Airline Business - Case Study Example

31 March 2008 Uncertainty in Business The uncertainty in business environment shapes the strategies pursued by companies. It should be noted that even the emergence of new business organizations are often facilitated by the changes and trends in the external environment. One example of this is easyJet Airline Company Limited (EasyJet) which is a budget airline in Europe that took its strategy from the American firm Southwest Airlines. In its operation, it can be seen that EasyJet responds to the uncertainties in business environment through the use of strategies which sustains its position as one of the leaders in business travel.

The emergence of budget airlines is directly attributed to the transformation of the global business environment. The major drivers which facilitated this trend are: the deregulation of the European air travel sector; the establishment of the European Union; the 9/11 tragedy; the rapid technological advancement; and change in customers' lifestyle and preferences. It is irrefutable that the deregulation of the European airline industry primarily contributed to the rise of low cost carriers. It can be recalled that deregulation has lowered the barrier to entry in the industry as well as enhanced the competitiveness of the players which are previously receiving subsidy from the government.

This, in turn, largely contributes to the cost efficiency of airline operators allowing them to charge lower prices to passengers. While this is true for budget airline like EasyJet large carriers have suffered significantly from the deregulation as this opens the door for the entry of smaller firms and heightening the competition among industry players. The establishment of the European Union affects the airline industry has the same effect like the deregulation of the sector. This has opened up markets and lowered operating costs, encouraging the proliferation of low cost carriers (Sorensen 2006).

The 9/11 tragedy which left terror worldwide has also helped in lowering the cost of air travel in order to fill up empty seats in the airline. Noting that customers are hesitant of flying because of the threats of another tragic terrorism activity, demand is lowered as previous travelers postpone their plans. These are coupled by the public's preference of budget airlines since they want to maximize the value of their money in response to the economic recession. Credit crunch has efficiently made customers more conscious of where their money goes making them shift to lower cost alternatives.

In air travel, this meant shifting to no-frill airlines which offers limited service yet at a lower cost.The rise in oil prices also affects strategy making. Budget airlines including EasyJet now partners with suppliers of fuel to arrange a fixed price at which the oil will be purchased in a specified time frame. This is still prevalent as oil prices continue to escalate and squeeze profits. This practice is also known as fuel hedging. ReferencesEuropean Airline Take a Round-trip Flight. 2004.

Estrategia. Published 10, March 2004Sorensen, Chris. 2006. Low cost airline flying high. Financial Post. Retrieved 07 January 2007