AIRLINE TRANSPORTATION

AIRLINE TRANSPORTATION Prepared by Funda KAYMAK Seçkin YENİEL Yiğit KOCAGÖZOĞLU

INTRODUCTION • newly developing sector in Turkey • has important role in economies • has many advantages such as security and transportation of inputs and outputs efficienly and rapidly • has a positive effect on development of many important sectors such as tourism

Number & Size Distribution of Firms and Barriers to Entry • regulations prohibite private sector to fly in the same line with THY. The schedules which the firm can fly was decided by government • Today, in the market, there are 16 firms, 5 of them are Turkish associated and 11 of them are charters.

the distribution of firms as number of seats and capacity of passenger

PRODUCT DIFFERANTION • the distance between seats. • young planes • different timetabling • no price-cutting for cancelling or changing the flight date

Diversification • giving technical licence education to other firms staff • widen their service to other areas Vertical Integration • some firms are educating people and employ them in their firm. • so they can be more effective in their operations. • decrease their transaction costs.

Vertical Integration • some firms are educating people and employ them in their firm. • so they can be more effective in their operations. • decrease their transaction costs.

Business objectives & pricing policies • This is a newly developing industry • So firms’ main aim is growth instead of making profit. • By growth they can increase their market share • In order to growth, their aim is to maximize sales revenue.

Business objectives& pricing policies • changing market structure monopoly to oligopoly • a price fighting has began • prices fall down and the consumer’s interest increases in airline transportation • as the number of firm has increased, the number of buyer has also increased. • firms determine their pricing policy according to this growth policy • they are applying some promotions • they are decreasing prices as possible as they do

Product design and branding • firms’ most important aim is to be first in their sector, so they differantiate their products, apply some promotions and try to increase their growth • In airline transportation sector, branding is a bit difficult in respect to other sectors • airline transportation is a luxurious service as average individual income level is not very high • firms decrease prices and targeting middle class customers. • Most of this target customer has not fly before • firms’ purpose is creating new brand loyalty over them

Advertising and marketing • Advertising is one of the main weapons of competition between firms • In order to branding and increasing market demand firms have to advertise their product • But in oligopolistic market, instead of non-price competition such as advertising and marketing, firms choose price competition • So they reflect advertising expenditure to price discount • but this oligolistic market is so new as the firms, • thus firms need to introduce company name and their service

Research and development • In airline transportation sector is based on service • quality of service • technology of planes • research and development activities mainly consist training the staff. They give education to their staff about security and technical service. Thus, by this way they increase the service quality. • research and development activities mainly consist training the staff. • they give education to their staff about security and technical service. • thus, by this way they increase the service quality.

Collusion • This sector is a very new sector as an oligopolistic market . • So firms are not in a collusion about • prices, • output levels, • advertising, • research and development. • moreover there is no constitution or any cooperation to create collusion. • we certainly say that firms act individually.

Merger • conglomerate merger • private firms merge with tourism sector firms • also it decreases the cost of tourism services and increase the number of passengers • vertical merger • firms server in different stages of process make merger • Havaş and Atlasjet

Profitability • Firms have to make a certain amount profit in order to provide growth of the firm • Otherwise they could not continue to their growth • The one of most important factor that affects the profitability is increasing in fuel prices. • The other one is that raising the value of YTL • Although these negative effects of economy, firms’ costomer-oriented policy, competition and price policy have earned more profit to the company’s. • government have reduced taxes • increasing in demand by developing Turkish economy • supported firms’ growth policy • this is reflected to the firms’ profits.

Growth • We examine firms’ growth by observing number of seats, planes and flight number.

Growth Nowadays firms try to increase their transport capacity so they can reach more customers. For example, Atlasjet will buy 9 planes and THY bought 5 new planes and also they have an agreement to buy 59 planes in 2006.

Quality of Service • the first quality measurement is consumer satisfaction • technology, service rendered while flying, security precautions and at the right time flights

This scheme is sample scheme for the firms that published by Ministary of Transportaion and every firm have to have this kind of organization scheme

Technical progress • Technical progress is one of the most important variable in order to protect and increase their market share and continuing their activities • For that reasons firms try to obey general standards and get some certificates that have international validity • firms have to renew themselves and their services continuously. • In airline transportation sector, firms make daily and weekly checks of their planes for security. • Besides, firms give some educations about any unfortunate incidents that arise from any technical problem for their staff.

Productive efficiency • When the market is monopoly there was no competition, so there was insufficient effort for cost minimizing. • After 2003 a price war has begun between firms and it made firms more competitor. • the most effective weapon in this war is cost minimizing. • moreover, there is no collusion between firms. • It also make this war heavier than it used to be. • this market is productive efficiency

Allocative Efficiency • In recent years we observed that the customer population of the firms has been changing. • Today this population includes the middle class consumers. • The main reason of this change is the price wars and government policy. • Due to fall in prices its more attractive to use airline than the other alternatives. • The explanation of the Minister of Transportation can summarize the story “we make real, the fantasy of traveling by planes” So this market has allocative efficiency.

GOVERNMENT POLICIES • Government applies encouragement policy over airline transportation. • Up to 2003 government policies was a difficulty for sector to develop • After 2003 government’s view has changed reversely and allow private sector to enter the market easily. • Approximately 5 months ago, government was taking nearly the half of ticket price under the name of lump-sum taxes, consumption tax and like this. • Ministary of Transportation have reduced private comsumption tax(ÖTV) and contrubution for education tax (EKP) that is taken by consumer

GOVERNMENT POLICIES • In addition, government does not apply a price floor policy for this sector in order to create better competition ambiance • Nowadays government is preparing to put a new obligation to firms about the age of planes. • Between six months and one year, every firm in this sector have to change their 12year-old planes. • In general, planes in Turkey are 25-30-year old and it is said that a bit difficult to apply for newly entered firms to this sector. • Also there are some regulations in European Union harmonization progress. • One of these are penalty for the firm’s delayed flights.

CONCLUSION • In other countries airports are managed by private firms the help of this application, air zones, airport capacity and runway can be used more efficiently and more productive. • This is called slot application and has just began to apply in Turkey. • 92% of total passengers are intense in only 8 airports. By new investments this intensity must be broaden to other airports. • It must be evaluated this developing sector’s investment possibilities by direct or indirect investments. • New airports must be founded and with other airports, they must be specialized.

CONCLUSION • There must be international partnerships between tourism agentas and this can be a positive effect on both sectors. • there must be some airline service companies such as ticketing firms, catering firms and security firms • Government must have a seperate institution by specialized staff and they put in order arrangements. Besides, THY must make private by the way competition would be more equitable

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AIRLINE TRANSPORTATION