Aravali Institute of Management

Presentation On Chaos in the Skies

Presented to: Mr. Vishwas Gupta

Presented by: Group A

Pre 9/11
1. Demand: Either for leisure or business Drivers for increase in demand were: Rise of world GDP Increasing world trade & investment Liberalizations of markets Growth in the no. of retirees 1.

Post 9/11
Demand: US domestic airline bookings fell by 74% & rest of world by 19%. Reasons for reduced travels were: Passengers were wary for increased personal risks Passengers started seeking alternatives like: video conferencing & using high speed railway transportation Longer queues & check-intimes Increased passenger door to door travel time

Pre 9/11
2. Cost Factors: There were variations based on: Fuel prices(50% inc. from 1999 to 2000) Length of the haul Currency exchange rates Protection afforded Complacency of mgmt. Power of labor union

Post 9/11
2. Cost Factors: Most of the airline companies focused on cost reduction strategies Customer price sensitivity was increasing Purchasing cheaper tickets Flying discount airlines Travelling short distances
Cont

Pre 9/11

Post 9/11
Expenses of airports had increased substantially like: Strengthening cockpit doors Modifying airline computer software for security Conducting detailed employee checks Inc. flow of information from Federal Agencies to airlines Restricting access to parked aircraft etc

Pre 9/11
3. Returns: There were very
less returns on RPKs (avg revenue per passenger km) Although the US airline market increased by over 160% Since 1970, it had fallen at a rate of about 2.5% p.a. By the 1990s many had moved back to their core business or divested.

Post 9/11
Returns: The balance
sheet of companies had got drenched in red. They had to either declare themselves as bankrupt or divest it The worst quarterly loss ever in the industry was posted by UAL (i.e. US$1.16 bln) Only Southwest Airlines could earn little profit

Pre 9/11
4. Full Service Carriers(FSCs): Focused on networks & product quality and to as many cities as possible Extra features were added: 1. In-flight catering 2. Leg-room loyalty programmes 3. Interlinking of smooth connections between airports & terminals

Post 9/11
4. FCSs: Passengers decided to holiday near their homes only o Long haul flights profit was affected by this o People wanted to travel business class but were unwilling to pay that

Pre 9/11
5. Low Cost Carriers(LCCs): Value

Post 9/11
5. LCCs: Hassle factor came in

for money concept LCC focused upon the management of costs Point to point services Fewer in-flight or ground amenities Single class & greater density Uniform fleet Utilizing less congested airports Price were set according to the date of purchase

because of increased security measures Airlines were struggling to lower down their losses

Pre 9/11
Strategies: 1. Fragmentation: less of restraints and constraints 2. Open Markets: policy which removed barriers to entry and exit 3. Hub and Spoke: pooling up passengers at one station and then putting them on respective flights

Post 9/11
Strategies: Airlines were only trying to reduce their costs

Pre 9/11
6. Alliances: to gain economies of scale alliances were done. Code sharing Block Spacing Franchising

Post 9/11
6. Alliances: 9/11 had discouraged alliances as individually airlines had incurred so much of losses that they were going bankrupt

Thank You!!