Part 1 � Analysis from the Hong Kong Landing SlotAuctions:
(10% OVERALL GRADE)
- In the landing slot auctions how much contribution did your airline make?
- What is the significance of Contribution?
- Analyse your performance, what could you have done to make more money?
Part 2 – From one of the 2 cases provided:Alaska Airlines or Kingfisher Nosedives, Answer the questions
Choice #1 Alaska Airlines
- What was Alaska Airlines� most dramatic argument for change, in effect, its �burning platform� or
�melting iceberg?�
- What �legacy� assumptions that were part of the existing culture were challenged and tested?
- What new and deepening commitments began to form and would foster the change?
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 2
- What stakeholder groups were identified and included in planning for the future?
- Which individuals or groups advocated and lead, and which remain entrenched and resistant?
- Analyze Alaska�s decision to move to an all 737 fleet?
- If you had been the CEO of Alaska Airlines, what would you have done to support the VP of Seattle
Operations in his role of fixing Seattle?
- How might the senior leadership team have reduced the potential risks of failure while moving through
this state?
- What strategies would you have deployed to develop employees� greater sense of ownership in
Alaska Airlines� success?
Assignment: Airline Operations ECM84SE
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 3
Assignment: Airline Operations ECM84SE
Introduction
The airline sector has experienced remarkable development and international expansion
in the previous decade. Aviation is important not just national but also international business
development and provides vital socioeconomic benefits. The considerable growth is attributable
for various factors including; deregulation of aviation laws and bilateral agreements among
governments; growing demand as a result of quality services putting pressure on airfares thus
reduce costs of travel. In addition, there is intense competition between airline and globalization,
which has contributed to the growth of the air transport with international business and tourism
that has greatly facilitated the aviation flight sector. The 1978 aviation deregulation act presents
new opportunities for airline’s leading to expansion of the aviation sector (Suganthlakshmi,
2011). Such expansion has also led to intense competition, in turn contributing in air disputes.
The sector has been forced to restructure its operations to remain sustainable while focusing on
airlines. The paper evaluates the strategic analysis of the Alaska Airline and the structure of
decision making.
Part One
In the landing slot auctions how much contribution did your airline make?
In the Hong Kong arrival slot auction, Alaska airline was in the 3 rd slot, which
represented full-service operations. The auction was performed for 3 days while about eight
landing slots were auctioned to the highest dealer. This means that, the airline contributed a total
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 4
of USD 49,796,250, with investments of approximately $ 1,75,00,00,007 and return on
investment (ROI) of 28%. During the auction, a total of USD 6b was invested while Alaska
invested USD 1,750,000,007 that earned 1, 4, and 6 landing slots.
The significance of the Contribution
This contribution was of great importance, because, Alaska was successful in low-cost
airlines with a ROI OF 28 percent. Owing to the fact that ROI is an indicator for measuring
performance, it depicts a high efficiency from not only investments but also provides productive
results. The focus was mainly on enhancing RASM for generating high profit margins for Alaska
airline. However, based on the load elements, the only chances of enhancing RASM is to
increase revenue using pricing strategy. This is practical in terms of assessing the cost of round
trip Alaska airline offer s and breakeven costs. Therefore, bidding for landing slots was
performed effectively. Because Alaska airline was in the full-service category, it was in position
to get rid of intense competition. As such, this move was important for airline when it comes to
generating a higher contribution. Nonetheless, there was intense competition, especially in
groups 1 and 2, which led to a low contribut5ion and significant losses in certain areas.
Analyse your performance, what could you have done to make more
To make more money and performance, Alaska airline could have bided a lower price
for its opening bid, then increase it when necessary (Suganthlakshmi, 2011). This attempt could
increase Alaska Airline’s opportunity for earning better contribution in the 1 st landing slot at low
auction value. By and large, Alaska acted as the basis and supported by its core competencies
while taking advantage of its rivals, which was important for increasing profitability.
Part 2
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 5
Alaska Airline was formed in 1985. It is a holding firm whose parent company operates
airlines, with a staff base of around 15,000 workers and a fleet of 200 aircrafts. The holding firm
and the parent company are both independently branded. The company is the seventh biggest US
carrier when it comes to passenger carrier and it is widespread across US. While headquarter in
Seattle, the airline has grown significantly to serve several US states.
- What Alaska Airlines’ most dramatic argument for change, in effect, its “was burning
platform” or “melting iceberg?”
Alaska airline’s alleges that the change is due to not only unsustainable but also travel-
hacking. As such, the airline promises to give notice in future. However, it has lost credibility
and has to refund mileage so as to restore it. - What “legacy” assumptions that were part of the existing culture were challenged and
tested?
Some of the assumptions include; the devaluation could have been regarded as an
inconsistency. Nonetheless, this strategy fails to depict a new normal because the airline’s has
the responsibility of communicating changes in its operations within one month. Another
assumption is that Emirates pricing plan is below the industry value, which is not true in
comparison to JAL that offers Emirates redemptions. - What new and deepening commitments began to form and would foster the change?
Some of the deepening commitments were in form of ensuring optimal and efficient
services. In this it is imperative to understand Michael Porter’s competitive forces, which shape
the strategy. In aviation sector, competitive forces are intense and largely affect the profitability
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 6
of the airline. Generally, some of the operations that would promote change include management
and other associated services including catering, handling cargo and baggage (Wilhelm, 2015).
- What stakeholder groups were identified and included in planning for the future?
Some these stakeholders include; business and leisure travelers, corporate clients, workers,
shareholders, the communities in which the airline operates. - Which individuals or groups advocated and lead, and which remain entrenched and
resistant?
The individuals advocated to remain entrenched and resistant are suppliers and Alaska
airline’s partners and airports - Analyze Alaska’s decision to move to an all 737 fleet?
The airline’s decision to move to an all 737 fleet implies an increase in the mainline fleet
to approximately 10 aircraft. In addition, a number of upcoming deliveries are likely to replace
737 fleet. - If you had been the CEO of Alaska Airlines, what would you have done to support the
VP of Seattle Operations in his role of fixing Seattle?
I would not ignore contract workers instead take into account that the airline in the
community should work towards accomplishing its corporate social responsibility. This is
effective when it comes to enhancing not only the bottom line but also recognising front line
employees and customers’ input to the bottom line. In short, good management requires
balancing all vital competing interests and enhancing the overall revenue.
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- How might the senior leadership team have reduced the potential risks of failure
while moving through this state?
The airline is known for its dynamic innovation technologically and improvement on
customer service. Therefore, senior leadership could have reduced the potential risk by
increasing the airline capacity, great craft operation, solitary aircraft type, economical fares,
terminus to terminus services, and rapid turnaround time at the airport, predominantly short- to
medium haul routes (Hwang, 2011). - What strategies would you have deployed to develop employees’ greater sense of
ownership in Alaska Airlines’ success?
While the cost effective model has largely been a preferred model for airline, the gap
between the full service carriers and low service carriers is getting smaller each day, as such, the
LCCs might take over the market share of FSCs (Suganthlakshmi, 2011). Being that this market
niche is still unexplored a lot of improvements can be done to grow it. It has been ranked highest
in client contentment for old-style North American Airlines for 5 successive years.
Part Three
XYZ Capital Partners SWOT Analysis
Strengths
Domestically, XYZ has a strong market presence; it takes in more commuters across US
than any other carrier. The carrier is one of the largest carriers when it comes to passenger
traffic. Owing to the remoteness of Alaska, air is the main form of transport. For five years
consecutively it has been ranked highest when it comes to customer satisfaction for traditional
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North American airlines. The company has a strong operational network on its well established
domestic market amid all turmoil characterized by international recession and increased
terrorism the Airline still continues to grow. Unlike its competitors, the company has been
generating profit for over three decades except six years since it was conceptualized; it has
enabled mergers to stay afloat. It has a great public acceptance in both travel safety and fast way
of air travel. It has segmented its market by offering different services and different pricing. This
model to a greater extent increase organization popularity and visibility because of specialization
(Perry, 2012).
The airline staff training is intense and high in terms of quality coupled with experience
earns them great customer satisfaction. The airline offer pilots extreme weather training an
aspect that enhances the safety of its operations. To help navigate through an impossible terrain,
the airline uses modern radar communication technology. This also enhances the reliability and
safety on its services. The company’s operations stretch back to the cold war era, when it offered
chartered flights to the Soviet Union. The airline does not have competitors who fear venturing
into this harsh terrain marred with extended flights. The airline obtains its greatest revenue
overseas; however, it still plays a major role in national transport.
Alaska Airline has established that computes 50,000 points to enhance real-time
performance of data which saves time and money. Approximately, the system saves the firm
about $25 to $30 million annually (Blachly, 2012). This is the cutting edge for XYZ Capital
Partners as it enables it to hold down expenses and compete effectively on routes that cost less
outside of US. It has received special honors on philanthropy and community involvement this
increases its acceptance by the wider community.
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Weakness
A large workforce that is spread over the vast geographic areas, with inclusion of the
international points, requires continual monitoring and communication increasing on the
operational costs for XYZ Capital Partners. Airlines demonstrate a high spoilage rate in
comparison to other sectors. Immediately flight takes off, a vacant seat is lost and is non-revenue
generating. Nothing can salvage such situation that revenue is lost. Aircrafts are very expensive
and require huge capital outlays (Ommani, 2011). While the commerce environment can change
rapidly, the in aviation sector it is very complex to make speedy schedule and airplane variations
due to staff commitments, contracts and other factors.
The greatest weakness for XYZ Capital Partners marketing mix is in the promotional
strategies. This is an attempt for cost cutting to stay lucrative but might work against them on
creating a new customer base or even losing customers to competitors. XYZ Capital Partners
model of business not necessary it depends entirely on one source of revenue and that is
passenger revenue in terms of fares. Anything that disrupts it sends the whole business on its
knees. It’s absent in the lucrative certain regions market that is growing in terms of tourism and
business travel also affects its operations.
Opportunities
Technological advancement can lead to cutting costs, starting with fuel efficient aircrafts
to additional computerization in terms of ground operations reducing the cost of man power.
Developing a symbiotic relationship with other carriers can increase passenger volume. This can
be achieved by harmonizing timetables; carriers can offer services to destination on a code
sharing arrangement with a partner carrier. XYZ Capital Partners offers continual opportunities
to both business and leisure air travel (Porter, 2008).
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 10
The recent growth on international tourism is increasing the air traffic the airline can tap
into this growing the market niche, and by so doing; it increases the revenue generating
platforms and air space. XYZ Capital Partners has in-flight entertainment player to improve on
customer satisfaction, which is a great marketing move that will improve the customer retention.
Threats
Global economic recession greatly affects leisure, business and optional travel that cut
down the market sphere as well as the revenue in it. Fuel cost is the biggest expense for the
airline as is the case everywhere; hence an upward approach can threaten the business strategy.
With the surge in the insecurity that has been greatly caused by terrorism negatively affects air
travel. This applies mostly by governments to safeguard national carriers and caution them from
external competition (Blake & Wijetilaka, 2015).Fluctuation in air travel in demand by the
economy class market segment, which hurts the business economically. There has been an
increase in personnel training costs; this has been characterized by high technological
advancements and the global increase in training fee.
Marketing Mix
Price
XYZ Capital Partners has a reputation for being lowly priced in terms of air ticket fare in
comparison to the competitor that is majorly delta air. The other attraction on the price cap is that
you can cancel your flight and get back your fare back without any penalty. This makes XYZ
Capital Partners attractive to its customers because of customer friendly policies. In this case,
there are price changes such as, reduction in price that customers receive in form of a credit for
use in future flight (Wilhelm, 2015). XYZ Capital Partners has mileage, which enable one-way
ASSIGNMENT: AIRLINE OPERATIONS ECM84SE 11
redemption for frequent flyers. The airline also introduced program 49 for planning mileage for
Alaska residents with various benefits including email notification, fare, discounts and sales
Promotion
XYZ Capital Partners is technologically savvy and recognized for embracing
technological changes to improve clients’ experience. The main mode of marketing is customer
referrals it endears itself to its passengers thus creating more customers by referrals from its
existing customer base. Such a marketing tool is easy to run because it is not expensive to run as
compared to mega sponsorship deals with sports clubs, and television adverts that cost millions
to run (Suganthlakshmi, 2011). This requires working on the personnel and hiring those with a
friendly character and attitude and imposing a strict code of character. The customer here is the
most important aspect of the business and how you treat them determines their loyalty to your
airline.
Internet being the greatest marketing platform, XYZ Capital Partners has earned a
reputation as having funny and clever ads, but there is only problem is that these ads are few and
far between. Such an operational philosophy of cutting down expenses though beneficial can
work against them. Airline business requires a lot of visibility and constant communication with
the public or you might run a risk of losing business to its rivals. A brand has to be recognised in
public at all times, most airlines fail to know that customers as such, they need being reminded
why they have to be in business and the younger prospects want a visible airline, it has to do that
if it has to tap into these market sphere. Therefore, XYZ Capital Partners has to look for ways of
understanding such issues.
On time delivery, nobody likes delay and XYZ Capital Partners to ensure that services
are delivered timely as well as performance. It has a reputation of prompt service delivery and
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keeping their schedules. Such a kind of reputation is a morale booster for the existing customers
and new customers (Porter, 2008). Again, this less intensive marketing strategy that stirs the
XYZ Capital Partners a head by generating greater customer confidence is the brand for such a
dynamic market.
The airline is devoted to its clients and this is one of the leading strategies as far as the
company is concern. XYZ Capital Partners should invest in Alaska Airline as services are
offered through way of technology, process, and customer relations they share passion. While
this is what the organisation aims to do, this is exactly what XYZ Capital Partners intends to
carry forth, before investing so as to share on the same network.
Place
Since the XYZ Capital Partners is strategically located, air travel is the main mode of
transport. On most occasions, residents use their services to buy goods and services. Patients are
also flown for emergency services. Recently, Alaska airline expanded to other regions,
particularly, Hawaii and non-airline centre so as to increase the revenue streams, an important
element that should convince XYZ Capital Partners to invest. There are plans to exit
underperforming routes and cut the capacity of other routes this is to enable it fully concentrate
on the more profitable routes. This is a short term strategy to due to increased competition from
established airline. However, with good marketing strategies, XYZ Capital Partners can be at the
top.
In business there is no jack of all trades, a company has to specialize on its core activities
that way it enable it to retain your existing customer base before thinking of a new market.
Furthermore, Alaska airline has developed new branding strategies for affiliate regional as well
as independently owned flights that it collaborates with, hence good venture for XYZ Capital
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Partners. Among the companies it has subcontracted to do additional flying for the group are;
Canadair CRJ-700 regional jet, SkyWest Airlines they are dedicated to serve the group and are
painted in a similar manner as Alaska horizon’s.
Product
The major product it offers is low cost passengers who travel frequently to either shop or
seek medical help. It offers alternatives for customers who do not have time sensitive shipment
and can wait for space available services. Moreover, XYZ Capital Partners operate a wide range
of flights connecting small towns to main transport centers and carry many customers in
comparison to other airlines across Unites States. On the course to increase its market share,
XYZ Capital Partners can invest in other airlines such as Alaska airlines. In such collaborations,
XYZ Capital Partners can sell tickets on Alaska flights, which will promote its services on global
networks and connection with frequent flyers. This symbiotic kind of relationship rides on the
already existing market of the two giant airlines, these minimizes the spoilage rates and in return
improves profitability while keeping the operational costs low.
There is an onboard offer of beverages from a fellow US company that produces coffee.
It also features on board entertainment; it is regarded as the first airline to introduce in-flight
entrainments in 2003. When the sun and the moon aligned on March 2016 the Alaska airline
decided to delay the flight for 25 minutes to catch this rare spectacle. In addition, Alaska airline
has an accommodating gesture; it gets individuals from one point to another while offering them
quality service delivery. It is not only the airline to talks to its people but also listens to them,
hence offering customer service at its very best.
Analysis
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Alaska Airline operates in a growing market niche where so much can be done to
improve its profitability by increasing its revenue. In 2014, for instance, the airline carried over
21 million passengers with a fleet whose average age is 9.7 years. It had a reported net profit for
the 4 th quarter of USD148 million despite the heightened competition on that year alone it was
reported to have a net profit of $571 Million excluding special items. The operating margins for
2014 expanded to 17.7%. Furthermore, full year pretax margin came in at 17.2%. As its giant
competitors went into restructuring, Alaska Airline turned itself into a high quality industrial
company. Most of the gains that year were attributable to the price o fuel, but even without this
the profit margin was substantial.
The airline is still much in growth phase, it can improve further by targeting new markets
such as the lucrative Asian market and the African market as a tourism edge. The strength of the
local economy especially, in the Pacific Northwest has helped keep the demand afloat, but the
rise in Alaska’s margin was characterized more by the reduction in fuel cost. Its competitive
capacity rose by 7% and the percentage of its market by 8% in the same year. It has launched 16
new North American markets in Seattle where Seattle signifies 55% market share.
With the recent decision to add more Q400 to grow the E175 sub fleet is interesting, this
is a statement even if the fuel prices rises these means that operation margins won’t suffer too
deeply, with such kind of management ideas investing in this company is profitable, there is no
better time to invest in such a fast growing company but now. With the recent acquisition of
virgin America it shows great growth prospective for the airline this will boost its capitalization
increase revenue and then in return more profits this in return rewards shareholders with
increased returns to investment. If I were to take a personal stand, I would therefore recommend
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any prospective investor to put their money in this company because it has proven sustainable
over the years, generation profit for 33 years for a business operation than span close to 39 years.
Conclusion
Based on the discussion and SWOT analysis, it is clear that Alaska airline is in the
transformation stage, whereby it is focusing on its strengths while capitalizing on potential
opportunities. The very objective of Alaska airline may be achieved if it puts emphasis to fulfill
the demand of users; implement appropriate marketing strategies; and improve services offered
particularly dewing inflight and post-flight.
References
Blachly, Linda (2012). Alaska Airlines places $5 billion 737, MAX order. Air Transport World.
Archived from the original on October 11, 2012. Retrieved 1/5/2016
Blake, Martin & Wijetilaka, Shehan (2015). 5 tips to grow your start-up using SWOT
analysis. Sydney.
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Hwang, Inyoung (2011). Alaska Air to Replace AMR in Dow Jones Transportation
Average. Bloomberg BusinessWeek. Archived from the original on May 9, 2012
Ommani, Ahmad (2011). SWOT analysis for business management 5 (22). African Journal
of Business Management, 9448–9454.
Perry, Dominic (2012). Alaska orders 50 Boeing 737s in $5 billion deal. London: Flight global.
Archived from the original on October 11, 2012. Retrieved (1st May, 2016).
Porter, M.E. (2008). The Five Competitive Forces That Shape Strategy [online]
Suganthlakshmi, T. (2011). Challenges and Strategies for Successful Airline Operation.
ZENITH International Journal of Multidisciplinary Research [online] 1 (3), 139-
Wilhelm, Steve (2015). Alaska Airlines logs big boost in passengers as it combats rival Delta.
Puget Sound Business Journal. Retrieved (1st May, 2016).
