Part 1 Analysis from the Hong Kong Landing Slot Auction
The contribution made by the Airline
The contribution made by the airline included the increase in the number of seats and the provision of a choice of ticket prices for the destination covered. The carrier added 13,750,000 seat miles in the new slot 7 at a price point that is equal to the historical price.
Significance of contribution made by the airline
The additional offerings of the carrier increase the number of flights to the destination covered and cement the price of the round trips. This makes it difficult for competitors to switch their prices. It also increases the pressure for rival airlines to conform to similar price ranges in their activities.
Analysis of performance and suggestions for improvement
The auction strategy has not been very successful. The increase in the number of seats and miles covered with the investment for the new slot increases the cost of operations. The pricing of the trip in the new slot is competitive, but it does not suffice to keep the airline profitable. As a result, the profit margins are negligible. The airline will have to increase its pricing to offset any increases in expenses. However, this might not work well in highly competitive routes. Instead, the airline should reduce its capacity so that it decreases its costs and increases its load factor. The alteration should help to increase the return on investment for the airline. The airline’s margin per day for its slot 7 investment was 4,109.59 daily or 1,500,000.00 per year.
Part 2
Analysis of leadership style of Juan Trippe of Pan Am
Juan Trippe was an authoritative leader who preferred to have his say on every affair that related to the success of his company. He preferred to work with people who supported his vision and would not directly oppose his views. He was not tolerant of alternative opinions and used this as a reason not to trust the counsel of people working close to him as fellow leaders and management staff. Trippe feels like he is the most experienced and qualified person to make decisions about his organization. It includes all the decisions about the growth of the company. He exhibits a lack of confidence in the ability of others, both directly and indirectly. Harold Bixby presents an example of this trait. He was Juan Trippe’s envoy in China who acknowledged that the company had become too hierarchical and bureaucratic. There was no humanness in the organization and most employees were only involved in deskwork. Managers lacked leadership qualities and did not even have sufficient experience of fieldwork and actual leadership.
He preferred a hierarchical leadership structure, where members of his organization would concentrate on formal communication tasks with their senior managers. The directives would also move hierarchically to the lowest level employee in Pan American Airlines. Besides being authoritative, Trippe would never consult others. He did not share his reports on leadership with the rest of the board of management of Pan American Airways. Instead, he chose to use the meetings with the board to score personal triumphs against fellow directors.
However, Trippe may have also expressed an authoritative style of leadership. As a president of the company, he held absolute authority for some management decisions, yet his managers would still have some control over the affairs of the company. The leadership team had autonomy, but it relied on the leadership of Trippe. There are descriptions of Trippe reacting forcefully and audaciously to proposals that go against his vision for the airline industry and his company. The ability to do that only stems from his authoritative characteristics. The evidence points to a leadership style that places Trippe as the head and the sole decision-maker. Therefore, suggestions for business development or related issues in the organization became unacceptable in Trippe’s case, unless they conformed to his vision for growth and profitability for the airline.
How the leadership style contributed to the success of the airline
The authoritative leadership style expressed by Juan Trippe allowed Pan American Airlines to maintain its industry leadership position. The airline remained focused on its vision of expanding and was able to take up growth opportunities when they came up. Trippe ensured that there was consisted provision of direction for the airline at the time when he was the head. Although employees were occupied with daily operations that did not provide them with sufficient experience of visionary thinking, Trippe’s authoritative leadership ensured that there was adequate communication of orders to every level of the organization. Even colleagues and managers who held different opinions from those of Trippe ended up supporting his programs for growth, and this eventually led to the success of the airline.
Another essential attribute of the leadership style expressed by Trippe was his reluctance to accept any reduction of his vision and approach to leadership for the airline. Trippe was able to push through with numerous negotiations by refusing to heed advice on scaling down on his expansion plans. He ensured that many negotiating parties eventually settled for a deal that was favorable to the airline’s business. Also, his relentless pursuit of the growth of the airlines allowed the company to survive in difficult financial times when its revenues could not keep up with the operations demands and contractual obligations. It was through Trippe’s authoritative nature, which insisted that his option was the most viable, that the airline got sufficient business to stay operational.
Although the authoritative style was instrumental in shaping the airline’s fortunes, it was also a test for Trippe as he tried to come up with solutions to the airline’s problems and finding supporters. He had to come up with offers that convinced other stakeholders of the importance of a proposal or demand that the airline was making. Often, the leadership style of Trippe required him to assume a position that was unpopular and then defend it until relevant stakeholders came on board. For example, when he chose to implement the low-cost fare solution to boost tourist travel, he could not sustain it. Rather than shy away from the decision, he went on to look for larger capacity planes to add to the Pan Am fleet and convinced the airline’s technical staff of the viability of the plan. These tough decisions taken by Trippe and his authoritative style eventually ensured that the carrier succeeded in growing in size and profitability.
The bold tactics by Trippe had an effect of shifting industry standards to create distinctive competitive advantages for Pan Am airlines. Such was the case when the company went ahead to order jet engines ahead of any other company in its competition for transoceanic business.
Description of how the airline took advantage of the American Government to expand operations
The airline used its ties to the U.S. Navy to build bases, airports, and other airline passenger and cargo facilities so that it could expand its intercontinental network. As a result, it got lucrative government deals, such as being a designated air mail carrier and getting exclusive privileges for contracts with the security operations of the U.S. government. The airline used its government influence to get the international airmail route, namely the West-to-Havana airmail route. In addition, the airline was able to come up with substantial resources for growth from its association with the U.S. government. For example, it worked with the government to spread the U.S. influence to the rest of the world, especially in South America, where it had established routes for cargo and passengers. Pan Am, through the leadership of Trippe, threatened to go alone and stop being under the regulation of I.A.T.A when transatlantic business for the U.S. airlines was at its lowest moments after the end of World War II. This would mean that its action would be seen as a volatile attempt by the U.S. to bulldoze its way into dominating the international airline industry. However, the real gamble that the airline was making was to put the governments of the respective countries that it operated in against each other.
The airline knew that the U.S. would take retaliatory action against European governments if they went ahead and restricted access to Pan Am airline. These points gave support to the evidence that the carrier relied on the goodwill of the U.S. government to expand operations (Nohria & Mayo 2007). Eventually, the company introduced low-cost transatlantic fares and expanded its fleet. Its net income more than doubled from 4.1 million dollars in 1950 to 10.2 million dollars in 1955. The Navy testified before the Civil Aviation Authority that the contribution of the Pan Am was influential in protecting Hawaii. This helped the company get an award for a foreign airmail rate from $2/mile to $3.35/mile and boost the financial outlook for the company. The airline also succeeded in handling building contracts for the military, which was to develop airports with navigational and weather reporting systems. Also, the airline’s Clipper Aircraft became an important military freight and carrier during World War II (Nohria & Mayo 2007). The airline grew because the majority of its routes were in the war zones.
Analysis of the route network set up by the airline
Pan Am had a route system of over 80,000 miles before its decline. It was covering the majority of major airports in the world. The airline had profit and non-profit ways that it serviced. It also had an elaborate route network in South America and Central America, which took passengers to the major coastal city stopovers throughout the continents. It also provided services to China and its Islands. Of the total available routes in the world, Pan Am got a strong foothold in North Atlantic, North-South America, Polar, and Europe-East Asia. The North Atlantic was the most significant (Nohria & Mayo 2007).
Part 3
SWOT Analysis
Strengths
Route network
Fly Dubai has a well-extended route network in the Middle East, which it easily serves from its Dubai operating location. The routes are Beirut, Amman, Damascus, Alexandria, Aleppo, Djibouti, Doha, Khartoum, and Baku. These routes have considerable traffic, given that they are in the same region and connect the respective countries with Dubai, a commercial hub. All routes are within four and a half hours from Dubai. Besides, the airline does not intend to add routes to the existing ones, unless it is under the maximum time of four and a half hours. Therefore, the airline can carry passengers on a round trip with ease and enjoy better performance on its business model that is sensitive to volume.
Marketing
The strategy expressed by the marketing messages of the airline is that passengers can fly more even as they pay less. This is a good marketing message that resonates with the overall business strategy of the company. It is also attractive to investors, as it points to a value proposition that the company offers to its target passengers, which is hard for them to refuse.
Strategy
Fly Dubai is a low-cost airline, and its strategy allows it to keep the costs of operation very low. It limits luggage for every trip and does not provide any in-flight entertainment other than a duty-free brochure and a magazine. This strategy is beneficial to the company as it ensures that costs are low, and the airline can operate profitably. Consequently, its price positioning for airline tickets is significantly lower than that of the competition. The airline can attract every day, low-cost traveler who is keen on flying to destinations without the additional offerings of airlines.
Barriers to entry
The obstacles to entry into the low-cost airline market are high. In addition to capital spending on aircraft and human resources, new companies must also make considerable investments in routes. This requires them to get landing rights in various airports. They also need a hub to operate. In this regard, the only way for new entrants to scale rapidly will be to acquire an existing airline. On the other hand, Fly Dubai is well-positioned because it already has a hub and more than 65 destinations in operation.
Finances, aircraft, strategy
HR management
The workers are friendly and committed to their job, which is a testament to the excellent work done by the human resource management. There have been no reports of widespread staff disgruntlement with the management about pay or any other issue. This is a welcoming reassurance to investors seeking to put their money in a company that has the potential to grow and keep staff maintenance costs low.
Effective use of resources
Fly Dubai is using Terminal 2 in Dubai as its hub, and unlike Terminal 1 and 3, there is no crowding and the terminal is very clean. Therefore, the airline can provide a convenient service to its passengers. It does not face challenges of finding parking capacity for its planes, which could lead to inconveniences for its passengers.
The fleet by Fly Dubai is relatively new compared to what its competition is using. Passengers notice the comfort and attractiveness of new machines. There are more miles yet to be covered by the company’s plans. From an investor’s perspective, the time it takes to replace planes is long. It implies that there will be no sudden capital expenditures in the business in the short to the medium-term period (Fly Dubai announces three new routes 2014).
Aircraft
The airline focuses on efficient use of its resources, and currently has 35 aircraft fitted with economy and business class options for passengers. Besides, the company is awaiting an order for 50 Boeing 737-800s, which will go a long way in boosting capacity so that the carrier can take more passengers on its current routes (Fly Dubai soars to new heights in 2013 2013).
Regulatory compliance
Fly Dubai is operating under the regulations of the UAE airspace and air transport authorities. It has fulfilled all regulatory demands for operating as a low-cost airline. In addition, it has met all arrangements with airports in its routes, which serve as its value propositions. To an investor, the airline is well placed for being profitable, as it does not have any challenges that could adversely affect its ability to function from a regulator’s point of view.
Safety record
There have been no reports of crashes involving Fly Dubai. Also, the airline is running a relatively young fleet and hopes to increase it. It does not have challenges with the safety of its aircraft and is unlikely to face any liabilities in the medium-term period.
Relationship with the government
In addition to the above strengths from an investor’s perspective, Fly Dubai is also in partnership with the Emirati authorities to process visa applications for passengers who have relatives that are traveling with them. The process requires travelers to pay a visa cost and deposit, in addition to presenting the relevant documents for the person seeking the visa. The Fly Dubai option is easy and convenient compared to what other airlines charge for visa applications. As a result, the carrier is likely to appeal more to passengers who are keen to have a no-frills traveling experience. This is good news for investors who need a business that has sufficient traffic demand to sustain its profitability (Fly Dubai vs Air Arabia 2015).
Weaknesses
Strategy
The maximum allowed luggage for the ticket price is 10kgs and passengers are expected to pay about AED 100 for additional luggage that weighs up to 32kgs. This does not go well with the competition, which allows passengers to have heavier luggage on the price of one ticket. Rivals have an advantage over Fly Dubai and can use this strategy to attract more passengers who are sensitive to price. This can be very difficult for Fly Dubai in the high season period when many travelers have a lot of luggage.
Opportunity
Fly Dubai has only been operational for less than a year. It is yet to prove itself in a very competitive market. However, with appropriate passenger comfort that it provides and a feel of premium airline flying, it can carve out a niche for budget travels that appeal to travelers who need comfort more than anything else. The airline is also being tested for its professionalism and adherence to schedules. It must continue to run its flights on time and meeting its service promises. This should go well with its current target customer base.
Safety record
The airline does not have a crash record and can continue maintaining its flights and in-flight crew to ensure that proper safety standards are met for every trip. An increased association with safety for the Fly Dubai brand will attract additional customers and make the airline more relevant in the highly competitive industry of low-cost flying in the Middle East.
Strategy
The Fly Dubai strategy does not have to be unique to the FCC business model, given that there are established players like Air Arabia serving the same routes as Fly Dubai. The company only needs to mimic what its rivals are doing. It will be able to save on its costs for innovation in operations and can transfer the gains to marketing and value addition.
Threats
Other low-cost airlines have more destinations compared to Fly Dubai. For example, Air Arabia covers 48 destinations in its route network from the Sharjah hub. Therefore, the rival airline can easily cannibalize Fly Dubai out of its market by giving passengers offers on its additional routes not covered by Fly Dubai.
Marketing
The marketing strategy for Fly Dubai, which presents a lower price than passengers end up paying, can be threatening to seasoned users of low-cost airlines. In its marketing messages, the company needs to come out openly with the additional charges that passengers end up paying when they buy a ticket to avoid negativity about its brand.
Finances
Fly Dubai will need additional financing to survive when the market becomes very competitive, or the demand for low-cost traveling reduces. With its proposed delivery of a new fleet of 50 airplanes, there will be additional payments made to fulfill those obligations. To an investor, this implies that the return on investment may not be immediate.
Recommendations
Investing in Fly Dubai is a recommended choice. The strengths of the airline are sufficient. They are instrumental in ensuring that the growth path undertaken by its current management remains viable. Therefore, an investor will likely realize favorable returns on investment, despite the possible threat of challenging economic times and capital expenditure on the new fleet that is awaiting delivery.
Reference List
Fly Dubai announces three new routes 2014, Web.
Fly Dubai soars to new heights in 2013. Web.
Fly Dubai vs Air Arabia 2015, Web.
Nohria, N & Mayo, AJ 2007, ‘Juan Trippe and Pan Amercian World Airways’, Havard Business School, pp. 1-31.