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Short-Haul Operations in Airline Industry Report

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Updated: Jun 22nd, 2020

Introduction

Due to increased globalisation, market accessibility has become more liberal in the airline industry making it more competitive. Competition in the airline industry increases when new airlines make entry into the industry and the existing airlines expand their services into other geographical markets. Making entry into new markets is easier for existing airlines than it is for new airlines as there are many restrictions and regulations placed on new airlines by governments (Fu & Zhang, 2010).

Some political issues like international trade and the tax policies in a country are also barriers to entry for an airline. The cost of acquiring an aircraft and having it operate with enough crew is very high, which means that the cost of establishing an airline is cost prohibitive to many airline companies. Short-haul airlines provide timely flights for its customers, usually businesspersons, who are keen on punctuality and are willing to pay for premium services. These airlines also provide cost-effective services by providing the same class of amenities to its customers. Although advanced technology replaces physical meetings, short-haul flights still provide the needed person-to-person business meetings. Therefore, this report analyses short-haul operations in airline industry using SWOT analysis and offers recommendations for appropriate changes.

Short-haul Operations

Essentially, the major determinants of major players in the airline are the safety of passengers, expediency of services, quality of services, economical consumption of fuel, security checks, and advanced technology. Therefore, short-haul airlines must ensure that they achieve these determinants so that they can compete effectively with major players in the air industry, such as Qantas and British Airways.

Short-haul aircrafts can make many and quick turns in an airport unlike long-haul aircrafts that require more time after they land to turn and refuel. Again, short-haul aircrafts may require no cleaning after passengers alight as most of them can travel the whole flight without eating, whereas long-haul flights, cleaning is important as everybody has to eat or drink during the flight. Short-haul flights are made within a country or between states, unlike long haul airlines, which travel between different time zones across different continents.

Different time zones cause a difference in the morning and night hours and cause long haul aircrafts to face restrictions put across for protecting the residents living near airports from noise pollution. Passengers in short-haul flights do not carry luggage as they are making short travels, while many people travelling in long-haul flights have luggage as they are going to stay in their destinations. Lack of luggage to load and off-load during travels reduces significantly the amount of time spent on the ground between flights.

Efficiency in the airline operations is possible because of the enough staff on the ground for short-haul trips. Employees normally deliver quality services during flights as they remain productive for a long period. The liberation of the market has seen a change in the ownership of airlines from government owned to private owned airlines and airports. Bel and Fageda (2010) state that private airlines and airports enable short-haul aircraft to land and take-off in the uncongested airports, hence, increasing their efficiency and performance. With advanced technology, short-haul aircrafts are easy to use for the majority of the customers. Easy usage is possible because one can book and deliver personal information in advance before getting to the airport. When one arrives at the airport, a comprehensive security check is undertaken efficiently.

Strengths

Strengths in the industry include advanced technology, which reduces queuing at airports, comprehensive security checks at airport entrances, creation of demand-based flights other than depending on the scheduled flights, manufacturing of aircrafts that are efficient in fuel consumption, accurate weather predictions, and easy maintenance and engineering for repairs. Advancement of technology in the airline industry, allow passengers to make travel arrangements in advance without queuing at the airports to book flights, give personal information, and make travel transfers. These advancements lead to passengers having a better travel experience and increased customer satisfaction. With satisfied customers, short-haul airlines can easily retain them. In the airports, quick and comprehensive security checks give travellers a sense of safety and improve the performance of airlines.

Increased efficiency in short-haul operations make it possible for short-haul aircrafts to make flights on a demand-based system rather than a published scheduled time system. This works well for most businesspersons, who may require making urgent travels or several trips in a day for more than one business meetings. Using advanced technology, airlines are in a position to manufacture aircrafts with improved engine structure whose fuel consumption is efficient. Economical consumption of fuel reduces the overall airline expenses, and thus leads to the increased profitability of the airlines. Some of the advanced technology used to reduce fuel consumption enable manufacturers to make aircrafts that are less noisy, hence, reducing noise pollution among those, who reside close to airports.

Unexpected weather changes are a threat to the safety of travelling with aircrafts. However, with new technology, accurate weather prediction is possible to enable passengers to choose their preferred flights and airlines to improve their overall performance. Innovative technology has improved some of the airline operations like maintenance and engineering making it possible for problems to detect and rectify problems easily. Quick detection of problems allows quick and effective remedies, which enhance safety of short-haul aircraft.

Weaknesses

The weaknesses in the short-haul industry include very volatile markets for passenger travels, fluctuating fuel prices, difficulties in sustaining a diversified front, and government restrictions. The market for short-haul travels is volatile because it is responsive to the prevailing economic environment. During economic recessions, many businesspersons are unwilling to pay flights to attend their businesses in various cities or states. Other businesses can be delayed causing travellers to purchase tickets at a lower price. Leisure travellers, who are price sensitive can change their plans and cancel flights when their disposable income reduces. All the short-haul airlines compete for this transportation, which is available for only a short-time, and then it disappears.

The fluctuating prices of crude oil are very volatile and could translate to extra spending for airlines if they are unprepared for the fluctuations. With fuel accounting for almost 30% of the total aircraft expense, high fuel prices mean that airline expenses increase. Sustaining a diversified array of products and services is challenging for airlines. Diversified products and services accommodate both the business class travellers and those, who travel in search of recreation opportunities. Airline companies cater for the preferences of one group at the expense of the other. Side-lined products make airline companies lose customers, make less, and experience diminished reputation, weaken their capacity to retain customers.

Governments have put in place restrictions and regulations restricting exits from the industry and consolidations. According to Hochberg and Lu (2010), an airline can still carry unprofitable operations even when they are heading to bankruptcy. Some government policies place restrictions on entry into the airline industry or expansion of domestic flights to new markets. The government also places air controls and safety procedures that reduce product quality and increase costs

Opportunities

The opportunities present in the short-haul airline industry include increased competition, which enhance diversification of services, exploitation of new markets, and purchase of new models of aircrafts. Increase in competition due to the liberation of the market entry in the airline industry offers an opportunity for airlines to diversify products, increase capacity, and purchase new models of aircrafts (Fu, Oum, & Zhang, 2010).

Airlines majoring in short-haul flights should diversify their products by increasing the frequency of travels between cities or states. Higher frequency of service leads to an increased market share giving them a competitive advantage over other airlines that offer both short-haul and long haul travels. Giving passengers in a similar class of travelling better services will give these short-haul airlines an upper hand in charging the travellers premium prices for using connections in their hubs. Even with more pay, these customers will remain loyal as they receive quality products in these airlines.

By offering competitive prices depending on the time of purchasing a flight, the class one travels under rebooking conditions. Short-haul airlines have an opportunity of remaining attractive to their customers due to the quality of services and expediency (Grant, 2010). This opportunity would mean that travellers in the same class of travel could purchase the ticket at a variety of prices enabling the airline to make profit. With an intensified rivalry among airlines, short-haul airlines could choose their overall capacity by improving the amenities provided to travellers while on board, choose how to allocate its capacity across connections, and set the prices for each connection that will support attractive returns for a long period. Buying new aircrafts gives an airline the opportunity to acquire new models of aircrafts, which are efficient in their fuel consumption (Owen & Lim, 2010).

The new models of aircrafts are friendly to the environment as they cause less pollution than the old models due to the reduced consumption of fossil fuels. Soto (2012) states that planes have an economic life of 20 to 30 years, meaning that with their purchase, short-haul airlines will remain efficient in their performance for a considerable period for the airline companies to make adequate profits and develop.

Short-haul airline companies with the aim of retaining customers should add attractive features to their services to enhance their customers travel experience. These features may be inclusive of on-board sale of foods and beverages, adequate seat space, entertainment services, and wireless accessibility to the Internet. They should also collaborate with hotel accommodations and car rentals to make it easier for their passengers to access them. As airlines expand their markets to venture into new geographical routes, they will encounter different people with different cultures. Klophaus, Conrady, and Fichert (2012) suggest that short-haul airlines should consider products and services diversification to increase products they offer to customers. By regarding every passenger as important, short-haul airline companies should ensure that customers’ needs are met in the best possible way to win them over and retain them.

Threats

The threats in the short-haul airline emerge from the availability of substitutes, government restrictions against market entry, and terrorism activities. Availability of substitutes is a major threat to the performance of short-haul airlines. Making the choice of not to travel is the greatest substitute. Leisure travellers may withdraw their travel plans or change their destinations to those nearby prompting the change of the mode of transport. Alternatively, with advanced new technology, businesspersons may forfeit physical attendance of business meetings and choose other options like video conferencing to hold the meetings (Snider & Williams, 2011). The emergence of electric high-speed trains serves as another alternative form of travel for many short-haul travellers. Other businesspersons, who can afford private jets, choose to use them to keep time and enjoy quality service during their flight.

With a more liberalised market, the entry rate of new airlines is constantly growing. According to Fu, Oum, and Zhang (2010), an average of 30 new geographical entrants through the existing airlines have been made during the past decade and the trend is rising. With a strong brand name and a large market, airlines are able to enjoy economies of scale, hence short-haul airline can target branding. The fear of terrorist attacks in many countries is also a threat to the safety of many travellers, especially tourists.

Conclusion

The airline industry has become competitive in the modern world due to the emergence of many airline companies. Big airline companies such as Qantas and British Airways have dominated the airline industry for they provide long-haul, medium-haul, and short-haul services. SWOT analysis of the short-haul services shows that technology, expediency, cost-effectiveness, comfort, security, and safety measures are some of the determinants, which major players employ in dominating the competitive markets. Short-haul airlines can diversify their products and services by offering higher frequent trips to different geographical areas, giving incentives for early ticket purchases, and rebooking to attract many travellers, especially businesspersons, who are concerned with punctuality.

Through diversification, airline companies are set to expand and increase their market share. By investing in new models that are technologically advanced, short-haul airlines will become more efficient as they cut on their expenses by reducing the amount of fuel intake. New models will enhance competitiveness of short-haul operations and reduce pollution on the environment by emitting small amounts of hydrocarbons into the air. Overall, economical consumption of fuels will give short-haul airlines economies of scale, increase market share, and optimise profits.

References

Bel, G., & Fageda, X. (2010). Privatisation, regulation and airport pricing: an empirical analysis for Europe. Journal of Regulatory Economics, 37(2), 142-161. Web.

Grant, R. M. (2010). Contemporary strategy analysis and cases: text and cases. London: John Wiley & Sons. Web.

Hochberg, Y. V., Ljungqvist, A., & Lu, Y. (2010). Networking as a barrier to entry and the competitive supply of venture capital. The Journal of Finance, 65(3), 829-859. Web.

Fu, X., Oum, T. H., & Zhang, A. (2010). Air transport liberalisation and its impacts on airline competition and air passenger traffic. Transportation Journal, 2(3), 24-41. Web.

Klophaus, R., Conrady, R., & Fichert, F. (2012). Low cost carriers going hybrid: Evidence from Europe. Journal of Air Transport Management, 23(2), 54-58. Web.

Snider, C., & Williams, W. (2011). Barriers to Entry in the Airline Industry: A Regression Discontinuity Approach. Review of Economics and Statistics, 6(62), 1-23. Web.

Soto, C. (2012). British Airways–Iberia: Environmental Friendly Synergies. Environmental Protection, 1(23), 1-72. Web.

Owen, B., Lee, S., & Lim, L. (2010). Flying into the future: aviation emissions scenarios to 2050. Environmental science & technology, 44(7), 2255-2260. Web.

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