Assignment by cuiliqing


									                           “Revival of a Sick Airline”


                   Few inventions have changed how people live and experience
the world as much as the invention of the airplane. During both World Wars,
government subsidies and demands for new airplanes vastly improved techniques
for their design and construction. Following the World War II, the first commercial
airplane routes were set up in Europe. Over time, air travel has become so
commonplace that it would be hard to imagine life without it. The airline industry,
therefore, certainly has progressed. It has also altered the way in which people live
and conduct business by shortening travel time and altering our concept of
distance, making it possible for us to visit and conduct business in places once
considered remote the airline industry exists in an intensely competitive market. In
recent years, there has been an industry-wide shakedown, which will have far-
reaching effects on the industry's trend towards expanding domestic and
international services. In the past, the airline industry was at least partly
government owned

Hind airline provides air transport services for passengers or freight. Airlines lease
or own their aircraft with which to supply these services and may form
partnerships or alliances with other airlines for mutual benefit. Generally, airline
companies are recognized with an air operating certificate or license issued by a
governmental aviation body.

The effecting major forces for an airline are
    Increasingly being faced with tough competition
    Aging Fleet and Low Profitability
    Poor On time performance
    Lack of Leadership
    Unhealthy Industrial Relations
    Inadequate Cash Flow

   Few more issues are:

      Low-Cost Carrier Phenomenon
      Rise of Emerging Markets
      Globalization of the Industry and of the Executive Job Market
      Chronic Financial Underperformance
      A Changing of the Guard

Main Text:

Increasingly being faced with tough competition:

             Competition in the airline industry is at an all-time high, challenging
provider to reduce costs while improving quality. In this environment, attracting
new customers and retaining existing ones through superior customer service is not
only a key competitive differentiator but a necessity. Obstacles met in the search
for flight information can diminish a customer's perception of an airline's
capability, decrease the opportunity for future revenue, and open the door for other
carriers to win the business
Deregulation has contributed to the industry’s problems and, furthermore, to
problems for passengers. Regulations and deregulation before deregulation of the
airline industry began in 1979, the Civil Aeronautics Board controlled both the
routes airlines flew and the ticket prices they charged, with the goal of serving the
public interest. With deregulation, any domestically owned airline that was deemed
“fit, willing, and able” by the Department of Transportation (DOT) could fly on
any domestic route. The primary regulatory role of the DOT changed from
approving whether an airline was operating in the public interest to deciding
whether an airline was operating in accordance with safety standards and other
operating procedures. While route schedules and pricing for the airline industry
have been largely deregulated for over 20years, many other aspects of the industry
are still highly regulated. Perhaps the most important regulation comes from local
governments, which own and manage the airports in their region and therefore
control key bottle necks to airport services: access to boarding gates and runways.
Most local airport commissions allocate gates without a formal market mechanism,
such as a bidding process; often they require proof that the airline would operate in
the best interest of the public.
In addition, international routes have been deregulated only gradually, through
negotiated bilateral open-skies agreements, which generally allow airline
companies from the two countries in question to fly between those countries
without restrictions. These open-skies agreements do not create a fully competitive
market as they do not allow foreign carriers to transport passengers within the
United States or vice versa.

Aging Fleet and Low Profitability:
                    Airlines' profitability is closely tied to economic growth and
trade. During the first half of the 1990s, the industry suffered not only from world
recession but travel was further depressed by the Gulf War. In 1991 the number of
international passengers dropped for the first time.

Airlines have had to recognize the need for radical change to ensure their survival
and prosperity. Many have tried to cut costs aggressively, to reduce capacity
growth and to increase load factors. At a time of renewed economic growth, such
actions have returned the industry as a whole to profitability. It is necessary for
airlines to reduce their debt, build reserves and sustain investment levels. In
addition, many airlines remain unprofitable.

To meet the requirements of their increasingly discerning customer’s the airlines
have to invest heavily in the quality of service that they offer, both on the ground
and in the air. Ticketless travel, new interactive entertainment systems, and more
comfortable seating are just some of the product enhancements being introduced to
attract and retain customers.

The availability of large aircraft such as the Boeing 747 made it convenient and
affordable for people to travel further to new and exotic destinations

Poor On time performance:
                Airline punctuality is in the headlines. Hardly a week passes
without an article in a newspaper, magazine or airline industry journal discussing
the issue of poor on-time performance and its impact on the industry and on
society at large.
Punctuality differs widely between airlines. It has become a competitive
differentiator, both in positive and negative ways—and customers do care strongly
about it. When following newspaper headlines its clear that airlines are active in
sharing good punctuality performance with the world, and when they have
problems with their punctuality, it is unlikely that the world will not quickly hear
about it in the press.
More importantly, however, punctual airlines appear to be more profitable
Punctuality is one of the key performance indicators in the airline industry and an
important service differentiator especially for valuable high-yield customers. In
addition, improved on-time performance can help achieve significant cost savings:
Airlines report delay costs from 0.6 to up to as much as 2.9% of their operating
Punctuality is a key leadership challenge throughout the organization and should
rank high on the management agenda—from strategy and planning all the way to
front-line operations the three main levers for punctuality improvement that are
within their reach:
— Network planning and control
— Aircraft availability
— Ground operations and departure process

Tools such as simulations, statistical sampling, process monitoring and key
performance indicators build the foundation to drill down to the root causes of
delays. The key success factor is to merge quantitative analytical rigor with the
rich qualitative information from front line observations, know-how and staff

Lack of Leadership:
“Leaders are change agents who see opportunities and promise where others see
only defeat."
Airline leaders separately expressed concerns that the lack of consensus from
political leaders at the conference means that the airline industry is entering a
period of confusion, inefficiency and risk mitigation.
At each stage of aviation's business life cycle—start-up, growth, maturity, decline,
rebirth—Leaders in the airline industry have primarily been local nationals despite
the highly international nature of the sector.
Individual executives shape the industry and were shaped by it is the subject of a
new history of the airline industry and its leaders, Entrepreneurs, Managers, and

Unhealthy Industrial Relations:
An unhealthy relation in an industry leads an airline out of the competition and
market and once an airline is out it gradually goes down and down. In order to
maintain an airline in all regards it is very necessary that it has a healthy relation in
an industry all the time and also understand what it takes to maintain a healthy
relation in an industry all the time in global terms. An airline also has to
understand who defines a market and what kind of market does an industry is
looking for. Market is a segment of requirements of a customer and their appraisals
which are moved in an industry through out.
Unhealthy industrial relations may put an airline out of the market. In order to
make an airline one of the best it should have healthy industrial relationship. The
market of an airline and the relation with the market goes hand in hand till then an
airline cannot become a successful one. On the other side an airline industry should
always have a healthy relation with customers such that they raise that value of an
airline in all regards. Customers are the source who defines an airline in a market
and then into the industry, customers always play a dual role inside and outside the
market. So customers are to be treated as their guest all the time.
Inadequate Cash Flow:

Cash flows of airlines, which had turned into a trickle with falling passenger traffic
and fares, are swelling again, but unlike in the past, carriers are not rushing to
expand their operations. Instead, they are building cash reserves that will see them
through the next dry spell.

The profit and loss accounts nor the balance sheet provides information directly on
cash flow position of an airline and how the cash was generated for the payment of
loan and repayment of loan.


    Air travel remains a large and growing industry. It facilitates economic
      growth, world trade, international investment and tourism and is therefore
      central to the globalization taking place in many other industries.
    Deregulation is also stimulating competition, such as that from small, low-
      cost carriers allowing an airline from one member state to fly passengers
      within another member's domestic market.
    However, rapid growth challenged our reservation center with unexpectedly
      high call volumes. This created unacceptable hold times to access
      information and book flights. We were concerned about losing prospects and
      existing customers.
 The need for a cost-effective interactive voice response (IVR) solution that
   could easily scale to support its growing customer base and improve
   customer service.
 Load Factor: This indicator, compiled monthly by the Air Transport
   Association (ATA), measures the percentage of available seating capacity
   that is filled with passengers. Analysts state that once the airline load factor
   exceeds its break-even point, then more and more revenue will trickle down
   to the bottom line. Keep in mind that during holidays and summer vacations
   load factor can be significantly higher, therefore, it is important to compare
   the figures against the same period from the previous year.
 Airline has to invest heavily in the quality of service that they offer, both on
   the ground and in the air. Ticketless travel, new interactive entertainment
   systems, and more comfortable seating are just some of the product
   enhancements being introduced to attract and retain customers.
 The outlook for the air travel industry is one of strong growth. Forecasts
   suggest that the number of passengers will double.
 For airlines, the future will hold many challenges. Successful airlines will be
   those that continue to tackle their costs and improve their products, thereby
   securing a strong presence in the key world aviation markets.
 Punctuality is one of the key performance indicators. Improved on-time
   performance can help achieve significant cost savings: Airlines report delay
   costs from 0.6 to up to as much as 2.9% of their operating revenues.
 Airline must posses all three disciplines of leadership .
                        Operational leadership
                        Product leadership
                        Customer closeness
 The biggest challenge is to choose a knowledgeable second in command
   who would inevitably play a major role in leading the company.
 Improved conditions have resulted in positive cash flow. It will provide
   relief to us because we can use the same for our working capital
 Healthy relations are required to know where exactly an airline stands
 Adequate flow of cash is profit driving factor. An airline should understand
   the source and the final flow of cash in and around.
 Globalization of the Industry.

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