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Airtran Airways Situation and Environmental Analysis Mbengone Ayivi-Guedehoussou Corey Butler Tanea Chane Evan Nix. Context.
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Airtran Airways Situation and Environmental Analysis Mbengone Ayivi-Guedehoussou Corey Butler Tanea Chane Evan Nix
Context The objective of our analysis is to draw conclusions about how trends in the external environment affect the entire airline industry as well as Airtran. Our goal is to evaluate these external trends, uncover threats and opportunities, and discover which trends deserve the most attention.
Agenda • Mission Statement • Demographic environment • Sociocultural environment • Economic environment • Regulatory environment • Technological environment • Natural environment • SWOT Analysis • Conclusion
Mission Statement Innovative people dedicated to delivering the best flying experience to smart travelers. Every day.
Demographic: Age • Generation Xers (Born 1965-1981) vs. Baby Boomers (1946-1964)3 • Incentive Travel • Locations • Generation X: outdoor, adventure environment • Boomers: fun in the sun destinations • Baby Boomers generated highest travel volume in 20031,2 • 268.9 million trips • Increased travel once retired • Generation Y (Millennium)4,5 • X-Fares (ages 18-22) • Growth potential in business travel
Demographic: Health • Business class vs. Economy fare8 • Flight induced Deep Vein Thrombosis (DVT) is minimal • Risk factors for DVT:7 • 40 or more years of age • Pregnancy • Certain surgical procedures • Cardiac conditions • Obesity • Airlines circulating germs?6 • Newer planes rely on re-circulated air • HEPA filters are used
Demographic: Marital Status • Married vs. Single9 • Married households account for 62% of trips taken, single (never married) represent 22% • Married travelers with children under 18yrs. plan to spend more • Romantic Travel • Most frequently occurs with married couples • Common among Baby Boomer generation
Sociocultural: Leisure • U.S. passenger travel reached its pre-9/11 peak in July 200410 • U.S. Airlines decrease domestic flights but increase international travel • Increase in International bookings • Terrorists attacks • Domestic fares increase along with increase in travelers11 • Conserve fuel14 • Frequent Flyer Programs12 • A decrease in reward travel • Decrease in availability
Sociocultural: Business • Rise in global economy along with an increase in business travel17,18 • Business travel accounts for only 18% of total volume, yet contributes $153.2 Billion in expenditures • Increased usage of low cost carriers • Legacy carriers reduce their fares • 17% decline in business travel fares • Loosened restrictions • Reduced interest in Frequent Flyer Programs
Economic Environment:High Fuel Prices • Hurricane Katrina • Every penny increase per gallon of gas costs the industry $190 million in extra expenses19 • Airlines have resorted to taking away of or charging for amenities • American Airlines reportedly would have made a profit in 2005 without the increase in fuel costs20 • Provided a way for airlines to raise prices21
Economic Environment: Effects of Deregulation of Industry • Created competition which meant lower fares for consumers and lower revenues for carriers22 • 1990- economic recession and the Gulf War caused a chain reaction including decreased demand and revenues22
Regulatory Environment: Deregulation • Original concern of this back in 1978 was that airlines would set fares too low, not be able to make a profit, and ultimately lead to degradation of safety and service22 • Shift to hub-and-spoke – this is more attractive to business travelers who are willing to pay more money22
Regulatory Environment:“Open Skies”23 • Would allow US airlines to fly to any of the 25 European nations and any European airline could fly to anywhere in the US • Already have developed separate Open Skies agreements with 15 European countries • Tied together with foreign ownership • Supported by United and Delta; not supported by Continental • Decision expected this summer
Regulatory Environment:Foreign Ownership • Currently airlines limited to 25% foreign ownership or no more than 1/3 of the board of directors23 • New agreement would allow for up to 49% foreign ownership24 • Fears that would result in loss of American jobs23 • Debate on real reason for this idea24 • Cash-infusion to help US airline industry • To help Open Skies get passed • Could cause a problem during war-time24
Technological Environment • AirTran Airways Renews Agreement for Navitaire's Open Skies Reservation System25 • AirTran recently added the fuel-efficient Boeing 737-700 aircraft26 • AirTran partners with Outtask and Worldspan26 • AirTran is the first carrier to install XM Satellite Radio on a commercial aircraft26
Natural Environment • The storm warnings as well as the Hurricanes affected 51% of Airtran's normal traffic and also its bookings.27 • Their Orlando headquarters and aircraft hangar in Orlando suffered damage and further harmed operations due to the hurricanes.27
SWOT Analysis Weaknesses Strengths • Low Cost Structure • Atlanta Operations • Youngest All-Boeing Fleet • Online Services • Dependence on Atlanta • Rising Maintenance Costs Threats Opportunities • Cost Reduction • Geographical Expansion • Inorganic Growth • Volatility of Fuel Prices • Strong Competition • Economic Condition * Source 28
Conclusion: Significant Factors • Baby Boomers Have Significant Impact On Air Travel • Passenger Travel Reached Its Pre-9/11 Levels • High Fuel Prices • Foreign Ownership • Fuel-efficient Boeing 737-700 Aircraft • Hurricane Impact
References • Schneider-Levy, Barbara. (2005) Travel afoot; Today’s globe-trotting baby boomers need more than just a pair of comfortable walking shoes. [Electronic version]. Footwear News, 61, Iss. 47; 36 • Koco, Linda. (2004) For some Boomers, income planning and travel planning go together. [Electronic version]. National Underwriter. Life and Health, 108, Iss. 25; 24 • Ligos, Melinda. (1998) Incentives for the ages. [Electronic version]. Successful Meetings, 47, Iss. 6; 49 • Mutzabaugh, Ben. (2006, April) JetBlue targeting ’20-somethings.’ USA Today. Retrieved from http://blogs.usatoday.com/sky/2006/04/jetblue_targeti.html • “The industry handbook-The airline industry.” Retrieved from http://www.investopedia.com/printable.asp?a=/features/industryhandbook/airline.asp • Polk, Caroline. (2002) Can flying make you sick? [Electronic version]. Government Executive, 34, Iss. 14; 64 • Hannapel, Coriene E. (2002) Flight risk. [Electronic version]. Dermatology Times, 23, Iss. 12; 17 • The torture of second-class travel. (1997) The Economist, 343, Iss. 8021; 91 • TIA – Travel Statistics and Trends. (n.d.) Retrieved April 9, 2006, from http://www.tia.org/traveltrends.asp • McCartney, Scott. (2006) The middle seat: What’s new in air travel for 2006; higher domestic fares but better deals overseas; prepare to pay for soda. Wall Street Journal, D.5 • Shifrin, Carole. (2005) US leisure travel on the up. Airline Business, 21, Iss. 9; 96 • Thompson, Jackie. (2006) What price loyalty? Airline Business, 22, Iss. 3; 52 • Travel Brief – AirTran Holdings Inc.: Charge of $2 is added to fares to offset rising fuel costs. (2004, May) Wall Street Journal, B.4 • Spohr, George. (2004) High oil prices test low-care air carriers. The Business Journal – Central New York, 18, Iss. 44; 3 • Rovito, Rich. (2004) Midwest grapples with jet fuel costs. The Business Journal, 21, Iss. 37; A3 • Hecker, JayEtta Z. (2004) Commercial Aviation: Despite industry turmoil low-cost airlines are growing and profitable. Retrieved from http://www.gao.gov/cgi-bin/getrpt?GAO-04-837T • Shifrin, Carole. (2005) Price fights. Airline Business, 21. Iss. 7; 56 • Lehane, Mark. (2005) The rise of the smart business traveler. Global Finance, 19, Iss. 8; 38
References • Mergent Online. Aviation: North America. Retrieved April 5, 2006, from www.mergentonline.com • Koenig, D. (2006). Analysts: 2006 Pivotal Year for Airlines. Associated Press Online. Retrieved April 5, 2006, from LexisNexis Academic database. • Zich, J. Airlines raise base fares sharply, still fill planes. USA Today. Retrieved April 12, 2006, from www.usatoday.com/travel/flights/2006-04-12-airline-prices_x.htm • Meyer, J.R., and Menzies, T.R. Airline Deregulation: Time to Complete the Job. Retrieved April 12, 2006, from www.issues.org/16.2/p_meyer.htm • Adams, M. Protectionism door threatens to slam on Open Skies. USA Today. Retrieved April 12, 2006, from www.usatoday.com/travel/flights/2006-03-29-open-skies-threatened_x.htm • Grossman, D. The Open Skies: A foreign-ownership quagmire. USA Today. Retrieved April 12, 2006 from www.usatoday.com/travel/columnist/grossman/2006-04-03-grossman_x.htm • http://www.navitaire.com • http://www.airtran.com • “AirTran and JetBlue may suffer financial consequences from Hurricane Frances” Retrieved from http://www.findarticles.com/p/articles/mi_m0CWU/is_2004_Sept_3/ai_n6181986. • “AirTran Airways SWOT Analysis” Retrieved from http://www.datamonitor.com.