Research Paper About Airline Influence in View of Global Downturn - 2475 Words

Research Paper About Airline Influence in View of Global Downturn (Research Paper Sample) Content: Airline Influence in View of Global DownturnByInsert Your NamePresented toInstructors Name, CourseInstitution Name, LocationDate DueOutlineI. The recent financial crisis brought devastating effects to many companies in the worldII. AirTran Airways OverviewIII. PESTE Analysis * Political factors * Economic factors * Social factors * Technological factors * Environmental factorsIV. Marketing Strategies that made AirTran Airways become superior to its rivals * AirTran Airways bases its growth strategies on the failures of its competitors * AirTran Airways is good at analyzing the opportunities that are presented by rival companies * Low-cost strategy * Financial Stability * Implementing security measuresIntroductionThe recent global financial crisis brought devastating effects to many companies in most parts of the world. Airline industries were among the companies that felt the effects of the crisis. The companies experienced a significant drop in the number of passenge rs. The reason for this is that many people lost jobs and therefore could not afford to pay the high transport fees that the companies charged. Besides, the prices of oil were high at this time, and this made the costs of providing air travel services to rise. As a result, many people were not willing to use air travel because of the high prices. The effects of the financial crisis made the companies that did not have a robust monetary base to incur massive losses. However, though some companies suffered tremendous losses, others were able to implement measures that enabled them to remain in operation even after the financial crisis worsened the market trends. The goal of this paper, therefore, is to describe the various factors that made it easy for AirTran Airways to survive the aftermaths of the financial crisis. It will also demonstrate the multiple strategies that AirTran Airways has implemented to enable it to emerge triumphant in the Airline industry.[CW Hill GR Jones, St rategic Management Theory: An Integrated Approach, Cengage Learning, New York, 2012, p. 24.] AirTran Airways OverviewAirTran Airways is a company that provides airline services in major cities in the United States. Most of its flights usually originate from Atlanta, and its headquarters are situated in Florida. It employs approximately 8,330 people. In 2010, the company was able to earn roughly $2,619.2 million. The amount reflected an increase of 11.9 percent of the total income that the company had received in 2009. The increase in revenue was because of the increased number of passengers who used the airline at that time. However, the operating profit for the company was $128.2 million in 2010. It reflected a 27.6 percent drop in the profitability that the company had earned in 2009. However, the company was still able to earn a high net profit despite the challenging economic conditions that faced the world economy at that time. It is an indication that the company had well laid out strategies which enabled it to emerge victorious in the market.[J Fulton, Airline Industry SWOT Analysis, Ehow, 2012, retrieved 26 May 2017, .] PESTE AnalysisDemonstrating the various sources of strength that made the company emerge triumphant in the airline market during the financial crisis will require the paper to focus on the factors that influenced the survival of AirTran Airways after the global financial crisis hit significant financial markets in the US. The PESTE analysis will provide a model that will make it easy to study the business environment of AirTran Airways. In this model, the factors that will be considered include political, economic, social, technological, and environmental factors. The classification of these factors will help to understand the influence that each element has on the performance of the organization.[R Clark, Strategic Choices for US Airport Operators, Leigh Fisher, 2011, retrieved 26 May 2017, .] Political FactorsThe political state of a country impacts directly on the aviation industry in any country. The various policies implemented in the aviation industry help in regulating the activities of the airlines in a state. These policies include open sky policies, taxation, and nationalization of carriers. It is the responsibility of the government to regulate how airline industries operate. The government also restricts the pricing policies and ownership of airline industries. As a result, the government ensures that the rates that are charged by the airline industries are affordable to the passengers. The government makes sure that responsible people own the airlines. It does this to ensure that the airlines implement security measures that protect the interests of the passengers. The government also encourages the introduction of more airlines to increase competition within the airline industry thus enhance delivery of quality services.[CW Lamb, JF Hair C McDaniel, Essentials of Marketing, Cengage Learning, New Yo rk, 2012, p. 32.] However, the influence of the government had an enormous impact on the way in which airline industries handled the economic crisis. Since the government regulates the fees that companies to charge passengers, it was therefore not possible for companies to increase their rates beyond a certain point. Nevertheless, AirTran Airways was able to realize profits because of its low-cost strategy. As a result, it was able to survive the economic crisis without incurring enormous losses. In fact, the earnings of the company rose when the financial crisis hit the world economy.Taxes play an essential role in enabling the government to increase its earnings. As a result, most airline industries pay high taxes to generate revenue for the government. Since tax rates were not reduced during the financial crisis, most of the companies incurred massive losses because of the high taxes that they were charged. It forced many companies to vacate the airline market. However, though th e taxes were hurting the profitability of AirTran Airways at the time of the economic crisis, the company was still able to provide airline services in the market by implementing its low-cost strategy. Also, when other companies left the market, AirTran took some of their shares thereby enabling it to increase its earnings. The company was, therefore, able to put up with the high tax rates during the financial crisis.[J Fulton, Airline Industry SWOT Analysis, Ehow, 2012, retrieved 26 May 2017, .] Economic FactorsThe demand for air travel depends on peoples income. Therefore, when the income of a person is high enough, the need for air travel services also goes up. However, during the economic crisis, many businesses were downsizing. Moreover, people were not able to secure employment at that time. As a result, people did not have enough money to spend on air travel services. Instead, people were using other means of travel such as roads and trains that were more pocket-friendly. Mos t airline companies were therefore forced to shut down their operations.[A Anup, Airline industry PESTE Analysis, Slideshare, 2011, retrieved 26 May 2017, .] Social FactorsTrends in the social environment usually have severe consequences for the airline industry. For example, lifestyles are changing today, especially among young people. The reason for this is that many young people are now able to secure jobs thereby raising their income levels. The increase in the number of jobs has resulted from the success of many businesses activities thus forcing many businesses to increase their demand for labor. The income levels of many young people have therefore risen significantly. As a result, an increase in the number of people who demand air travel services has become apparent. However, during the economic crisis, most young people lost their jobs thereby forcing them to stop demanding for air travel services. Leisure travel also reduced significantly at the time. As a result, many air line companies lost a large number of passengers, and this made them reduce their earnings significantly. However, AirTran Airways diversified its travel operations to account for the reduction in the number of passengers in the main routes where it used to operate.[R Clark, Strategic Choices for US Airport Operators, Leigh Fisher, 2011, retrieved 26 May 2017, .] [Anup, A, Airline industry PESTE Analysis, Slideshare, 2011, retrieved 26 May 2017, .] Technological FactorsTechnology has enabled many airline companies to carry out their operations more efficiently. Companies are acquiring larger aircraft that can carry a large number of passengers. Itis enabling companies to reduce the costs they incur on fuel. Also, the internet has made it possible for companies to provide their customers with real-time travel schedules. Companies have improved their efficiency and reduced costs of operation. AirTran Airways has been on the front line in implementing technology in its processes. As a result, the services it offers to its customers are more efficient. Furthermore, the company has been able to reduce its costs of operation since it has invested in aircraft that consume less fuel. During the financial crisis, therefore, the company did not incur massive losses since most of its operations were efficient. As a result, the company was able to cope with the devastating effects of the global economic crisis efficiently.[CW Hill, GR Jones, Strategic Management Theory: An Integrated Approach, Cengage Learning, New York, 2012, p. 40.] Environmental FactorsThe concern for the environment is growing because of the significant rise in global temperatures. Many airlines are being criticized all over the world because of the pollution they cause to the environment. The government has also embarked on a strategy aimed at charging air...