Cathay Pacific, Lufthansa and Thai Airways
p1/19
BBA2 - Marketing 1 – Prof. Taylor Term Paper – SS/02
Cathay Pacific, Lufthansa, and Thai Airways
By Stefan Broda, Dennis Damer, Suttinee Keawsuwan, Yin Tong, and Li Xin
Table of Contents 1. Introduction ............................................................................................................................ 2 2. About the Three Companies................................................................................................... 3 2.1 Cathay Pacific Airways Limited ...................................................................................... 3 2.2 Lufthansa Public Limited Company
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Due to overcapacities in the airline business, made evident by the major financial difficulties of Sabena and Swiss Air in the last months, most companies are therefore trying to define, acquire and keep those customer groups most important to them. Recently the nature of competition has changed. The creation of Star Alliance and oneworld has resulted in more cooperation between the members and fiercer competition with other alliances and their member companies. A major obstacle to comparing companies within the airline market is the highly regulated market structure, which allows for only imperfect competition. Often the national carriers are seen as symbols of national pride and enjoy a privileged status domestically.
Term Paper – Marketing1
BBA2
SS/02
Cathay Pacific, Lufthansa and Thai Airways
p3/19
2. About the Three Companies
Destinations Countries/Territories Daily departures Passengers (000) Fleet RPKs (000,000) Operating revenue (000) Operating profit (000) Net profit (000) Frequent flyer programme Airport lounges Major hub airports Year of formation Ownership 571 135 8.511 238 2.023 ----Yes Yes -1999 -729 44 124 26 10.728 151 292 11,864 2.058 72 -47,153 -4,426,194 -678,103 -641,691 Yes Asia Miles Yes First&Business Hong Kong 1997 1946 PLC PLC 93 73 352 35 1,700 244 41,300 18,038 243 81 88,606 42,395 13,356,240 2,869,686 914,727 358,368 605,424 113,656 Miles and More Royal Orchid Plus First&Business First&Business Frankfurt,
In the local region, Qantas managed to outweigh its competitor by gaining a toll of 65% compared to its competitor. Evidently this shows Qantas is the number one preferred airlines compared to other competitor airlines like Virgin, Tiger Airways and Emirates airlines. However the situation is not the same in South East Asian region as Qantas only managed to obtain about 15% of market share compared to likes of Air Asia who leads the market share with 60% in this region. Conversely, this is not a concern for the airlines as the airlines managed to generate revenue of 5 billion dollars, with a predicted passenger growth of 4.9% which is equivalent to 2.9 billion passengers by 2034.
The airline industry is a hyper-competitive marketplace as many airlines have gone out of business
The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).
This is an analysis of the Airline Industry in Europe. The paper will cover the current market situation, including financials and market volume. Following this will be a Five Forces analysis on the factors that affect industry competition. The paper will conclude with key insights into the profitability of the industry and a SWOT analysis of one of the industry’s best performers and what rivals and possible future entrants can learn from their success.
The “ Battle Of The Air” has been used to describe current situation in the airline industry. The emergence of “ No Frills “ discount carriers such as Air Asia, Mahlindo, Firefly have threatened the survival of the traditional giants such as MAS, SIA, Thai Airways in the APAC regions and even the Big Boys across the continents such as United, Delta, Continental, Luftansa, Emirates and US Airway ( Myron J.Smith, 2012 ) face competition
Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.
Cooperation within alliances poses several challenges to managers: the size of the alliance, the need to intensify cooperation and the harmonization and standardization of common processes, and the search for synergies to reduce costs. However, in times of crisis, alliances do not necessarily prevent stiff competition between the partners. At present, five alliances One World, Star, Wings, Sky Team and Qualiflyer stand out as the core groupings around which other airlines with strong regional networks will come together to form worldwide networks and can be described as global alliances. But they remain fragile creations subject to competing attractions and economic forces. Over the years, several companies have switched from one alliance to another. Austrian Airlines, for example, moved from the Qualiflyer to the Star alliance. Air France has recently floated the idea of creating a Mediterranean alliance with Alitalia and Iberia. To make this three-way deal possible, Iberia would have to leave the OneWorld alliance.
The last part of industry analysis is about rivalry. In aviation industry, the rivalry is very drastic. This industry develops slowly or even stagnant and it is mature in recent period. There is no new company established in developed areas and also there is no major firm going broken. Most of survivals are big companies. All of them have abundant capital and ample operating experience and hold a relatively fixed percentage of market. In long run, the number of airline companies does not change. In another word, the cake is divided up. However, people define business with a ward, for profit. If airline companies want to share more percentage of market, they must seize other companies’ part.
The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts
American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.
The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or
Airlines Industry is large and growing, it is also the most fiercely competitive sector. It facilitates international trade, world economy growth, tourism and international investment. The airline industry has over time with the use of modern technology been able to take advantage of the short haul, high frequency and gained a competitive advantage over other forms of travel, such as buses and railroad travel. Additionally, the airline industry still holds the market for global travel at a low cost and convenient way to travel. The aviation industry gives a good contribution to the GDP which includes the following: airline services, general aviation, civil airport operations, aircraft manufacturing, and
3,4- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the “ Deregulation” of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the
The implications of this analysis are that the focus on the Chinese market is justified. The Chinese air travel industry is booming, and indeed this is fueled by that country's rapid growth and the increased demand for
One of the world’s most competitive and prominent industries is the airlines industry. It generates huge amounts of income as well as employment each year. Some of the common names in US air travel service providers are Alaska, Northwest, Southwest, US airways, American etc.