According to Cathay Pacific Cargo (2012), commence operation of Cathay Pacific Airways Limited is started on 24 September 1946 in Hong Kong. Market structure of Cathay Pacific is oligopoly. Oligopoly is a market structure which only has few sellers provide similar services in a particular country (Mankiw, Goh, Ong, Yen, Cheng, Mustafa & Lee, 2012). Airline services available in Hong Kong are Cathay Pacific, Air Hong Kong, Hong Kong Express Airways, Metrojet, Oasis Hong Kong Airlines, Dragon Airlines, Waterfront Air, Heliservices and Hong Kong Airlines (Cathay Pacific, n.d.).
Surging jet-fuel prices had a significant effect on the carrier’s operating results, as fuel is the group’s biggest single cost. Cristopher Pratt, chairman of Cathay Pacific Airways said Cathay pacific’s core business knock down into the red in the first half of the year because of indefatigably high fuel prices, the global economic fall and weak air cargo demand (Cathay Pacific blames fuel costs, 2012). Managing director of Air Cargo Management Group, Seattle, and the first issue for the air cargo industry is the forever-increasing price of fuel and fuel now symbolizes a greater percentage of total operating costs, Cathay Pacific increases about 39percent (Cathay Pacific 2013 profit, 2014). Operating costs include both fixed cost and variable costs. Fixed costs, such as overhead, remain the same regardless of the number of products produced; variable costs, such as materials, can vary according to how much product is produced (Mankiw et al, 2012).
This reduces the profit that will gain from airline services (Cathay Pacific, 2013). Vice president, global airfreight services for UPS Supply Chain Solutions: “Every air cargo service provider has introduced surcha...
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...ling but they save some of it.
In addition, the Group reported profit of HK$2620 million in year 2013. Nevertheless, due to high price of jet fuel, the shares of profits from non-airline subsidiaries and from associates decrease by 30% from HK$1,126 million to HK$781 million (Cathay Pacific Airways Limited, 2013). Cathay Pacific Airways Limited (2011) stated that the increase of 5% of jet fuel price increases the profit and vice versa. Therefore, it is concluded that the Group’s gross profit is part of their aggregate income and the depreciation on air planes is counted as part of gross income and GDP. Parkin (2008) mentioned that in circular flow of income and expenditure, investment and saving interact with income and consumption expenditure. The economy in the Group will come to equilibrium if rate of injections is equal to rate of withdrawals in circular flow.
"In early 2000 Air Canada along with entire airline industry faced huge loss due to the high global economic downturn. With slow travel outstanding to the downturn and September 2011 incident the airline industry was hit extremely hard. Air Canada consequently posted net losses of $1.32 billion in 2001 and $828 million in 2002. Furthermore, with the spread for SARS disease Air Canada’s Asian route got effected
Established in 1920, Qantas is the world's 11th largest airline and the 2nd oldest. It was founded in the Queensland outback as the Queensland and Northern territory Aerial Service (QANTAS) Limited, by pioneer aviators Hudson Fysh, Paul McGinness and Fergus McMaster. Qantas was a former government owned business; it did not view profits or efficiency as its prime goal. In 1993 a 25% stake was sold to British Airways. Qantas was privatised in 1995 and has had to adopt management practices to overcome both internal and external influences and had to change its narrow-minded culture. Although Qantas is primarily a passenger airline, air freight is also an integral part of its core business. Other Qantas operations include catering, tourism and E-commerce devoted to transport and air travel.
Superheroes and villains are not commonly associated with airlines, but in the article “A Tale of Two Airlines” by Christopher Elliot, it is put into a different perspective. The two airlines in question are Spirit and Southwest. Although both have some similarities, they both have considerably different views on how to treat customers. Southwest practices treating customers with respect, while fares may be a little higher. Spirit’s beliefs are to treat customers “like cargo” with lower fares. With their friendly attendants and better overall customer interaction, this appoints Southwest as the hero, making Spirit our villain. Elliot makes his point by exclaiming the “heroes” should be rewarded with a higher multitude of passengers and the “villains” should not be granted this satisfaction.
of price versus service in the airline industry as a whole, as well as, the
Qantas International faces both direct and indirect competition, in a highly competitive, global marketplace. Direct competitors to Qantas International are those airlines that market full service international air travel, and the primary direct competitors identified in this market are Emirates and Singapore Airways.
Many elements of Delta Airlines are described in detail, within this paper. There is a breakdown of the external and internal factors, using external and internal analysis. Porter’s Five forces are used to create the external analysis, and the key factors for Delta are power of buyers, and rivalry. Delta’s competitive advantages are identified as customer service, sustainability, brand image, strong strategic alliances, and corporate travel. Delta’s main issues are the low expansion in international markets, continuous changing of incentive program, and glitches within technology. Delta should expand more into the Chinese and African markets in order to gain market share within the airline industry.
Northwest Airlines is one of the pioneers in the airline transportation industry and is ranked at the fourth largest air carrier in the United States today. The success of the carrier depends on the quality and reliability of the service at a reasonable price. Close competitors force Northwest to innovate their services by increasing efficiency. This essay will try to examine different perspectives in the services needed to successfully complete the company’s objectives. The analysis will explain historical and financial perspectives that may give a better understanding of the current market trend of the organization.
Thomas, B. (2010, May 12).Briefing Aviation: Rulers of the new silk road. Financial Times, p.16
From viewing the annual report of Air Canada, the net income has been steadily increasing for the past 10 years up until 2016 where it had a drastic increase. The increase in income is due to the new implements of the program Aero Miles points where guests receive points for flying with Air Canada which can later redeem and receive discounts on their flights. This encourages guests to continue to travel by Air Canada more often now that they are receiving a discount. Air Canada has had an increase Air Canada will continue to grow their company and take pride in their
...fares, which in turn affects their profit. The other four marco forces can be exploited to the LCCs advantage. Technology is LCCs best option to expand its business as its low cost and aligns with the LCC model. Deregulation in other markets serves as an opportunity for LCCs to expand into other regions and tap on the latent potential of the market. Most industries have a direct proportional relationship with the economy; however, the LCCs have a inversely proportional relationship with the economy and they can take advantage of the economic downturn to improve its financial position. Last but not least, the demographic factor dictates the market that LCCs should target and if done properly, it will provide a constant stream of revenue. In all, the macro-environmental factors cannot be ignored as they present could present an opportunity or threat to the airline.
Since airlines have historically shown poor performance, it has been suggested that airline business is not cyclical business but bad business (Das, 2011). Indeed, the combined net profit margins of United States airlines, for instance, have typically been only about half of the Standard and Poor’s 500 list of industrial, utility and transportation companies’ net profit margins (ibid.). For several years the airline industry has been very turbulent and has been through financial...
During 19991-1992, Modiluft, East West and Damania went bankrupt. Air Sahara and Jet Airways survived along with government own Indian Airlines because they had the capability to bear losses. Globalization and privatization had a major impact on aviation industry. Indian aviation industry was deregulated by the government in 1990s. As a result now 14 airlines are operating today in Indian sky. Now, collaboration with international organization and foreign direct investment are welcome to improve infrastructure and technology. Today people who can not afford high prices of Full Service Carriers (FSC) can travel by Low Cost Carriers (LCC) or budget airlines. Air Deccan was India’s first LCC started in 2003. It flies to several metro and non-metro destinations. All airlines have three major fixed costs i.e. fuel costs, financing or aircraft lease and labour cost. But LCC costs are 10 to 15 per cent lower than FSC. This is because of three reasons. Firstly, saving on distribution cost as passengers book tickets on the internet. Secondly, no frills are offered on board. Thirdly, to accommodate additional seats, catering and cabin crew space in these aircraft has been used. So these aircraft have 40 seats more than the FSC.
In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases. (Malaysia Airlines ,wikipedia)
Jet Airways is a Mumbai based airline which was incorporated as a limited liability company in April’92. In May’94, all the shares were transferred to Tailwinds International co-held by Naresh Goyal (60%), Gulf Air (20%), and Kuwait Airways (20%). In Oct’97, as result of change in civil aviation policy, forbidding foreign investment in passenger airlines, Goyal took control of the entire company.
Air travel is a huge and tremendously flourishing industry. Globalization can be defined as the integration of national and local economics, culture and societies through a web of communication, transportation and trade. The current era considers globalization as the dominant driver of almost all business due to the influence or the international market. The emerging prosperity of the global aviation industry plays a substantial role in economic growth, tourism, global investment and world trade, which are the impacts of globalization. This essay portrays the negative and positive effects of this globalization on the airline industry.