Increasing Foreign Market Commitments †Free Samples to Students

Question: Discuss about the Increasing Foreign Market Commitments. Answer: Introduction The airline industry has been exemplified by intense competitiveness with well-established price range pressure that further demands a continuous necessitate in developing its level of efficiency. However, similar to it the airline industry is regarded as a business that continuous to develop with an increased number of passengers who are frequent flyers. Since the origin of commercial and profitable air traffic, the airline industry has manifested by increased level of development in comparison to the GNP (Gross National Product) tendency and enduring productivity growth (Belobaba, Odoni and Barnhart 2015). Several technical advancements, recent commercial ventures and rate of efficiency progressions have facilitated to absorb and further comprehend inflation, which in amalgamation with increased living standards have facilitated more number of people to opt for airline travelling. It has been reported that over 3 billion passengers are anticipated to travel with commercial airlines in 2014. It is been expected by the International Air Transport Association(IATA), that the international travel and traffic has witnessed a slight rise of over 6% along with the competence to develop by about 6% (Williams 2017). Further progress is expected to persist a steady development in addition to this the aircraft manufacturer Airbus anticipates determined and constant positive annual traffic development until 2023 of a rate of over 5% (Dai, Liu and Serfes 2014). The report will intend to focus on the US Airlines Industry by focusing on its strategic position. The paper will intend to provide a synopsis of the US airline industry and further conduct a competitive study through Porters five-force analysis and further highlight its advantages and disadvantages. In further to this the report will explore it economic performance and identify strategies to improve airline profitability. The US airline industry consists of a vast range of airlines that vary from low cost carrier air models to the multitude global airline groups. The airline industry in United States is referred to be among the leading dynamic airline industries across the world. The airline industry in the United States in recent times have been responsible in producing advanced balance sheets, improved assessments and generated 13 consecutive quarters of revenue and profitability along with the functioning margins over 10% based on the evidence to the level of quality and discipline followed by the management with this strong competitive industry (Tan 2016). With the increasing growth of domestic airlines who are witnessing a steady profit and restrained operating expenditures because of the major portion to below $50 barrel crude keeping petroleum costs at low range (Hannigan, Hamilton and Mudambi 2015). This status has led the US airline industry face rough path of turbulence, which caused risks a nd threats to the US bottom line profits. One of the reasons behind the turn down of the US domestic line is excessive competence and ability coming on website at great discount rates when the US economy was facing a growth in the low rate single digits (Doganis 2013. The routes established between US and Latin America, whereby the value delivery services have been belligerently progressing that has been regarded as the largest development in recent available seat miles occurring over the past five years. The Domestic Airlines domain has been witnessing a development over these five years because of the increasing levels of per capita non-refundable income, consumer reliability along with total commercial revenues, which have reinforced demands from both corporate, as well as leisure passengers (Vahlne and Johanson 2017). Passenger airlines belonging to the US are making profits from an enhanced economy. The airlines of the United States is anticipated to hold a well established pos ition for passenger carriers in 2014 regardless to the crippling winter weather in certain regions of north eastern and mid western United States. It has been anticipated that the US airline industry will establish its fourth consecutive year of productivity in 2014 (Holloway 2017). As per the recent Statista survey, passengers from USA have travelled more frequently for leisure purposes in the past six months along with the major section of the airlines generally travelled on economic category flights. It must be noted that the on-time arrival rate of performance of the airlines of US has seen certain number of improvements in 2017 to an average of over 80% (Ambec et al. 2013). While the number of grievances have increased to some extent by more than 1% in comparison to last year with Spirit airlines producing the highest rate of grievances and complaints based on per 100,000 enplanements (Flouris and Oswald 2016). Components of Porters Five Forces Analysis on US Airline Industry The major factor for conducting Porters Five Forces for the US airline industry is because of the US industry has been threatened by steady headwinds from the wide range of external forces. These threats involve the declining passenger traffic, rising functional expenses, increased rate of fuel and petroleum prices along with improved and safer landing with better maintenance cost (Porter and Heppelmann 2014). However, it can be stated that the global airline industry has been facing a death spiral specifically in the United States whereby, numerous renowned air carriers were either reinforced into bankruptcy or had to come in amalgamation with other airline companies in order to remain steady in the industry. Bargaining Power of Suppliers- (High) The supplier power in the US airline industry is immense due to the three major factors that US airline comprises of in terms of fuel, aircraft along with labour force which are further been influenced by several external forces (Vanhove 2017). The price of aviation petroleum for instance is subjected to the instability in the international market for oil and lubricants that has been revolved massively due to several geopolitical and other elements. Due to the restricted number of the two major suppliers, which are Airbus and Boeing, they tend to direct the prices and maintain immense authority (Belobaba, Odoni and Barnhart 2015). The other increased cost contribution of the US airline industry and is further controlled by the workers of American Airlines subsidiary. Bargaining Power of Buyers- (Low) The increasing rate of propagation of online ticketing as well as distribution methods, various US airlines namely, American, Delta Airlines, Virgin America and others who fly broad range of passenger everyday no longer needs to rely on their representatives and other intermediaries for their ticketing requirements (Zou et al.2014). However, there has a strict regulation and policies situated at the demand sector of the US airline industry. This further signifies that all passengers travelling in any airline belonging to the US airline industry is provided utmost protection and security by the regulators. Threat of Substitute Products or Services- (Medium) US airline industry is not exposed to threat from its substitutes (Holloway 2017). Unlike other nations, US citizens generally prefer flying, thus making it a natural phenomenon in comparison to its substitutes such as roadway transports, which have comparatively less influence on the passengers (Kleymann and Serist 2017). However, several US citizens use their personal cars for long distance journeys thus posing as a threat. Threat of New Entrants- (Low) - The US airline industry requires huge capital venture in order to make an entrance. During their exit, the airlines must script down and further absorb several losses. US airlines have been witnessing low-level traffic since the massive attack of 9/11 and an absence of popular and desirable gate accessibility in airports (Grant 2016). These factors have been posed as threats and obstacles of entry in the US airline domain. Furthermore, the capital, labour intensive, and energy demanding nature of the airline industry in the US can cause complexities for new entrants. Rivalry among Existing Competitors- (High) - US airline industry comprises of several domestic and international airline carriers. The three most renowned international carriers are namely Delta Airlines, American Airlines and United Airlines (Wu and Liao 2014). It also consists of an additional nine large carriers that has its operation in primarily domestic air carriers but further have some global destinations namely Alaska Airlines, JetBlue, Southwest Airlines and Hawaiian Airlines (Holloway 2017). These airline services mainly compete on ticketing price range and services. On the other hand, they compete on the ground of the flight frequencies, reliability and other services and amenities (Grant 2016). The Southwest Airlines Company is known as the major competitor within the US airline industry that carries more than 100 million passengers in an average year that is poses as the biggest threat to the other airlines (Choi, Lee and Olson 2015). Benefits and Limitations of Porters Five Forces Analysis on Us Airline Industry Porters Five Forces Analysis has been widely implemented in order to analyse varied industrial positions. As the US airline industry experience several challenges while maintaining competitive benefits over its rivals, the above conducted Five Forces analysis has effectively determined the fundamental competitive impact of external forces on the US airline industry. The Five Forces analysis has explicitly evaluated the authoritative position of suppliers within the US airline industry. If the level of this force within a particular sector is high then those buyers have a less degree of pricing authority over their client companies or suppliers (Belobaba, Odoni and Barnhart 2015). Since the US airline industry alike any other airlines sector is intensely reliant towards supplies like fuel, labour force and aircraft manufacturers, the negotiation power of the suppliers have thus been explicitly evaluated through this analysis. The US airline industry being a lucrative industry has high degree of competitiveness amongst the multitude of companies providing services to the same target base. As there has an assembly of players all trying to destabilize and challenge each other (Holloway 2017). The US airline industry has always been occupied with historic rivalries. Earlier leading airlines Pan AM and TWA (Trans World Airlines) had competed with each other for dominance over the international routes. In recent times, Delta and American airlines have emerged as strong opponents within the industry (Flouris and Oswald 2016). The Five Forces analysis have been beneficial in order to analyse the rising competitiveness between these two airlines. Delta has reportedly posed criticisms against its rivals for mediocre and substandard services and reliability and further endorsed its high and improved quality amenities through effective marketing strategies. In terms of US airline industry, the immediate domestic competition lies on the sharing of common challenges and strategies of labour and services, shifting governing environment and alike. The Porters Five Forces analysis have not been successful to identify the threats that can be caused through new entrants within the airline industry (Borenstein and Rose 2014). Though the level of threat has been shown as low in this force analysis, yet the detailed exploration could have facilitated to understand the strategic position of the US airline industry. One of the major area of limitations underlying the analysis of Porters Five Forces has been incompetent to pay equal attention and consideration to all five forces. It must be noted that for most industries, especially the airline sector, there will be one or more than once forces, which will overshadow the other significant forces (Belobaba, Odoni and Barnhart 2015). For example, the threat of substitutes has not been explicitly evaluated within the analysis framework. Economic Performance of US Airline Industry The US airline industry to, from and within the United States has created three distinctive types of economic benefits. Certain reports reveal that economic footprint of the airline industry has been assessed by its contribution to GDP, employment and taxation revenues produced by the airline sector as well as its supply chain. However, the economic significance and value created by the US airline industry is more than it has been evaluated (Flouris and Oswald 2016). The US airline domain aid over $600 billion in GVA that is Gross Value Added to the nation that is equivalent to almost 5% of the countrys economy (Grant 2016). The total economic contribution to US GDP consists of catalytic advantages via aviation associated with global tourism of over $100 billion that create the airline sector input as a whole. Over 3 million jobs have been directly aided by the airline sector and further 2 million jobs indirectly have been financed through the US airlines supply chain. The US plays a major contribution to the US public finances for more than $55 billion in taxation charges that involve income tax revenues and receipts from the US labour force (Flouris and Oswald 2016). Social security and corporation taxation has further been levied on the revenues and profits of the US airplane industry. The US has been recognized as the worlds largest airline services sector that gives a production of $30 billion direct and $40 billion in indirect contribution along with almost $22 billion induced as benefit to GDP. It has been reported that over nine hundred thousand scheduled global flights have their departure from several airports of the US annually that have been destined for more than 250 airports in over 100 countries (Flouris and Oswald 2016). Several air passengers residing in the US consists of approximately 600 million of the passenger as a whole. For a major section of air passenger flights in aggregation pay $600 billion including tax charges along with the US residents paying around $500 billion (Belobaba, Odoni and Barnhart 2015). The air transport sector is considered crucial for the distribution and supply of increased value to weigh products of passengers. The year 2010 witnessed 3200 routes relating major US airports to urban collections across the world. On an average, there were 5 outbound flights per day along these air path routes. A total number of more than 350 of these routes were linking the US to cities of over 10 million residents with five outgoing flights every day available to passengers (Flouris and Oswald 2016). The rate of frequencies has been higher to the majority of economically major destinations. For instance, travellers benefitted from a number of 31 outgoing flights each day from Los Angeles to the New York offering high-speed accessibility for commercial and leisure purposes all through the day . It must be noted that, several of these city pair networks are only achievable due to the passenger traffic density offered by major hub airports. Identifying Strategic Position for Airline Profitability of US Recognizing strategic positions within the airline industry is immensely necessary from both a qualitative and quantitative perspectives. Establishing correct operational performance can facilitate in balancing the functioning trade-offs that the US airline experience. For instance, Delta airlines tagline is one time machine while the Alaska airline believes in safe on time and with your bag at the lowest expenditure (Choi, Lee and Olson 2015). Furthermore evaluating drivers of operational performance is another strategy to use for ultimate profitability. Several airlines services such as BCG has shed light on certain operational measures such as OTP and proficiency along with focusing on customer contentment and employee engagement. Considerable improvements in airline route linkage have contributed to the financially viable performance of the broader economy with the enhancement of its overall productivity level. However, this development in efficiency in airlines companies outside the airline sector passes through two major channels such as via the impact on national firms of improved access to international markets as well as enlarged foreign competition in the domestic market (Art 2013). This must be noted that enhanced associations gives US-based trades and businesses improved access to international markets acknowledging the exports and enhances contest and rivalry in the local markets from international based suppliers (Choi, Lee and Olson 2015). This way, advanced networking acknowledges US companies to specialise in areas whereby, they own a comparative beneficial factor (Grant 2016). It must be noted that the increased rate of fuel and oil prices have further complicated the scenario that led several U S airlines to face bankruptcy during the 2000s that included Delta, United, American. However, this airline sector have conquered all the struggles and obstacles and have been regarded as recent driving agent of airline profitability further influencing the airline service decision-making processes. Conclusion To conclude it can be seen that the US airline industry has undoubtedly struggled a long journey to become such a lucrative and immensely profitable sector. It has successfully produced improved balance sheets and enhanced valuations by facilitating a profitable operating margin within the US economy. This airline sector is reportedly to be on an achievable line despite of the increasing fuel and labour expenses. A consistent demand for air travel in US has overtaken major section of the US economic development. The report has effectively provided a vibrant and well-established synopsis of the airline industry of the United States. It has further conducted a competitive forces analysis of the US airline sector by proving a diagram and detailed analysis through Porters Five Forces. In addition to this, the paper further evaluates the strengths and limitations of the five forces analysis by shedding light on the airline sector. 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