US Airways Group - Putting It All Together - Essay Example

?U.S. Airways group is currently the fourth largest commercial airline in market share currently in the domestic market. The first three major competitors for U.S. Airways currently holding a combined 42% of the domestic market are Delta, American Airlines and South West Airlines (Misra, 2010 ). The level of competition in the domestic airline market is very stiff therefore the level of customer satisfaction and the quality of customer service provided becomes one of the most important factors for a successful airline. In a market characterized by low-fares, high volumes, traditionally basic services such as in-flight meals and movie were included in the fare price but in today’s fierce operating environment airlines have resulted to charging extra for these services in an effort to offer the lowest selling price possible for the passengers. U.S. Airways is suffering from an image problem, where it is collectively viewed as one of the least admired corporations in its industry sector. In the Fortune 1,000: Most Admired Companies 2006, U.S. Airways received the lowest score out of ten of the major airlines in the U.S. Even in the 2011 Fortune survey with added competition from other major airlines out of the twelve companies surveyed only AMR received a lower score than U.S. Airways. Furthermore it has not improved in any of the attributes surveyed in the study (Cnn, 2011). It is clear that U.S. Airways needs to address its quality of service in order to increase its market share in the domestic market as well as successfully entering into the global airline market. The airline industry in general is very susceptible to external economic, legal and political factors which can deeply affect its day to day operations. The recessionary economic conditions in the domestic economy as well as internationally significantly affected the airline industry particularly in the years 2008-2009 where most major airlines reported operational losses. Price gouging and intense competition have been a defining characteristic of the industry ever since the deregulation of 1978. After the 2010 travel season with slight improvement in the domestic and global economy the airline industry has been able to bounce back maintaining full occupancy rates for its flights and has once again reached profitability (Yahoo, 2011). One of the biggest costs for any airline is the cost of fuel, so in general the industry is particularly vulnerable to fuel price increases (Datamonitor, 2011). Regardless, rising costs and the volatility of fuel prices has cut the average margin of the airline industry to only 2%.U.S. Airways as a whole needs to improve the customer satisfaction rate by improving their customer service, improving the quality of its services, and decreasing the percentage of delayed flights. They also need to improve the speed of the boarding process in order to improve customer satisfaction. These are some of the things that U.S. Airways management needs to address in order to improve their market share and increase revenues. The airline industry has always been characterized for being a highly regulated industry with various federal agencies overseeing their operations from a safety and security standpoint. The Federal Aviation Administration (FAA) is responsible for regulating and ensuring the overall safety of all civilian as well as commercial flights in the domestic airspace. All airlines operating in the domestically are subject to the rules and regulations of the FAA. The FAA has the authority to issue any directives or changes in procedures, including aircraft maintenance. For U.S. Airways the adequate planning and budgeting of enough cash reserves, manpower, airplane inventory and financial resources to meet with the changing operational demands of running a domestic and global airline must be factored in the strategic and contingency planning of the company. There is a high degree of complexity in the operation, maintenance and repair of commercial aircrafts. As a consequence there is a high level of added costs associated with new maintenance directives or changes in procedures that can increase operational costs significantly for the parties affected .This high degree of risk exposure associated with governmental regulations and operational directives is a contingency every airline needs to prepare for and create an operational and financial strategy to meet with the changing capital demands and changes in operational and tightened security procedures. With the arrival of the 2001 Aviation and Transportation Security Act, the governmental oversight and the changes in security and airport security procedures included the federalization and standardization of all major commercial and civilian airports in the U.S. The Transportation Security Administration (TSA) is the federal agency in charge of the security of all major airports in the U.S. The occurrence of 9/11 and the legislation of The Patriot Act brought about many operational changes for all domestic airlines airports and tightened security procedures which significantly increased operational costs for the airline and the passengers ended up footing the bill by paying higher fares. Terrorist threats and bomb scares have introduced new controversial security procedures. The use of full body scanners have become common place in many domestic airports. Many individuals feel that the naked image of the passenger seen by the TSA operator, violate the passenger sense of privacy and expose the public to high levels of radiation. Furthermore by refusing to use the scanner, you are then subject to the enhanced pat-down where every part of your body is extensively probes and pat down including the more sensitive genital area and breasts. This procedure which is also marred in extensive public controversy and outcry from many individuals which view it as an abuse of power and a violation of the individuals civil rights. TSA is also responsible for screening and checking all baggage and cargo entering the aircraft. All this additional security procedures had to also be paid by the airlines themselves, so an additional increases in the costs of fares and services had to once again be implemented in the cost structure The image of domestic air travel in general has been negatively affected and certain individuals even refuse to travel by airplane anymore due to their refusal to subject themselves to the humiliation and possible harm of the new TSA security mandates and full body scanners. Environmental restrictions on limiting the aircraft emissions are in the works from the EPA which could also become a factor in the operation of all airlines in the near future. U.S. Airways is planning on expanding and building their brand by expanding to the global airline market. There are many barriers of entry for any airline venturing into the global market that are challenging even for a competitor the size of U.S. Airways Group to deal with. These barriers of entry not only challenge the strategic planning of management, but expose the company to a whole gamut of new risks from operating under different political and regulatory rules of each individual country and adapting the corporate structure to best fit the local customs and mores. The capital requirements for expanding into the global market can stretch the financial capabilities of any company. The cost included adding new aircrafts, hiring additional staff, pilots and technical personnel to support the new operations can become an extremely complex and a major financial undertaking requiring extensive strategic planning and financial liquidity. U.S. Airways is planning to penetrate to the highly competitive European airline market. It is one of the most attractive options for any major airline planning to integrate its flights into the global market. The European tourism industry accounts for over 75% of all the global tourism revenues (Rita, 2000). With over 27 tourist location located geographically together it presents the best opportunity for growth albeit at the expense of high capital requirements, including an extensive marketing campaign to build and enhance the brand image in the new market and a discounting structure favoring a discount voucher for first time flyer in order to prevent a price war from starting in the new market. The other location that the company wants to explore for expansion is venturing into operating in Afghanistan, although it is a third world economy, with an average annual income per capita of only $900 (CountryWatch, 2011). The is not a lot of competition in the local airline market and with the right partnership maybe with the U.S. military subcontracting their services for air cargo and soldier transport could provide U.S. Airways with an additional revenue stream that could prove to be significant. U.S Airways is a company at a crossroad in its current strategic path. The firm has been successful in its domestic US marketplace, but now the firm needs to expand into the global business arena. The are many factors that must be consider prior to expansion including finances, regulations, barriers of entry, economy, and legal factors. The market that the company has the greatest interest in is the European Union marketplace. One of the aspects of the company that need to be improved prior to implementing any expansion plan is the customer service function of the company. In the airline industry customer service has become as important as price in order to achieve customer retention. References Cnn.com (2011). World’s Most Admired Companies. CNN Money. Retrieved May 27, 2011 from http://money.cnn.com/magazines/fortune/mostadmired/2011/snapshots/2099.html CountryWatch (2011). Afghanistan. Retrieved May 28, 2011 from CountryWatch database. Datamonitor (2011). US Airways Group, Inc,: Company Profile. Retrieved May 27, 2011 from Datamonitor database. Misra, R. (2010). What is the domestic market share of the top US airlines? Retrieved May 27, 2011 from http://www.quora.com/What-is-the-domestic-market-share-of-the-top-US-airlines Rita, P. (2000). Tourism in the European Union. International Journal of Contemporary Hospitality Management, 12(7), 434-436. Yahoo.com (2011). Form 10-k for US Airways Group – Inc. Retrieved May 28, 2011 from http://biz.yahoo.com/e/110223/lcc10-k.html Read More