Airline Analysis Essay

This essay has a total of 2366 words and 10 pages.

Airline Analysis



Statement of Problem:
SlugAir, a small regional airline, aspires to become a much larger airline. They pride
themselves on being an efficient, single-class, on-time and reliable airline. This airline
appeals to those who want reliable, "get me where I wanna go" service whether the
passengers be the everyday traveler or a cost-conscious business traveler. Currently,
SlugAir serves small locations throughout California and the Western US. SlugAir serves
these locations by feeding hubs for the national carriers and servicing routes that avoid
the major hubs. This strategy has allowed SlugAir to become a very profitable small "no
frills" airline. Most airlines are organized in what is called hubs and spokes. The hubs
are two major cities that all of the airline's flights fly out of to smaller cities called
the spokes. In between the hubs is what is considered the airlines main route as the
flights in between the hubs are the companies most profitable. Flights to the spokes make
the airline extra money and people on these flights usually have a lay over at the hub and
then go onto the smaller city or may even switch planes to get to their final destination.
Thus, the airline "feeds" its own route by flying to their hubs ( main money making
cities) on the way to also getting those that want to get to smaller cities to their
destinations. In order for SlugAir to become bigger and more profitable it must open a
route between two major cities in the west. For efficiency, these cities need to be ones
that it currently services in order to allow them to feed their own route. The competitors
that we are considering are 1) United 2) Alaska 3) Delta and 4) Southwest. In order to
find the best possible route to open we will evaluate each of these airlines and the
routes in which we want to compete. We will look at each airline in terms of their size,
power and efficiency in the routes we are considering. We will look at the flights
offered, their times and frequency. We will also look at the possibility of SlugAir
competing with each of the competitors and how each might react should SlugAir enter their
market. Lastly, we will evaluate ways to improve SlugAir as an airline. We will look at
ways to make the company more appealing, more widely known and more successful.

United Airlines Corporation (UAL Corp.)
United Airlines is the largest domestic air carrier in the world. With hubs in Chicago,
Los Angeles, Denver, San Francisco, and Washington D.C., and key international gateways in
Tokyo, London, Frankfurt, Miami and Toronto. United flies to 134 destinations in 27
countries, with a fleet of 577 aircrafts. United's 101,000-plus employees worldwide bring
people together safely, conveniently and efficiently almost 2,300 times a day. United's
mission statement is: "To be recognized worldwide as the airline of choice."

In 1994, United launched Shuttle By United, which competes successfully against the new
wave of low-cost, no-frills carriers. In 1997, United formed The Star Alliance global
partnership with four International carriers to provide customers with access to more than
815 destinations around the world. In May 1997, United discontinued its "Friendly skies"
slogan introduced in 1965, and launched a new ad campaign called "Rising", which focuses
on the company's new Customer Satisfaction Philosophy (CSP), which will become the basis
for all their actions in the future.

There is only one direct route to and from Seattle to San Francisco, which is provided by
Shuttle By United and not by United Airlines itself. Shuttle By United provides
approximately 10 daily flights from Seattle to San Francisco for as low as 166.50 USD
(based on round trip); and 10 daily flights from San Francisco to Seattle for as low as
133.00 USD (based on round-trip and 7-day advance-purchase). These flights operate only
between the hours of 6:00 AM and 6:00PM-10:30PM, depending on the day. And according to
their online reservation system, they do not offer one way trips, only round-trips (this
may be different, if calling the airline directly or booking flights by other means).

It would be virtually impossible for SlugAir to compete with United, because United is
such a huge, world-renowned corporation. United could respond to SlugAir's competition by
doing one of a few things; they could introduce more low fare deals, and in the long-run
could probably create additional direct routes to and from Seattle to San Francisco
themselves. They can also do nothing at all about SlugAir's imposition on their
territory. They are making so much money from their other domestic and international
routes, that SlugAir's imposition wouldn't even cause a dent on their total revenue.
United has bigger issues to worry about, like their planned merger with US Airways; which
will make them an even greater Corporation. Whichever way they choose to react to
SlugAir's imposition, they are still powerful enough to compete on their own, and still be
the strong name and corporation that they are.

Delta Airlines
Delta Air Lines, the #3 US carrier (behind UAL's United and AMR's American), is expanding
its US regional operations while building a global alliance. With hubs in Atlanta,
Dallas/Fort Worth, Cincinnati, New York City (Kennedy), and Salt Lake City, Delta flies to
205 US cities and about 45 foreign destinations. It also serves more than 220 US cities
and nearly 120 destinations abroad through code-sharing agreements. In the US, Delta owns
regional carriers Delta Express, Atlantic Southeast, and COMAIR. Internationally, it has
formed the Sky Team alliance with Air France, Aero Mexico, and Korean Air Lines to compete
with rival alliances Star and One world. Delta also owns 40% of computer reservation
service WORLDSPAN.

Delta Air Lines, has three flights each day round trip from San Francisco to Dallas (Fort
Worth). Delta has no flight from San Francisco to Dallas (Love Field).

Delta's connection carriers suspended three flights. Delta has also reduced its domestic
schedule by 2.7% during the first quarter of 2001 to provide more reliable service for its
customers.

The key issue facing the industry today is the possibility of consolidation and
restructuring. Delta's objectives are to Become #1 in the eyes of their customers;
develop an airline network to take passengers from anywhere to everywhere, build a
superior team with the will and the means to win, and find innovative ways to maximize the
value of the company's core resources.

Delta Air Lines is in very strong position in the industry. They are strength are that
they focus on the networking and new technology developing. They developed a website to
reach out to their customers. It made the customers easy to access to check the flight
schedules and to purchase tickets; it saves customers time, on line service also provides
the luggage track system this enables communication between the airline and the customers.
This service has improved the customer service, and business efficiency.

We are expecting Delta Airlines will have some strategies changes if Slugair decided to
attack Delta Airlines territory, such as establish a hub in Dallas. Delta probably will
change their flight schedules around and give some promotions to lower their price to dry
Slugair out of the market. Since Delta Airlines is the 3rd largest carrier for the United
States, they are in a very strong market position right now. For those reasons we think
that Delta is not the best target for Slugair.

Southwest Airlines:
Southwest Airlines started off as a company with 3 planes serving 3 Texas cities. Today,
it has over 300 planes serving 55 plus cities and has grown to become the 4th largest U.S.
airline in terms of domestic customers carried. According to the 1999 Financial
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