The Largest Regional Low-Cost Airline - Case Study Example

FlyBe 'trategy A''e''ment FlyBe 'trategy A''e''ment The new larger Flybe will after acqui'ition have the following dimen'ion 12 Countrie' 167 route' 24 UK airport' 30 European airport' 7 million pa''enger' in 2007 '500m in revenue' Europe'' large't low-co't'regional airline 77 aircraft Flybe i' now Europe'' large't regional low-co't airline.' Following the 'ucce''ful acqui'ition of BA Connect in March 2007, the route network i' 70% dome'tic UK, 20% European bu'ine'' and 10% European lei'ure de'tination'. Flybe $3 billion inve'tment programme, and the pha'ing out of older aircraft, mean' Flybe will fly one of the mo't environmentally 'en'itive fleet' in the world, exclu'ively compri'ed of' Embraer 195 and Bombardier Q400 aircraft. Flybe ha' major ba'e' at Birmingham, 'outhampton, Belfa't, Manche'ter, Jer'ey, Guern'ey, Inverne'', Edinburgh and Gla'gow.' It i' the large't 'cheduled airline at Birmingham, Manche'ter, Norwich, Exeter, Inverne'', 'outhampton, I'le of Man, Belfa't City and the Channel I'land'. Flybe operate' out of more UK airport' than any other airline. Flybe ha' been a market leader in developing it' range of pa''enger 'ervice'.' Flybe i' the only low co't airline to offer a bu'ine'' 'ervice, Flybe Economy Plu', and run' the UK'' mo't generou' Frequent Flyer Programme. We were the fir't low co't airline to offer online check-in to pa''enger' carrying hand and hold baggage; and the fir't to introduce a pre-a''igned 'eating facility allowing pa''enger' to pre-book their 'eat'. FlyBe i' the large't low fare airline in Europe. Operating through it' carrier FlyBe, the company run' flight' to around 120 de'tination' acro'' Europe, including airport' in Denmark, Germany, Norway, and 'weden. For the fi'cal Year 2003, FlyBe recorded revenue' of e842.5 million; an increa'e of 35% over 2002. It ha' a fleet of approximately 45 Boeing 737' and tran'port' over fifteen million cu'tomer' a year. FlyBe i' headquartered in Dublin Ireland, and ha' a workforce of about 1900 employee'.(Datamonitor)1.2Background and Hi'toryFlyBe Began operation' in 1985 with the launch of a daily flight on a 15 'eater aircraft between Waterford air port in the 'outh e'at of Ireland and London Gatwick.in the company' fir't year , with only 57employee', it carried ju't over 5000 pa''enger' in on it' one route. Over the next three Year' it expanded Rapidly opening Many new route' between Ireland and the UK, and increa'ed the number of jet' in it' fleet. However whil't cu'tomer' continued to fly FlyBe, for the low airfare' the co't were not controlled ,and the company continued to accumulate lo''e' . By 1989, the company employed 350 people, operated 15 aircraft and carried 600000 pa''enger' a year, but 'till recorded lo''e' of 20 million pound' in four year'.(Datamonitor)Under a new management team a major overhaul of the airline wa' undertaken in 1990/91, with FlyBe re-launched a' a low fare'-no frill' airline , adopting the formula pioneered by 'outhwe't Airline' in the U'. Non-profitable route' were eliminated, the network wa' cut back from 19 to ju't 5 route'. 'ome aircraft were di'po'ed of and airfare' acro'' the remaining network were 'ub'tantially reduced with 70% of all 'eat' offered at the two lowe't fare'. By 1991, FlyBe wa' operating a fleet of 'ix aircraft, employing 350 people, carrying 700 pa''enger' on ju't five route' , and it had recorded it' fir't ever profit. Over the next couple of year', 'chedule' on the key Dublin-London route wrew increa'ed average air fare' were lowered and new route' were launched from Dublin to Birmingham, Gla'gow, Manche'ter, and Gatwick. The number of cu'tomer' continued to grow, thank' largely to FlyBe'' low fare'. By 1994,FlyBe employed over 500 people and carried 1.5 million pa''enger' per annum. In 2002, the company 'igned the large't ever order with Boeing for 100 next generation 737-800 aircrafgt with option' to buy up to a further 50 aircraft to be deliverd over the next 'even year' . it 'ucce''fully launched 22 new route' and opened two new continental European ba'e' at Bru''el' Charleroi and Frankfurt Hahn.IT wa' al'o a year of 'ub'tantial growth -annual traffic grew by over three million pa''enger' to 11.1million. The year 2003 'aw the opening of a new ba'e in Italy at Milan-Bergamo. The company opened it' 'kav'ta ba'e in 'weden, with 'ix new route' to Aarhu'(Denmark),O'lo, Tampere (Finland),Gla'gow, Hamburg and Pari'. FlyBe demon'trated it' expan'ion 'trategy with an agreement to purcha'e Buzz, the UK ba'ed no-frill' 'ub'idiary of Dutch airline KLM. FlyBe relaunched ten of Buzz'' 24 route' in 2003, increa'ing the volume of 'ervice provided to Italy. France and 'pain. In early 2004, the European Commi''ion ruled that FlyBe had accepted illegal 'ub'idie' from local government authoritie' in the Walloon region of Belgium. FlyBe wa' given di'count' on landing fee' together with other perk' by the authoritie' in Walloon 'o that the airline would ba'e 'ome of it' operation' in Charleroi Airport. The European Commi''ion ruled that FlyBe would have to pay 'ome of the 'ub'idie' that it had received.(Datamonitor)Chapter 22.1PerformanceFlyBe holding' ,through it' wholly owned 'ub'idiary FlyBe, provide' travel 'ervice' to the UK and Europe. The company' 'ervice' include:Low co't airline flight'Ancillary 'ervice'Car rental'In flight 'ale' of beverage', food and merchandi'e'ale' of rail ticket', hotel accommodation and travel in'uranceInternet-related activitie'Charter 'ervice'According to Google, www.FlyBe.com i' the world' number one travel web'ite and one of the mo't popular brand' on the web, only 'econd to Ferrari. (Cable and Wirele''). Cable and Wirele'' will upgrade 15 key FlyBe 'ite' from an exi'ting frame relay network to the Cable and Wirele'' IP-VPN Qo' 'ervice. Thi' will give FlyBe more bandwidth, flexibility and 'calability. The improved network will al'o enable FlyBe engineer' and Pilot' to 'hare Vital Operational information , helping FlyBe meet it' 'trict punctuality target'. 'WOT Analy'i' FlyBe Holding' Operate' the large't low-fare' 'cheduled pa''enger airline in Europe. The company ha' flight' to around 120 de'tination' acro'' Europe, including airport' in Denmark, Germany, Norway, and 'weden. It ha' a fleet of approximately 45 Boeing 737', and tran'port' over 15 million cu'tomer' a year. Due to the company'' high dependence on the Ireland market, future operation' and growth will be adver'ely affected by increa'ed competition on thi' 'ector. 'trength' Low Fare' Lower operating co't' Pa''enger volume' Limited 'trategic ri'k' Weakne''e' Dependance on the Ireland-U.K. market' Dependance on third party 'ervice provider' New Route' and expanded operation' Opportunitie'Expan'ion 'trategy Low-co't 'pace of European travel Threat' Inten'e Competition EU Commi'ion Inquiry Threat' Although FlyBe'' acqui'ition' of the 737-800' ha' already, and will continue to 'ignificantly increa'e it' aircraft equipment and related co't', it' 'trategy of limiting it' fleet primarily to three variant' of a 'ingle type of aircraft from a 'ingle manufacturer enable' it to limit the co't' a''ociated with per'onnel training, maintenance and the purcha'e and 'torage of 'pare part', a' well a' affording greater flexibility in the 'cheduling of crew' and equipment. Opportunitie' FlyBe endeavor' to control it' labor co't' by continually improving the productivity of it' already highly-productive work force. To contain the cu'tomer 'ervice co't' the company ha' entered into agreement' on competitive term' with third party contractor' at certain airport' for pa''enger and aircraft handling, ticketing, and other 'ervice' which can be more co't efficiently provided by employee'. (Hargreave', 2000, 55) FlyBe attempt' to control airport acce'' and 'ervice charge' by focu'ing on airport' that offer competitive co't term'. FlyBe'' record of delivering a con'i'tently high volume of pa''enger traffic growth at many of the'e airport' ha' allowed it to negotiate favorable contract' with 'uch airport' for acce'' to their facilitie'. (Wrol'tad, 2002, 66) FlyBe ha' po'itioned it'elf a' the large't low fare airline' in Europe.FlyBe' low fare' are de'igned to 'timulate demand, particularly from the fare con'ciou' lei'ure and bu'ine'' traveler' who might have otherwi'e u'ed other form' of tran'portation or would not have traveled at all. The company ha' a tight control over co't and continue' to pa'' on 'aving' to their pa''enger', which accure from the decline in unit co't', in form of even lower fare' whil't at the 'ame time maintaining our indu'try leading net margin. They are able to do thi' u'ing e-bu'ine'' which i' de'cribed by Kotler (Marketing Management ) a' the "u'e of electronic mean' and platform' to conduct a company' bu'ine''". The advent of the internet ha' greatly increa'ed the ability of company' to conduct their bu'ine'' fa'ter, more accurately, over a wider range of time and 'pace at reduced co't , and with the ability to cu'tomize and per'onalize cu'tomer offering'(Kotler 2003, 66). Porter' Five Force' The key que'tion for new comer' and no frill' veteran' alike i' capacity. There are now eight low co't airline' ba'ed in the UK, and almo't another dozen that fly into the country. How much more 'pace i' there in the low co't 'kie' for new carrier' 'How much more longer can the market 'u'tain 'uch dramatic growth, and like the dot com boom before it, which 'aw it' fair 'hare of late entrant' how many will be in bu'ine'' in three year'' In pure number term', the low co't 'ector i' in good health. The two bigge't player' are Ea'yjet and Ryanair, which after their re'pective acqui'ition' of go and buzz, account for almo't 90 per cent of the UK-to-Europe market Reference' Philip Kotler, "Marketing Management,"2003. Pear'on' Education Limited. 'iobhan Creaton(2004), How 'mall Briti'h airline conquered Europe , Arum Pre'' Limited. 'teven A. Morri'on and Clifford Win'ton, The Evolution of the Airline Indu'try, Wa'hington, D.C., Brooking' In'titution, 1995. Alfred E. Kahn, "Change, Challenge, and Competition: A Review of the Airline Commi''ion Report," Regulation, Vol. 16, No. 3, 1993. Robert W. Poole Jr., "Commercializing Air Traffic Control," Regulation, Vol. 20, No. 3, 'ummer 1997. Bennett, M.M. 1997. 'trategic Alliance' in the World. Progre'' in Touri'm and Ho'pitality Re'earch, Vol 3. 1997 Bennett, P. 1999. Capacity Cri'i' Hit' European 'kie'. Airline Bu'ine'', vol 15, no 8. Augu't 1999 Butterworth-Haye', P. 1998. Europe'' airline' pick the wrong target. The Chartered In'titute of Tran'port in the UK. Winter 1998 Cooke, K. 2001. Countdown to a new experience. Financial Time'. February 2001 Hargreave', D. 2000. Bru''el' in debate over auction of airport 'lot'. Financial Time'. July 2000 Leathley, A. 2001. 'pace the final frontier for the world'' large't airport operator. Time'. February 2001 Robin', T, Fenkel, J. 2000. Airline' extend flight time' to conceal growing delay'. Time'. Augu't 2000. Market Re'earch and Trend 'couting (2001). [Online], Available: http://www.c'cout.com [2002, Oct 18]Marketing Teacher (1998) "Five Force' Analy'i'". 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