Effects of the Low-cost Carrier Airline Companies on Turkish Airlines - Case Study Example

Table of Contents RESEARCH OBJECTIVES 2 RESEARCH QUESTION 2 LITERATURE REVIEW 2 RESEARCH METHODOLOGY 5 FACILITIES AND RESOURCES 6 BUDGETING AND COSTING 7 TIME SCHEDULE 7 BIBLIOGRAPHY 8 EFFECTS OF LOW COST AIRLINES ON TURKISH AIRLINES COMPANY PURPOSE OF RESEARCH STUDY Turkey appears to be a very attractive market for the low cost airlines and many low cost airlines have started their operations in Turkey. By keeping their profit margins and expenses low, these airlines have created tough competition for the premium airlines which is exclusively based on prices on the domestic routes. Turkish Airlines is being considered as one of the airlines which have been greatly affected by the competition created by low cost airlines. Therefore, there is a need to investigate how low cost airlines have changed the market structure of Turkish Airlines industry in terms of competition and what is the impact of this competition on Turkish Airlines Company? RESEARCH OBJECTIVES The major objective of the proposed research study is to determine the impact of competition created by low cost airlines on Turkish Airlines Company. The study will also help to understand how the entrance of low cost airlines into Turkish Airlines Industry has affected the market structure of the Industry. To determine the impact of low cost airlines on the profitability of Turkish Airlines To evaluate the effects of low cost airlines on the operations of Turkish Airlines To analyze how low cost airlines have affected the strategies and objectives of Turkish Airlines Finally, this research will study whether perceptions of consumers about their favourite celebrities are affected by the nature of products endorsed by them. RESEARCH QUESTION In order to achieve the research objectives, following research question has been developed. What kind of competition low cost airlines have created in the Turkish airline industry and how this competition has affected the profitability, operations and strategies of Turkish Airlines Company? LITERATURE REVIEW The global aviation industry has shown a rapid growth after the introduction of liberalization policies. Liberalization of airline industry in Turkey not only increased the number of airline passengers but it also increased the air services as more and more low cost carriers (LCC) entered into Turkey airline industry. According to InterVISTAS-EU Consulting Inc. Liberalization may impact the home carriers as they can loss market shares by stimulating the market however, high traffic growth may set off the market share loss. Secondly, liberalization in turkey has increased the viability and lowered the profitability of national carriers however; it has also provided opportunities to the national carriers by widening their pool of investment and allowing them to expand into new markets (InterVISTAS-EU Consulting Inc., 2009). The study of InterVISTAS-EU has significant implications on Turkish Airlines. The Airline was enjoying the monopoly before the entrance of low cost carriers into Turkish market. With the increasing number of low cost carriers in the Turkish aviation industry, the interest of the researchers increased to explore how these airlines could affect the state-owned Turkish Airlines. The profitability of Turkish Airlines was highly threatened by low cost airlines. Pegasus is the second largest carrier in Turkey after Turkish Airlines and the model of Pegasus is like that of Ryanair and EasyJet and promotes no-frills flying , low fares, online booking, baggage allowance and seat assignments (Pekenc). As a result of higher competition in the airline industry, Turkish Airways did not change its strategy. CEO of Turkish Airlines, Kotil (2010) argues that the company pursues a combination of two schools of thoughts and offers quality service at reasonable rates. Kotil also argued that success of strategy of Turkish Airlines is evident from the profitability of the company as number of passengers it is carrying over the last six years. The five critical success factors of Turkish Airlines against Onur Air, Pegasus and Atlasjet include product quality, customer loyalty, market share, customer services and management experience (Torlak & Sanal, 2007). It has found that Turkish Airlines has positioned itself as an excellent service provider and company is not pursuing price competitive strategy. This positioning strategy of Turkish Airways appears to be more threatening for the airline because for air travelers traveling expense is one of the primary priorities. Therefore, it is important to determine the extent to which the low cost airlines have affected the profitability of Turkish Airlines. Low cost airlines might have a significant impact on the operations of Turkish Airlines. Turkish Airlines offer quality services by hiring the young and educated people and growth of the company allowed it to hire more people with high university degrees. The company hires the people through its selection institute which has a very solid selection process (Kotil). When low cost airlines entered into Turkish market, how did they impact the HR operations of the company? Turkish Airlines have been focusing on delivering the promised values to customers rather than indulging in competitions and price wars. For the low cost airlines, investing in high tech planes and modern technology is not possible because they have to keep their costs low to offer low fares. On the other hand, Turkish Airlines operations are seem to focus on the core values of the company. As reported by Hurriyet Daily News (2010) Turkish Airlines has been greatly investing in buying new crafts and 737-900ER is the backbone of Turkish Airways because 737s with Boeing sky interiors help the company to offer high quality on board services and passenger comfort. Turkish Airlines has increased its fleet by doubling it to over 120 crafts during the last five years and company expected to double it again in the next five to seven years (MRO Management, 2009). Therefore, the growth and expansion strategies of Turkish Airlines and focus of the operations of the company reflect that Turkish Airlines gives more value to its core values. How the values and core operations of the company are affected by the low cost carriers? Is the company still pursuing the same HR, marketing and operational strategies? Another interesting area of investigation for the researchers was to determine how low cost carriers have affected the strategy of Turkish Airlines. The growing low cost Turkish carrier Pegasus Airlines has positioned itself as a major caterer for business traffic thereby; its demand has increased in the corporate agencies (Dunn, 2009). Dunn also highlighted that Pegasus has created price competition in the airline industry and its price of one way tickets in Turkey is 79-99 EUR and for European countries is 119-139 EUR. If Turkish Airlines continued operating with its previous strategy, it might have lost the huge low cost travelers market. In 2007 the major airlines in Turkey were Turkish Airlines with 81 percent domestic shares and 46 percent international shares, Sun Express with 8 percent domestic and 5 percent international market share and Atlasjet Airlines with 11 percent domestic and 2 percent international market shares (InterVISTAS-EU Consulting Inc., 2009). In 2008, Turkish Airlines launched its subsidiary low cost airline as a separate brand with the name Anadolujet. As claimed by Turkish Airlines, the launch of Anadolujet was a part of company’s strategy to expand its direct services to European destinations (Routes Online, 2010). The launch of low cost airline as a subsidiary of Turkish Airlines seems to be a strategy of the company to compete the low cost carriers however, Turkish Airlines does not consider it as its primary strategy. Even after launching its los cost airline Turkish Airlines has maintained its position as a legacy carrier. The company has established its distinction by offering a superb cabin product and by continuously buying jets from Airbus and Boeing (Rahman, 2010). The literature cited shows that low cost carriers have increased the competition in the airline industry of Turkey however, Turkish Airlines has been successfully operating as the top national airline. Regardless of the extent to which low cost carriers have affected the Turkish Airlines, one point which is clear is that Turkish Airlines has been affected by the entrance of low cost airlines. In order to determine how the low cost airlines have changed the nature of competition and how they have affected the profitability, operations and strategies of Turkish Airlines, there is a need to conduct a research study. The proposed research study aims to study the effects faced by Turkish Airlines because of the low cost airlines. RESEARCH METHODOLOGY This study is exploratory in nature. The aim of this research study is to study the impact of low cost airlines on Turkish Airlines because Turkish Airlines is the major legacy national flag carrier of Turkey. A broad, qualitative methodology was deemed suitable to study the impact of low cost airlines on profitability, operations and strategies of Turkish Airlines Company. Secondary sources such as website of Turkish Airlines and low cost airlines, online journals, electronic sources and annual reports of the companies will be used to collect data and information. The important findings of the different researchers will be also used in qualitative analysis. On the basis of analysis of the information taken from secondary resources, important conclusions will be made on the impact of low cost airlines on Turkish Airlines. The primary data will be collected by conducting the interviews with the workers and management of Turkish Airlines. The purpose of conducting the interviews is to understand the perceptions of workers and management of Turkish Airlines on the competition they face from low cost airlines. The interviews will be conducted with the personnel of Turkish Airlines who would have sufficient access to the information about the company and it would be determine through designations and positions. To avoid any biased attitude, the interviewees will be communicated that information taken will be solely used for academic research. Since the impact of low cost airlines on three areas of Turkish Airlines will be studied including profitability, operations and strategies therefore, through interviews information on strategies and operations of Turkish Airlines will be collected. To analyze the impact on profitability of Turkish Airlines, annual reports or financial statements will be used. A generic approach will be used in this paper to analyze the impact of low cost airlines on Turkish Airlines Company and most of the data will be collected from different electronic sources, journals, publications and books of few authors. The electronic sources that will be used will be usually the official websites of the company and other reliable resources to increase the reliability of the proposed research study. The information collected through secondary sources and interviews will be analyzed in consideration to the theoretical concepts and models of Hospitality. FACILITIES AND RESOURCES The facilities and resources that will be used in this research study include: Journals Internet and electronic sources Printing and binding Microsoft Office BUDGETING AND COSTING The total budget and expenses to conduct the proposed research study are as follows: Budgeted Items Expense Travelling Expenses Online library or Journal charges Printing and Binding charges Internet and Printing Charges Other Expenses (if any) Total Cost TIME SCHEDULE The table shows the time allocated to each of the activity to conduct the proposed research study Serial # Activities Start Date Completion Date Duration 1 Research to select the topic       2 Identifying the purpose of the study and developing the research question       3 Highlighting the limitations and assumptions       4 Determining the variables which will be study in this research study       5 Creating the literature review       6 Designing the Research methodology       7 Submission of research proposal       8 Approval to conduct the proposed research study       9 Collection of information from secondary sources       10 Preparation for conducting the interview       11 Interviews at Turkish Airlines       12 Organizing the information collected through interviews       13 Analyzing the data       14 Reporting the findings and analysis       15 Compiling the report 16 Editing and formatting of report       17 Final research study submission       18 Final report submission       BIBLIOGRAPHY Dunn, G., 2009. Low Cost Carriers: Ready for Battle. [Online] (Published 2009) Available at: http://www.flightglobal.com/articles/2009/04/21/325429/low-cost-carriers-ready-for-battle.html [Accessed 8 October 2010]. Hurriyet, 2010. Boeing and Turkish Airlines Finalize Jet Together. [Online] Available at: http://www.hurriyetdailynews.com/n.php?n=boeing-and-turkish-airlines-finalize-an-order-2010-03-09 [Accessed 9 October 2010]. InterVISTAS-EU Consulting Inc., 2009. The Impact of International Air Service Liberalization on Turkey. [Online] (Published 2009) Available at: http://www.iata.org/SiteCollectionDocuments/Documents/TurkeyReport.pdf [Accessed 8 October 2010]. Kotli, T., n.d. Media Centre Interview. [Online] Available at: http://www.russianavia.net/index.php#state=InterviewDetail&id=614 [Accessed 9 October 2010]. Kotli, T., 2010.Skylife July 2010. [Online] Available at: http://www.turkishairlines.com/de-DE/skylife/2010/july/articles/welcome.aspx [Accessed 9 October 2010]. MRO Management, 2009. Talking Turkey. [Online] Available at: http://www.mytechnic.aero/press/mroman.pdf [Accessed 9 October 2010]. Pekenc, S. C., n.d. Clear Skies: Launching Turkey’s Leading no Frills Airline. [Online] Available at: http://www.dogstardesign.co.uk/uploads/SPARK_3_Pegasus.pdf [Accessed 9 October 2010]. Rahman, S., 2010. Turkish Airlines budget subsidiary seeks to increase traffic to Dubai. [Online] Available at: http://www.zawya.com/Story.cfm/sidGN_12092010_130905/Turkish%20Airlines%20budget%20subsidiary%20seeks%20to%20increase%20traffic%20to%20Dubai [Accessed 9 October 2010]. Routes Online, 2010. Anadolujets new European routes. [Online] Available at: http://www.routesonline.com/news/29/breaking-news/70565/anadolujets-new-european-routes/ [Accessed 9 October 2010]. Torlak, G, N., & Sanal, M. S., 2007. David’s strategy formulation framework in Action: the example of Turkish airlines on Domestic air transportation. [Online] Available at: http://www.iticu.edu.tr/kutuphane/dergi/f12/M00201.pdf [Accessed 9 October 2010]. Read More