Inthe landing slot auctions, the contributions are given for everygroup. For group 1, the contribution was $769,559,375.00. In group 2,there was no contribution. In group 3, the contribution was$197,924,375.00. For group 4, the contribution was $13,775,000.00. Ingroup 5, there was no contribution. This brings the totalcontribution made in the landing slots auctions to $981,258,750.00.
Thevarious contributions that are realized in the airline aresignificant in a number of ways. First, through the contributions,the company can invest profitably by understanding its market andknowing the right side of the venture. Given that there is growingimbalances between the demand for the transport activities andavailable airport capacities that can be supported to meet thevarious demands, such contributions are integral in understanding thebusiness (Le, et al., 2003). With the contributions in place, thevarious operational logistics can easily be taken into account andthe challenges that are likely to be met addressed. The airlinerelies on the contributions to determine on the areas to investheavily and the areas to commit little funds. It is evident that whenthe airline invests wisely, there are high chances of increasing therevenues.
Inorder to increase the revenue, we have to first assume that thenumber of seats for every flight is constant. With a fixed number ofseats in every flight, the airline company can consider increasingthe number of flights per day and that translates to getting moreslots or bidding for more slots (Hong and Harker, 1992). In order tobid for more slots, the airline should consider having thehub-and-spoke (HS) networks as an alternative means of getting newslots and also a means of concentrating more flights in waves attheir hubs. This would imply improving the flight waves in accordanceto lower connecting time as well as considering expansion andincreasing the number of transfer passengers. To ensure that theventure is profitable, the model should consider creating a newflight schedule which is made of flights which are already operatedby the airline. Flights that are assigned the new slots in which theairline revenue has to be maximized should also be included in theschedule (Jones, Viehoff and Marks, 1993).
Indoing so, the airline can consider having the flights assigned to newslots being chosen from a set of flights which are made of those withthe destinations that are usually not served by an airline (Joneset al., 1993).This in short can be alluded to be route network expansion as aresult of introduction of new route. The main points that must benoted include two factors which are slot price at secondary marketand the changes in the realized revenue every year (Jones, Viehoffand Marks, 1993). The various issues which form the output that mustbe put into consideration including the new flight schedule, thenumber of years that are necessary to recoup the initial purchasingoutlay for the new slots and the possible number of connections thateach and every airline can realize upon introduction of the newslots.
Part2 of Case Study
Leadershipis the process that instills motivation, direction and support of agroup of followers to accomplish a commonobjective.There are two essentials for successful leadersfirst they must be positiveabout what they want to do. Second, in scenarios of potential alliesand hostile criticstheymust explain what they want to dowiththem (Miller and Chen, 1994 p 6). Inthis case study,the essay is going to analyze the style of leadership that JuanTrippe used in the management of the pan-Americanairline, and how the style contributed to its success. It willfurther describe the advantage the airline took over the Americangovernment in the expansionof their operation. Finally,the paper will give the analysis and description of the of the routenetwork that the airline set up.
Theleadership style Juan Trippe used in managing the pan-Americanairline is a benevolentautocrat. Benevolent Autocratleadership style is the one with characteristics of dedication,decisiveness, industrious and commitment (Faux, 2010). This styleapplies to the leaders who evaluate the quality and the quantity ofthe job in advance. In line with this style, autocrats are onlyconscious on the company’s costs minimization, the projected andachieved profits and lastly, they consider if the sales targets havebeenmet.In this case,they are the main pillar of the business hence they assist indeveloping and proposing the new ideas. The new ideas help inincreasing the efficiency and effectiveness in productivity whichguarantees better results (Faux, 2010 p 45).
Inthis case, Juan Trippe showed numerous initiatives.For example,the faith act from Trippein aeronautics happened to be the greatest ever to bemadeby an airline in technology. Trippeshowed development when he gained the courage to choose massivecompetitionandbest strategies for Pan Am airline to enter the domestic market in amajor way. Thishappenedto be the first time in its history When the National Airlines waspurchased.
Trippewas industrious and committed to the future of the company despitethe company struggling with a huge debt. It is evident that Trippebelievedin the gamble for the firm’s future. Because of his commitment,Trippe stepped down from the active management of Pan American.However, the future of Pan American airline still looked promising.Notable, Trippe was a risk taker he secured funds for the newequipment, through loan agreements. His risky nature wasalso seenwhen he decided to invest in larger jets thatcould accommodate more passengers and fly at accelerated speeds.
Trippewas bold his bold tactics had their effect on foreign aircraftcarriers. Additionally, he dogged his gambles when he ordered threeadvanced ideal Comets for Pan American. ManyAmerican airline chief executive officers protested the move on theground that the cost of buying and maintaining jets deterioratedtheir economy in both the short and long terms (Lynesand Dredge, 2006 p 121).
Trippe’seffort was continuous, he developed many new ideas and had been acontinuous innovator. At his competitive age, it is evidet that hehad done so much to shape the Pan Am. However, it was unfortunatethat he failed to train the new leaders who would have taken over thecompany for the future consistent growth. Research has indicated that any successful leader must have apositive attitude towards his job. Additionally, it is evident thatsuccessful leaders consult their allies before making any majordecisions (Lynesand Dredge, 2006 p 121).
Theairlinetook the advantage of American government to expand in the followingways. Firstly,although many management teams feared and protested the costs ofpurchasing and maintaining the large jets, it is clear that the fearwas due to the losses in future. The airline took that advantage andbought the airline with the largest passenger capacity which savedthe economy than propeller driven aircrafts.American manufacturers were opposed to the idea and they even refusedto make the jets. Airline companies did sufficient research anddecided to settle for jets which used the engines that are used topower the air force one jets. It is evident that these engines havebeen used in jets which participate in war. (Lynesand Dredge, 2006 p 121).
TheAmerican government failed to support single chosen instrument. TheAmerican government did not support the airline interests at first.However,other foreigners fed their traffic into the airline and this made thevarious airlines in the United States to be at odds. ThismadeTrippedesigna plan that could consolidate three airlines into a newairline called Community Company (Hong& Harker, 1992).Conversely, the community plan faced many challenges especially whenit became a bill in Senate.Many senators opposed the bill thatmade it to fail.
Thecompetition forinternational passengers increased with the increased number ofairlines.However, theAmerican government failed to support the move by international airtransport association (I.A.T.A) to increase airlines and regulate thefares. Other countries in Europe saw the need but America objectedthe proposal from Trippe.This issue led to stagnation of the overall travels from the US,which led to the expansionof airline to cater for the high demand.
TheWorld Warleft Europe in dire need of social-economic cooperation from theUnited States. However, America appeared to be obstructing the lowfare for the commonman. The airline went ahead to introduce new low-costfare in public traveling.Pan Am’s presence was expanded to buy airline overseas fromAmerica. ThismadeAmerican Airwayschangeto pan-Americanworld ways(Lynes and Dredge, 2006 p 121).
Indescribing the route network that airline set up, the followingchanges should be considered the number of airlines from Americaserving the California to Hawaii route increased,andthenumber serving the Orient increased from two to four, the route alsoled to South Pacific. Another route is York and London where the fareweresetat $572.88
Globaloperations made more routes in US and Europe during World War II withmore of the routes being within war zones. There was a trip toSan Francisco and Hong Kong for public relations. Additionally, TheMartin Aircraftcarried passengers in the longest route over the North Atlantic. Theroute was 2,000 miles between Newfoundland and Ireland. Furthermore,there is a route in Macao, south of Shanghai inmainland China. The route from America to China was a low cost routethat was developed to save on the fare.
Part3 of Case Study
SWOTanalysis of new airline in the market
SWOTin full Stands for Strength, Weakens, Opportunities and Threats. Themain focus of the SWOT analysis is to examine the micro and macroenvironmental factors that affect the operations of a firm. Afterclear examination,the SWOT analysis providesthe decision to bemadein strategic planning. Therefore, SWOT analysis prepares thecompanies on how to effectively do away with threats. Use theavailable strategies to pursue achievable opportunities. Maximize ontheir strength and eliminate any weakness detected. For example,before the establishment of the airlinebusiness, the company needs to identify some of the competitiveadvantagesit has over the other similar companies. It also needs to compare theinternal weaknesses ofthe competitors. The viability of the project and external entitiesthat may negatively affect the airline business also needs to beanalyzed(Kajanus et al., 2012). Thissection, therefore, isgoing to discuss the SWOT analysis of airline business, and thebenefits of investing in this business.
Thestrengths of any firm in SWOT analysis constitutes the advantagesthat the firm has over its competitors. It involves an analysis ofwhat the airline does better than the rest of the competitors.Accessibility to cheap resources is another strength that firm canacquire over its competitors. The analysis was carried out to checkif the new airline could function well in the market. Several factorssuch as the economy, level of employment and transport cost were putinto consideration (Kajanus,et al., 2012 p 6).Theinvestigationwasdoneon the price of purchasing an aircraft and the minimum fare thatcould be charged in the process of transporting passengers and cargo.Other analysis includesthe competitive strategies such as online booking, the trainingservices needed to its employees, the office front help to customersand sponsorship of major sports to promote its brand. The need todetermine employees’ training, performance program of the newairline was noted (Ahmed et al., 2006). There was an analysisof the customers’ relationship to airline owners this was done toconfirm if the relationship can build a worldwidepartnership. Moreover, experts analyzed the number of jets a newairline company needsand to which parts are required to fly.
Variousinvestigations werealso doneby a team selected bymanagementto examine the number of airlines to be put in place, and if thenumber of airlinescan meet the demand of the potential clients. Additionally, theanalysiswas also done withthe wastes produced. If possible, could the fewwastes maximize the companies’ outputs and minimize the inputs?Furthermore,the chief executive officer in his proposal recommended the teaminvolved in the analysis to research the market and determine thestrategies that a new airline company need in order to have acompetitive edge over the existing airlines.
Finally,the analysis was carried out to check if the requirement of newtechnology such as latest computer model, the amount of suchtechnology and initial capital.The testwasalso doneon fuel, labor costs and other expenses. In line with this, the needto determine the number of airports and all charges wasputinto consideration.
Theweaknesses of the airline would include aspects such the areas wherethe firm can have some improvements. This should also include theareas where the firm should have improvements in order to avoid anylosses. Several analysiswere done with regard to finding out what weaknesses the company mayhave in the market. They include, first, the high cost of operationand implementation of new technology (Ahmed et al., 2006). Secondly,experts analysedif prices of its tickets will be high compared to other airline, andif the new airline is planning to be a member of the airline bodiessuch as UAE. At some point,the need to know if the technology was affordable was raised.Furthermore, in-depth examination was done on the establishmentof the youngairline(Houben, Lenie and Vanhoof, 1999, p 128).The analysis included lackof the confidence to invest fully,and the fears the manager may be facing to avoid taking risks. Pooremployee morale and employee motivation were key factors that werelooked into. Additionally, the causes of low performances werediscussed and why most CEOs resigned frequently. Other weaknessesanalysis included the loss of customers through negligence and stiffcompetition from other companies. Finally, experts analyzed theweakness posed by rare plane crashesand bankruptcy.
InSWOT analysis, opportunity comprises of the available chances andopportunities that the firm can take as an advantage over thecompetitors. The market expansion analysis was carried out todetermine if the newairline would pick up well in the existing segmented markets. Theexperts analyzed if a lot of investment will be made by developingthe old airport. Apopulationcensus was done in the country and categorized into classes(Sevkli, et al., 2012, p 16).
Thenumber of who travellers who could access the internet was analyzed.Moreover, the market research on the travelersand tourists forecast the need fortheir annual growth. The experts examined the number of distributionchannels, market segmentation and product differentiation (Ahmed etal., 2006). This examination was vital as it would help the airlinemake decisions that would ensure its survival in the market.Middle-classpeople wereinterviewedabout their airline preferences and their chances of opting for thenew airline (Houben,Lenie, and Vanhoof, 1999 p 130).
Ananalysis of the threats of new entrants into the market was carriedout. This analysis only targeted the services and products thecompany could offer. The challenges such as capital requirement, theamount of buying aircrafts and the barriers of new companies wereassessed. Also, the need to determine the brandto compete with the existing airlines was analyzed with the mainemphasis being put on the famous ones. Thethreatof other substitute products and services was done especially withother air transport companies (Ahmed et al., 2006 p 160)
Inaddition,the research was carried out to determine the variety of airlinecompanies that offer the best services to customers and theavailability of expansion in the market. Furthermore, the rules andregulations were considered and theireffect on the company. The corrective measures of the airlineto counter aircraft crashwere analyzed (Ahmed et al., 2006). Thiswasdone majorly to determine if the new airline was air worth before itstarted operating fully. The experts investigated the level ofbreaches such as unproceduralmanufacturing processes. Finally, the laws regarding airline industrywerealso carried out and its operation(Houben, Lenie, and Vanhoof, 1999 p 127).
Viabilityof airline business
Accordingto the SWOT analysis that has been discussed above, it is abundantlyclear that the strengths and the opportunities outweigh theweaknesses and the threats. This is an indication that the businessin question is indeed viable and the airline should go ahead andstart the business (Ahmed et al., 2006). The airline industry has alargemarket. It is a business that operates internationally. The businessSWOT analysis provided that there are favorable micro and macroenvironment to invest in the airline business. After clearexamination,the analysis providedthe major decisions that are needed in strategic planning. Therefore,the SWOT analysis prepared the company on how to effectively do awaywith threats. In the airlineindustry,it was discovered thatthe new airline could function well in the market (Ahmed et al.,2006).
Theinvestigationdoneon the price of purchasing an aircraft confirmed that aircraftsvaried in the prices some were cheap while other were expensive. Thereport also confirmed that less fare could be charged in the processof transporting passengers and cargo. However, it is useful to notethat the airline business had some few weaknesses. To start with, thehigh cost of operation and implementation of new technology is amajor weakness (Lynes& Dredge, 2006).Whereas technology may be easier and cheap to implement, it isevident that the same may be expensive to maintain. Additionally,the price of its tickets were high compared to those of otherairlines. Consequently, the new business was not planning to be amember of the airline bodies such as UAE. The market expansionanalysis confirmed that the new airline would pick up well in theexisting segmented markets. The experts recommended that a lot ofinvestment will be made by developing the old airport. Apopulationcensus done in the country categorized people into classes whichshowed that numerous people were in the middle class. These providedassurance to the company that these class of people would be usingthe aircrafts at least twice every week.
Withregard to threats, it was clear that new entrants were greatchallenge. However, the new entrants were few and therefore there wasno cause for alarm. It was confirmed that competition was mainly onservices and products that the company offered. The other challengessuch as capital requirement and the cost of buying the aircrafts wereseen as factors that would slow down the operations of the company(Lynes& Dredge, 2006).Also, lack of brandingdenied the company the possibility of competing effectively with thealready established brabds.
Inconclusion, it is clear that the contributions that the airline madewere essential. Through the contributions, the airline is able tocarry out a market analysis and find out when and where to invest.When a firm invests the right amount of funds into the right venture,there are high possibilities of making profits (Miller & Chen,1994). The number of slots that an airline has are essential indetermining the operations and the profitability of an airline. It isvital for any airline to have proper schedules in place to ensurethat it utilizes the slots awarded fully (Lynes& Dredge, 2006).With regards to leadership style, it is abundantly clear from thediscussion that Trippe applied the benevolent autocrat style ofleadership. While he led Pan Am, he focused on increasing thecompany’s profitability, as well as minimizing the cost.
Consideringthat the airline business is one of the most expansive business, itis clear that the chances of new entrants to make profits and succeedare high. The airline business operates across numerous countriesaround the world and the competition is not very stiff. However, ituseful to note that the airline business is an extremely expensiveventure and only companies which can take huge risks can venture intoairline business.
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