Case: SkyWest, Inc. and the Regional Airline Industry in 2009 Assignment Questions: What are the general economic conditions of the U. S.
regional airline industry macroenvrionment? What is the relationship of the industry to the national and global airline industries? The U. S regional airline industry has been suffered and experienced declining of their profit. This case can be explained by the component of macro-environment. Focuses on the global forces and technology, the businesses nowadays have been changed dramatically to global business.
What I meant by that is, not only do the business in domestically, but also with different nationality partners. It could lead them to think then, if the business has been changed to globally, more people will fly with the airline industry. However, the technology improved day by day tremendously that people who are doing the business do not required to fly. They can do the business by telecommunication, email, live meeting with visual, or etc. This improved technology could be the one reason that decline the passengers typically in categorized in business travelers.
Another factor is General economic conditions. Lately, the world economy is experiencing a long recession which affect almost all the businesses not only just the airline industry. Many countries have difficulties with managing their financial status. The relationship between national and global airline industries seems does not too much different. Both U. S national airline industry and global airline industry are suffering from rising fuel cost, global recession, improved technology, safety issues, and etc. The world is connected as big one nation these day.
If one failed, all the other parts will be falling apart as well. It’s just a matter of time when it would happen. What does a Five Forces analysis of the industry tell you about competition in the regional airline industry? Which forces tend to be the strongest? The weakest? The five forces analyses of the airline industries show that it has normally a intense competition which means their profit margin have been thin. Normally, overall impact of the five competitive forces is moderate to weak is good place to expect good profit and a nice return on investment.
The strongest forces: The weakest forces: What factors are causing change in the regional airline industry? What is the individual and collective impact of these changes on the regional airline carriers? There are several factors that caused dramatic changes in the regional airline industry. Rising fuel cost is the one factor. Rising fuel cost is not the only issue for the airline industry, but for almost every business on earth. The amount of fuel that we could utilize is limited, but there is no alternative energy source for fuel yet for commonly used.
Day by day, the cost of fuel rising, and typically airline industry are suffering from that. The cost of fuel takes parts almost 45% of the whole expense. Therefore, many airline companies are trying to lower the expense from somewhere other such as give pressure to lower or smaller airline company to reduce their cost or number of departure. The other factor can be the safety matter. After 9-11 tragedy, safety rises above the surface and became one of the main factors for the people who want to fly with airplane.
The 9-11 terror affected to the people that stop using the airplane along with the new created government regulations which would cost airline companies to cost even more money. What are the key factors that determine success for companies in the regional airline industry? Make sure that the regional airline industry has enough partnerships with many different major airlines. The more partnership that regional airline have with major airlines, they will be guaranteed with stable income balance. Also, the customer satisfaction is the key factors for the success.
Find the way to work with the major airlines that no immediate schedule change, accurate luggage system along with the departure/ arrival time, and safety. What is SkyWest, Inc. ’s strategy? What kind of competitive advantage is it trying to achieve? SkyWest Inc. is well-known airline company with its high customer satisfaction and employee satisfaction factors. Their strategy is keeping the strong factors and be more competitive with acquire more routines by partnership with major airlines other than United and Delta. By getting more partnership with other major airlines, the SkyWest Inc. an gain more routes and connection flight to the major cities which will increase their revenues. What are SkyWest’s competitively important resources and capabilities? What are its resource weaknesses and competitive deficiencies? Its market opportunities? Its external threats? Their important resources are their customer and employee satisfaction with the airline. The potential threat could be the sister companies’ culture. The SkyWest Inc. is nonunionized airline, but ASA is unionized airline company. If the SkyWest Inc. mployees are unionized, there will be some decline in productivity and cost more money for airlines for each flight. What does an analysis of SkyWest, Inc. ’s financial statements reveal about the company’s performance? The SkyWest Inc. was suffered from 2004 through 2008 with decreased net profit caused by multiple factors such as rising fuel cost, decline on customer satisfaction, and etc. However, the financial statements for 2009 shows hope for the company that it can start pick back up their revenues. The airline is doing its best trying to increase their profit by acquisition and getting more partnership with major airlines.
What recommendations would you make to the management of SkyWest, Inc. to strengthen the company’s competitive position and improve its financial performance? In the Service-Provide industry, customer should always be the main focus for the firm. No matter how good their product or cheap their product is, if the customer experienced or had bad impression from the firm, the chances for customers to come back would be very low. Fortunately, SkyWest Inc. is already well known for the good customer satisfaction with good safety standards and the quality of service during the flight.
Therefore, the airline should put effort in to maintain what already they are strong and complement the weak points as well. The weak point that the SkyWest Inc. is their dependency to the major airlines. To increase their dependencies, the airline would need more contract with major airlines other than just Delta and United. Also, they need to start thinking in expanding their business internationally. China, Brazil, and other nation’s growth in airlines increase rapidly. Therefore, they need to look more into the international business not limited only for the U. S region.