# 2 Yes there are different strategies between budget airlines and the major network airlines. The six major airlines are based on a “hub and spoke” system, while the budget airlines are on a point to point system. Also most budget airlines don’t serve food and also have employees use multiple roles in the airports.
# 4 For the industry to return to profit they need to be bale to manage how far they fly compared to prices on barrels of gasoline. Also they need to keep operating prices down to allow for tickets prices to be able to be set at a high price. Also maybe to find a way to change laws for major airlines to allow them not to slip into bankruptcy so easily.
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3 comments:
#1- Jason Shaker
Competitive forces model is based on 5 factors: risk of entry by potential competitors, rivalry among established companies, bargaining power of buyers, bargaining power of suppliers and substitute products.
Risk of entry by potential competitors were shown when airline profits began to slump in early 2001 when business travel started to fall off in the wake of the 1990s. Things got much worse after the terrorist attacks on September 11 because the demand for flying went down. The second factor rivalry among established companies was also a factor because of the 6 large airline companies when one company made a strategic move, it affected the other five, if one airline was getting more business then the others were taking a hit. The third factor bargaining power of buyers was a factor because when the budget airlines started to enter the lucrative coast to coast markets because they took advantage of new long range versions of their favorite aircraft. This also made airlines drop prices which they could not afford to do. The fourth factor bargaining power of suppliers factors into this especially with the price of oil going up, Airline companies rely so much on oil that when the prices went up they had to keep spending lots of money to keep their business going. The fifth factor substitute products was a factor because the budget airlines give more choice to customers which will take business away from the big six airlines.
The analysis explains the low profitability of the industry very well because it gives a lot of reasons why these airlines are losing money.
Plane Wreck Question #3- Pete Wilson
The biggest strength for budget airlines would be the "hub and spoke" system. The network airlines route their flights through major hubs. This system was developed for a way of efficiently using airline capacity when there wasn't enough demand to fill a plane flying point to point. This has gained 38,000 city pairs, some of which generate fewer than 50 passengers per day.
The only weakness for the budget airlines would be the in-flight services. Other network airlines recoup their costs by charging higher prices than the discount airlines, particularly for business travelers, who pay more to book late and to fly business or first class.
Plane Wreck Question #5- Jeff Scott
In 2001 and 2004 the major network airlines cut their operating costs by $13.4 billion and have reduced payrolls by 100,000. Yet it has not been enough to check the expansion of the budget airlines or to close the cost advantage the discounters enjoy. The other airlines have made steps in order to fix the threat posed by the budget airlines but they haven't done enough to clear themselves out of the water from going bankrupt.
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