Transcript Slide 1

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
Strengths
Weaknesses
• Low Cost Structure
• Dependence on Atlanta
• Atlanta Operations
• Rising Maintenance Costs
• Youngest All-Boeing Fleet
• Online Services
Opportunities
Threats
• Cost Reduction
• Volatility of Fuel Prices
• Geographical Expansion
• Strong Competition
• Inorganic Growth
• 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
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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
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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
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Spohr, George. (2004) High oil prices test low-care air carriers. The Business Journal – Central New York,
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Lehane, Mark. (2005) The rise of the smart business traveler. Global Finance, 19, Iss. 8; 38
References
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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
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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.