Management report of virgin atlantic airlines
The airline was established in the 1990s (1992) by the adventurous successful entrepreneur Sir Richard Branson. He started the airline to give the UK citizens a cheaper and quality airline service, that initially they didn’t enjoy especially the airfare from its main competitor British Airways. Over the years, they have increased the customer list, through expansion and offering of more travel destination.
Primary Internal and external influence that virgin Atlantic is subjected to
There are quite a number of influences that affect the airline and they include;
Over the years the tax policy has heavily influenced the airline. With each year, the tax paid by the airline to the British government keeps increasing, hence this results in high cost of production, resulting the airline fare to be increased. Due to the globalization of the airline, different countries have different tax policy for especially foreign investors, hence this affects the cost.
The increase demand by the environmentalist for this industry to reduce its amount of air pollution (green house effect), has tremendously affected the airline. This has resulted the airline to reduce the aircraft weight, cargo weight etc to reduce the amount of pollution the airbus produced. With the increase awareness of global warming, the airline has undertaken to research of use of biofuel, since it’s friendlier to the environment. The company has donated two airplanes i.e. an airbus and Boeing to be used in the research.
The laws of employment have become increasingly tight especially after the recent strike by the cabin crew. Due to the increase of terrorist attack especially the world trade centre 9/11 use of airplane, the company has undertaken an insurance policy for the pilots and cabin crew. The organization has also had to undergo training to develop the cabin crew on how to handle unruly passages that usually use sexually offensive language.
The political stability of countries especially affects the airline. This especially experienced when travel bans are issued by foreign envoys i.e. ambassadors, high commission. This especially affects in the high peak to tourism in certain countries e.g. Kenya. Early during the year, after the disputed general Election in Kenya, the country was experiencing anarchy resulting to travel bans been issued by the US, UK, European Union Foreign envoys.
Different trade agreements between different airlines e.g. the recent merger of Singapore Airlines, affect the Virgin Airline i.e. splitting of profit, responsibility, shares. The organization has also made agreements with other airlines, so that they can sell tickets on behalf of the Virgin Atlantic. This has increased our customers dramatically. Another factor that influences the airline is the different tariffs that each particular airport i.e. international Airports impose on Virgin. Some of the tariffs that each particular airports are exceptionally high, reducing the frequency the airline lands in the country. This normally inconveniences our customers and gives an advantage to our competitors.
There are also barriers that re imposed to the airline especially when it comes to other different countries, together with these are different laws of the land affect the airline, e.g. In particular Islam countries, our female cabin crews are restricted to where headscarf’s, as the Islam law dictates.
Over, the years there has been an increasing trend where almost all countries are experiencing a decrease in GDP per capital, due to the increasing of living, high levels of employment, high increase of illegal immigration. This has reduced the purchasing power of basic commodities of the consumers. This has resulted in a decrease of consumers, in the airlines industry. The increase cost of spares, increase of oil, and increase of insecurity worldwide has affected the airline reducing the profit margin and slowed down the expansion of the airline.
The economic growth has hugely affected the airline, with the pending recession of the major economic superpower USA, affects the airline because the consumer frequency will decrease. The slow economic growth in the USA has domino effect on the other countries. The company has been forced to reduce the airline flights in the country, which have a huge consumer number which Virgin Airline tremendously enjoyed. Due to this, the British Airways merger with American Airlines has slighted benefited from this pending recession, due to consumer loyalty.
The interest rates have increased, tremendously due to the slow economic growth of the country. Hence, it’s unable for the organization to increase its aircrafts, from its current number. The payment of our loans, and overdrafts, have become an inconvenience and increase the cost of production, resulting to the increase of airfare. This has had a trickling effect, because the consumers aren’t able to afford the airfare and their travel frequency.
The high increase of exchange rates, has affected the airline. With the increase of oil which is the major fuel used, has rally increased the cost of production resulting to increased airfare. If the cost of oil increase as it is now, it will be so difficult to operate in this industry.
The inflation rate has increased in all countries, affecting the cost of production. Unfortunately, this is a factor that the airline cant control, hence a different strategy has to be employed, to offer a counter-effect of the rising inflation rate e.g. reduce in import taxes of the airplanes spares, reduce in tariffs by other countries starting with United Kingdom, more use of technology series e.g. booking tickets on line instead of travel agencies etc.
These include the demographic and cultural aspects of he external macro-environment. These factors affect consumer’s needs and the size of potential markets. Some of the factors that influence the organization include;-
Different countries have and practice religion; hence the airline has undergone training of the staff, so as to equip them on how to handle different consumers with different religion practices. This has made many consumers, to be comfortable with the airline and this ensures loyalty of the consumer to the airline.
· Age distribution
With the different ages of our consumers, the organization has personally undertaken ways to improve and make it fun for the consumer. E.g. due to the increase of frequent flights by the children going for holidays, the organization has put e.g. video games, movies, music to entertain the children, the aged people are well taken care-off by the cabin crew. Due to this hospitality, the airline has become a better option compared to the competitors.
The company has trained its own staff in learning of different language and this helps in communication effectively with our customers who perhaps don’t know English. With this, it has added a bonus to the company over our competitors.
· Health consciousness
The company has undertaken to improve the quality of health offered on board of the plan. The refreshments offered in the plane are quality and healthy. This also with the comfortable seats and make seat-beds, used especially in long flights.
The atmosphere and environment in the plane is of sanitation and hence the consumers know that there health is well taken care-off.
With the different consumer lifestyle, the organization has invested heavily to accommodate the different lifestyle. E.g. the introduction of economy class especially designed to accommodate the business class, who spend long hours travelling, through the introduction of own computers, work desktops, phones, fax machines etc. This has enabled the airline, to become a preferred option by the business class.
· Social responsibilities
The organization has undertaken areas in the society to improve the living conditions. E.g. in Africa i.e. Kenya, the company has undertaken to help in the slum upgrading, offering protection by building home sanctuary for endangered animals e.g. Whit rhino. The company has enabled communication in South Africa get clean water from boreholes etc.
There are many restrictions and barriers that have been imposed by different countries. This has hugely added the cost significantly and slowed down the rate of expansion. Certain countries have unfair and high tariffs hence slowing down the entry of the airline in the country, by doing so, it has slowed down globalization of the airline.
They influence by lowering barriers to entry of new services, reduce minimum efficient production, and some include:-
· Research and development
Due to the increase of air pollution, the organization has funded and undertaken research on use of Biofuel instead of crude oil. The organization has donated two aircrafts to this research. The company is also undertaking research of new frontier i.e. airspace tourism which is still in development stage, but the potential consumers are enthusiastic about the venture.
Due to the introduction of office equipments e.g. computer with internet facilities, iphones, DVD screens, fax machines, has enabled the business people to do their office work in the plane.
Use of technology has enabled the airline improve and offer quality service to our consumer and kill boredom experienced in long flights. This through the introduction of personal DVD screens, and movies, together with music.
Use of technology has enabled the airline to communicate with the consumers. Instead of a consumer booking an air ticket via the travel agencies which expensive. Hence the introduction of online booking has reduced the cost to our consumer, plus the consumer gets to choose his/her preferred seat position. Technology has helped increased awareness through advertising in the net, website formation, blog e.tc.
SWOT analysis of Virgin Atlantic Airline
The company enjoys a number of strengths, because this has been in the market for over 10years. Some of the strengths it enjoys include;-
· Wonderful brand
The brand is catchy noticeable. The brand enjoys the assumption of venturous services and good time.
· Good product and quality service
The airline was initially started to ensure the consumers enjoy a cheaper and quality services compared to its competitor and it has maintained that.
· Increased travel destination
Over the years, the airline has expanded its destination to all over the five countries, from just transatlantic destination. Hence is become one of the preferred choices of the consumer.
· Good input of technology
E.g. the introduction of business economy class with all the office equipments e.g. phone, computers with internet etc.
· Enjoy good consumer relations and consumer loyalty.
· Organization has a good and aggressive sales team.
· Introduction of more air flight frequency per week. This ensures there is no inconveniency experienced by the consumer i.e. Virgin Atlantic Airlines is always available.
· More aircrafts are purchased with the latest technology.
· Enjoys a good relationship with airplane/bus manufacturers e.g. Boeing, together with spare parts suppliers.
· Enjoys good working condition with other airline competitors e.g. KLM, Emirates,
· Enjoy a working merger with e.g. Singapore Airlines which has enabled the company the Asian consumers.
This if the absence of certain strengths.
Unpredicted issues of travel bans- this particular affect the tourists’ destination and the flights are cancelled. This reduces the frequency of airlines flights to a particular country due to insufficient booking.
Need more awareness campaigns in new destination e.g. Kenya through advertising etc.
Purchase of more planes, to accommodate the increase of flight destination.
Offer affordable discounts especially for consumers who re travelling as a family (five to eight members).
Increase consumer services staff training especially the cabin creq and ground hostesses.
These are changes in the external environment that can be leveraged for growth and increased profit. These include;-
· Develop good and affordable services.
As peoples lifestyle are changing and consumer are more concerned with time management, the changing of technology day by day can enable the airline offer better services e.g. reduce time for checking in and out of airport e.t.c
· Competitors offering high prices.
· Virgin Atlantic Airlines has been known to be a spontaneous brand with a different way or style of marketing, hence should take advantage of this concept.
· Should seek better supply deals with the manufactures of the aircrafts and spare parts.
· Negotiate with other airlines to form mergers, just like with Singapore Airlines.
· Negotiate for better regulation by the government since the organization is undoubtedly an asset to the United Kingdom.
· Take advantage of the friendly trade policies that UK is enjoying with the European Union and ask for reduce in tariffs.
· Expand its airline network to other countries especially in the developing countries e.g. Ghana, Egypt etc.
These are the changes in the external environment that can put the organization at risk and they include:-
Increased and unfair regulation by British government.
Increased Airport and airline insecurity by terrorist. This is especially after 9/11; world Trade centre.
Impending slow economic growth of the world’s economic superpower US. The recessions will affect he profit margin and reduce the number of consumers.
Increase of competitors by other airlines. This has resulted to aggressive marketing to capture the market i.e. consumer by lowering of prices e.tc. It’s almost becoming a do or die industry.
Unpredictable increase of crude oil. This has really affected the cost of production, together with the dollar loosing ground (becoming weaker). The exchange rates have increased, affecting the purchase of crude oil, which is the major fuel used.
Unpredictable weather patterns, has affected the air flights with flights being cancelled, inconveniencing the consumers. E.g. show blizzards, rainfall etc.
Environmental regulations. More and more airlines are been requested to reduce the emission of air pollution, by reducing cargo weight, aircraft weight etc. or reducing the number of airplanes. This has reduced and will reduce the profit margin.
VIRGIN ATLANTIC AIRLINE GLOBALIZATION
The globalization of the airline to capture the international market, has been a huge improvement to the organization, but still there is some challenges experienced that influences the organization policies and the decision making, and they include;
· Co-operation with other airlines
The airline has taken a strategic to from partnership with other airline so as to capture the market of a particular country and also ease the entry into a foreign country. This co-operation or merger has proved to be beneficial to the organization in improving its network globally of international destination and has increased the profit margin. Mergers with other airlines, ensure the Virgin Atlantic airlines consumer still afford the same cheaper airfare, quality with other airlines in partnership e.g. Singapore Airlines.
The airline has also undertaken the decision to involve other airlines to sell air ticket on behalf of the airline. With this measure the cost of production is reduced.
· Consideration of different cultures of people
Definitely the airfares are fixed according to the different purchasing power of the consumers of different countries. The culture of the Europeans is different form the spending habits of e.g. the Asians. The organization has undertaken the decision to make the airfare flexible to suit the different culture of the targeted consumer.
The organization has undertaken to train its staff, to handle different culture of the people e.g. how to handle the Muslim consumer, Jewish consumers etc. hence, ensuring the airline is consumer friendly.
The organization has undertaker measures to reduce pollution drastically and obey the particular regulation of the environment. This has been done through reduction of aircraft weight, use od degradable supplies e.g. plastics, e.tc. The organization has undertaken the policy of ensuring that the staff and consumer are well educated on how to reduce pollution, wherever they are.
Research of outer space Tourism
More and more consumers are curious about the outer space and hence the company has taken the initiative to be the first airline that’s researching an offering this service. Still, this service is still in research and development stage but its proving to be a successful adventure.
The airline has decides to take up measures to improve the living conditions of its different country destination. With this, the company is able to share its resources with its consumers and help alleviate poverty, improve health. Etc. Some of the areas the company has directly been involved include:-
Ensuring there is clean water by drilling boreholes in South Africa, Kenya etc.
Donation and building of school in the low housing projects i.e. slums
Upgrading of slums, by building of low cost houses.
Empowering of the women, by funding there projects e.g. keeping of poultry, dairy farming etc.
Consideration of trade agreement and tariffs.
The organization has undertaken to understand the different trade laws of every particular country that in their destination lists. This ensures the company complies with the land and air laws and this results in unnecessary fines like the USA fine the company was charged with. The company has undertaken to negotiate for the reduction of tariffs, which is affecting the business.
Increased airline destination to other countries especially developing countries
Power of negotiating better deals with the manufactures.
Globalization has resulted the company to purchase more airplane and airbus, hence the company is able to enjoy better and affordable deals reducing it costs.
Invest in the latest technology
To improve the delivery of the services and ensure efficient communication with the consumers, and also out down costs.
Regulate and offer better working conditions for the employees.
Negotiate on lower interest rates offered by the banking units.
The above areas have influenced the organization policy and decision making and the company so far has responded well under the circumstances. The negotiating on lowering the interest rates will significantly reduce the cost of production and the airfare would not be increased to meet the increase. Other areas the organization has responding well include:-
Investing in the latest technology
Bargaining power of the airline to its manufactures
Regulation and improvement of employees
Campaigning for better trade policies and low tariffs.
Still, the organization should undertake to understand more of the peoples different cultures, with this entry and maintain the market would be easy.
Some of the areas the organization can improve are:-
Better working conditions for employees
The increase of insecurity from the terrorists, unfortunately make the employees vulnerable. Hence the company should take measure, so that the employees are able to send distress call if anything look suspicious without solemnly relying to the pilots. The package on accidents and terrorists attacks. Should be offered by he insurance companies.
Reduce in the interest rates
Even with the global increase of inflation, the organization should ensure the rat charged by the banks should be a win-win situation for both the airline and the banks.
Negotiate on flexible trade law and low tariffs
The company has offered opportunities of employment worldwide and with this, the organization can negotiate for fair trade laws especially the ones that hurt the industry e.g. reduction of tax required to pay by foreign investors.
A low tariff negotiation can reduce the expenses of the organization and in turn these results in much cheaper airfare compared to its competitors.
Invest more airline flight in developing countries
More and more developing countries, have dramatically improved in their GDP, Infrastructure and their population growth is high e.g. chin which has a large population number, India, Nigeria, Kenya, Ghana, S. Africa. The organization should be taken advantage of this and capture this fresh market by offering reduced airfare of which these countries don’t enjoy by their own airlines.
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