quoted by the Airline are inclusive of maintenance or a promise of safe travel. When the company obtains money from travelers without delivering all the assurances, then it is engaging in unethical behavior.
All passengers expect that regulators and maintainers will do their job in guaranteeing safe travel. Aside from honoring its end of the financial agreement with the customer, American Airlines was also endangering the lives of these travelers by putting them in aircrafts that had not been properly inspected and maintained.
When an organization knowingly makes decisions with the full knowledge that it could cause harm, then that institution is creating a health hazard among those concerned. In essence, this could lead to massive injuries or even death (Patankar, 2012). There is no doubt that such actions are highly unethical.
Manipulating earnings by differing maintenance could also have a double effect as the companys reputation could be compromised. American Airlines brand image has a direct effect on the amount of business it gets. Clients often look for information about an Airline before flying it, and if American Airlines has a poor maintenance record, then many potential customers will take their business elsewhere.
This may in turn destroy its prospects for revenue growth and hence its sustainability. Therefore, abating maintenance process would be unethical to shareholders because it would ruin their long term ability to get returns from the business.
Factors that led to bankruptcy filing and whether the move was ethical
This main carrier decided to take such an action owing to perpetual and intense losses experienced in 2008, 2009 and 2010. Net losses in 2008 were close to $2.1 billion, and in the subsequent year they reduced to $1.5 billion. In 2010, they reduced further to $471 million. Other major competitors were making profits while United was struggling to stay afloat. It needed to free itself from debt obligations in order to change those numbers.
Maintenance issues also had a part to play in this turn of events because the company deferred aircraft maintenance in order to increase short term profits. This led to a surge in safety complaints from some of the passengers in its flights. As a result, the government, through the Federal Aviation Administration, stepped in and found that the company had violated safety regulations.
FAA imposed a $162 million fine on American Airlines. This figure was too much to handle for the organization, so it opted out of payment by filing for bankruptcy. Challenges in management of labor also caused the problem. Most American Airlines pilots are unionized, and they demanded for additional payments and incentives. If American conceded to pilots demands, it would not be able to compete with other carriers.
Conversely, if it rejected their wishes, then it would not operate optimally as some of them would leave the organization. To get out of this dilemma, the firm chose to use the bankruptcy route. It could negotiate with labor effectively without loosing so much in compensation. American Airlines was affected by several other Airlines in the US that had also filed for bankruptcy.
Key organizations include United, Delta, Northwest and US Airways in 2005. The companies felt that filing for bankruptcy would protect them from several debts and permit them to reorganize. It is likely that these earlier moves may have shown American Airlines that it has a lot to gain by filing for bankruptcy.
It was unethical to file for bankruptcy because most of the reasons that put it in that position could have been prevented. The firm could have honored its maintenance obligations. Furthermore, it should have nipped the labor situation in the bud before things spiraled out of control.
Impact of the bankruptcy on American Airlines employees and retirees
In the US, companies that file for bankruptcy are not obligated to pay their retirees benefits as this duty is then transferred to the national retirement authority. The latter body is currently overwhelmed by the amount of retirement benefits it has to pay. It is already unable to settle millions of dollars worth of debt, so American Airlines literally abandoned its retirees after filing for bankruptcy (Schultz, 2011).
Employees were also affected by this move as their jobs were no longer secure. Thousands of non unionized employees are expected to loose their jobs in 2013 as the firms restructuring actions are justified in law. Abandoning any payments due to employees is highly unethical because the company is dishonoring pledges it made to these individuals concerning their claims.
When an organization abandons its retirement obligations by filing for bankruptcy, then it engages in unethical and irresponsible business practices. The company intentionally caused its business stakeholders to lose money that rightfully belonged to them. It is an abusive practice because it primes survival over integrity. The firm was responsible for the losses it created, so it should own up to them.
References
Patankar, M. (2012). FAA human factors guide for aviation maintenance and inspection. Web.
Rappaport, A. (2005). The economics of short-term performance obsession. Financial Analysts Journal, 65, 61.
Schultz, E. (2011). Retirement Heist: How companies plunder and profit from the next egg of American Workers. NY: Penguin.
There is no use denying the fact that modern world belongs to giant international corporations which try to spread their influence and increase the level of their incomes. Certainly, money and organizations which deal with them have always been important for the functioning of society. Since the invention of money people became dependant on this tool, though, in modern world the situation is unique.
Never in the history the issue of money was so topical and important and never corporations, which deal with them, had such a great power. Though, it is obvious that increase of the number of corporations, which want to become beneficial and obtain great incomes, leads to the appearance of rivalry. Trying to win it, companies perform different actions and use various remedies in order to make their rivals weaker and guarantee certain advantage.
Very often, these actions can even break the law and cause serious harm to people or companies. Additionally, trying to become more beneficial, companies also can step outside the bounds of law. That is why, a great number of trials appear. Being not satisfied with the actions of a company, complainants sue over certain organizations in order to attain justice. The bigger a company is the greater number of trials will be.
With this in mind, it is possible to say that the issue of resolving law cases becomes very important, especially for international companies. Being one of these organizations, Emirates Airline also has several problems connected with this issue and, that is why, its actions should be analyzed in order to understand the main peculiarities of the pattern which is used by the organization to solve existing problems.
First of all, the main information about the company should be obtained in order to understand better peculiarities of its functioning and what problems it might face. The company is relatively young. It is founded in 1985 and is one of the youngest companies of this sort in the world (The Emirates story, n.d).
Moreover, is should be said that at the beginning its main aim was to guarantee delivery of tourists to the region. However, being sponsored by the government of the UAE, the company started its blistering development. New planes were bought and new directions organized. Emirates Airline has never stopped in its development and, that is why, nowadays it is one of the greatest international carriers, and the seventh largest airline in the world in terms of revenue (The Emirates story, n.d).
The company does not have rivals in the Middle East and its current tempos of development allow to suggest that in several years it can become the best airline company in the world, leaving behind such giants as Lufthansa or American Airlines. The company mainly uses planes like Boeing and Airbus. Nowadays, there are 176 planes which can deliver people to any place in the world. With this in mind, it is possible to say that Emirates Airlines is a huge international corporation which has its offices all over the world.
Resting on the given facts, it should be said that the company nowadays performs great number of different functions and operates in different regions. That is why, it should take into account peculiarities of culture and mentality of people. It should also be said that the company is oriented on people who can afford its services. In other words, Emirates Airlines suggests a wide range of services for rich people. Its planes are known for their luxurious conditions for first class fillers.
Special coupes and unique menu can be taken as the evidence to this statement. Moreover, the company also deals with a great number of celebrities and stars which often use its services. With this in mind, it is possible to say that the company should be very careful it its functioning as its clients are very often rather influential people who can create many problems. Additionally, Emirates Airlines should also remember about its rivals which will obviously try to prevent its further development.
Taking into account these facts, it is possible to say that the company will obviously face a great number of problems connected with its activity and services. The fact is that the more clients a company has, the more problems it also obtains. It is impossible to satisfy demands of all people as they are different. Especially topical this statement is for representatives of luxury class who have complicated demands for their transportation.
Though, it should also be said that other companies of this sort very often can also have their claims towards Emirates Airlines connected with the violations of international law or some rules accepted among airline companies. With this in mind, it is possible to outline two main categories of lawsuits which the company has to face in its functioning (The Emirates story, n.d).
The first one is combined with the complaints of the companys customers because of their dissatisfaction with its functioning. The second category is connected with the claims of other companies who provide their services in the same sphere. Thus, sometimes travel agencies can have certain pretensions to the company (Townsend, 2015). These are the main actors which sue over the company. Besides, it should also be said that sometimes governments of different countries can be complainants and have their pretensions to a company.
It is obvious, that the company will not be able to continue its beneficial functioning if all these problems have not been solved. That is why, to avoid paying compensations to all people, who sue over the company, Emirates Airlines has a special department which main aim is work with this claims. This very department consists of experienced lawyers whose main aim is to control the functioning of the whole company.
First of all, these lawyers have to organize functioning of the company in accordance with existing international laws for other companies not be able to blame Emirates Airlines. Additionally, lawyers are present at each regional department in order to organize functioning of the company in a country according to its rules.
Finally, these very lawyers have to advocate the company and guarantee its stable functioning. Taking into account a great number of problems of this character, which appear every day, it is possible to say that this department obtains great significance.
There are several ways in which a company can solve problems which appear in the course of its functioning. First of all, is should be said that there are several ways of dispute resolution. The first one is rather traditional and means going to the court where all participants of the process will try to persuade a judge that they are right. However, there is another way to solve problems. It is Alternative Dispute
Resolution (ADR) which suggests great number of other methods, other than going to the court (Alternative dispute resolution in the air passenger rights sector, 2012). It is obvious, that the company prefers to use the second one because in that case the conflict will not be made known to public and reputation of the company will not suffer. Moreover, it is possible to solve the problem with low spending. However, not always complainants agree to use this very type of dispute resolving and lawyers of the company have to go to the court.
Judicial Dispute resolution is the most popular practice which is widely used by a great number of different companies and people all over the world. If an organization and a complainant are not able to make a compromise by their own forces, they go to the court where lawyers will advocate their interests. It is obvious that any big company has a great number of trials and, that is why, its lawyers are rather experienced in this field.
Moreover, they have access to great sums of money and, due to this fact, it is difficult for common people to win such trials. It should be said that this type of dispute resolution is applied every time when a company is officially sued. The case of Carol Wilson can be taken as the example. Emirates Airline was sued by a family of passenger who died during the flight (McGinley, 2011). The family claimed that the stuff of the company was not able to provide help for Carol when she suffered from heart attack.
Wilson family filled a lawsuit at the US district court in Texas (McGinley, 2011). That is why, lawyers of the company had to advocate its interests according to US laws and prove that the fault of the stuff was minimal as the passenger was delivered to the hospital alive. Another similar case is connected with the flight diversion. Religious scholar and Chief of Pakistan Awami Tehrik Dr. Tahirul Qadri sued Emirates Airlines for diverting flight Ek-612 from Islamabad to Lahore Airport (Haroon, 2014).
Being not able to reach destination point, Dr. Qadri refused to leave the aircraft. This fact made the case even more complicated as Dr. Qadris actions can also be taken as the violation of law according to which no one is allowed to stay in the aircraft after its landing. That is why, Emirates Airline proclaimed that it would also take actions against Dr. Qadri.
Description of the case shows its complicated character as both sides had their strong and weak arguments and lawyers had to work with them. Another passenger sued an airline for $4 million for a nine hour delay in an Abu Dhabi court (Shroff, 2013, para. 1). He stressed inconveniences caused by this delay and demanded compensation. Though, the court did not see problem and clear evidence, that is why a passenger was refused to pay and, mover, had to compensate court costs.
However, there is one more way to solve problems which is used by Emirates Airlines. Very often, the company tries to negotiate with a person or a company in order to make a compromise and not to sue each other. Being the part of Alternative Dispute Resolution issue, this method does not mean participation of a great number of lawyers in the process.
Usually, company representative holds a parley with another side, insisting on the necessity of making a compromise. Moreover, this company representative should be informed about the main peculiarities of the issue. That is why, usually, consultations with the lawyers of the company are needed for him/her be able to suggest some possible variants and foresee aftermath of negotiations.
It is possible to say that Emirates Airlines obviously had a great number of cases like this. It should also be said that these cases are not so provoking as lawsuits and, that is why, usually there is no much attention given to them be media. Emirates Company usually pays an indemnity if some flight are cancelled to compensate tickets cost and other inconveniences. Moreover, it is obvious that a company will pay in case of some accidents of catastrophes.
With this in mind, having analyzed the main peculiarities of the ways in which Emirates Airline prefers to resolve different disputes, it is possible to make a certain conclusion. Being one of the greatest international companies, Emirates Airline obviously is often sued because of its popularity and peculiarities of functioning.
That is why, it has a certain department which main aim is to advocate the companys interests in the court and try to protect it from unfair lawsuits. It should also be said that the company has great experience in this filed. However, it also uses some methods which can be taken as Alternative Dispute resolution. The company tries to make a compromise in the course of negotiations and persuade a person or a company to accept suggested conditions and not to go to the court.
References
Alternative dispute resolution in the air passenger rights sector. (2012). Web.
Haroon, A. (2014). Emirates to be sued over flight diversion. ETN. Web.