Full and Final Report PDF
Full and Final Report PDF
The impact of global financial crisis on aviation industry, emergence of Low Cost Carriers
(LCC), its acceptance around the world and reduction in transportation cost has reviewed here.
Customer satisfaction criteria’s are also showed in the literature review section. Global Aviation
industry adds $ 727 billion revenue to the world economy. The US airlines industry creates 58
thousand jobs and contributes almost $ 2.8 trillion to the GDP. The growth rate will be expected
to grow because of the reduction in fuel prices and innovation. The recently solar power aircrafts
will boom the world very soon. There are also some risks associated with the rapid growth. The
frequent accident of planes and missing of some aircrafts have raised the issue of security and
safety as a major concern.
The condition of Airlines Industry compared to other SAARC nations is not good. The market
size of the whole market is almost $300 million. Only Singapore airlines carry more passengers
than all the passengers carried by Bangladeshi Airlines. But the recent trend is very optimistic
with the popularity of domestic flights. Large number of workers are going abroad every year,
people are going to middle east for Hajj, increasing cross national business, enhancing tourism
both inward and outward has enriched the Airlines Industry to an attractive one/. At present there
are more than 20 Airlines in Bangladesh. The most prominent of them are Bangladesh Biman,
US-Bangla Airways, United Airways, NOVOAIR and Regent Airways.
The Airlines Industry has been analyzed with PESTLE analysis, Porters Five Forces model,
SWOT analysis and Key Success factor analysis. PESTLE analysis gives the macroeconomic
environment information about the industry. Porters Five Forces provides a picture of the
competitive structure; SWOT analysis shows the Internal Strength and Weakness in respect to
Opportunities and Threats. The key success factor of the industry has also been identified to
become successful in that particular industry.
United Airways is the first private airlines in Bangladesh to run a flight to London. At present it
is one of the major airlines in Bangladesh. The company is offering flights to both local and
international routes at a competitive price. So, finally it has been revealed that Airlines industry
is one of the most potential and profitable industry to invest for both national and international
Investors. Though are complex legal structure and high exit and entry barriers in the industry the
growth potential is enormous. Airlines need a large amount of fixed and initial investment. But
the variable cost in this industry is very low. Reduction in oil price in the global market has made
it more attractive. The expansion of world tourism and global business has made it a part and
parcel of International Economic growth.
Contents
Chapter-01: Introduction ................................................................................................................. 7
Lessons Learned............................................................................................................................ 23
Conclusions ................................................................................................................................... 23
References ..................................................................................................................................... 24
Chapter-01: Introduction
1.1 Background
The B.B.A. Program under the department of International Business offers a course named
“Bangladesh in International Business (IB-410)” which requires submitting a Report on a
specific topic determined by the course instructor. The Report is under the headline of “Analysis
of Airlines Industry”.
As the students of international business, we should have knowledge about the prominent
industries around the world. Global Airlines industry is one of the most potential and fast
growing industry that has been experiencing rapid growth. The sector is creating a large number
of jobs annually and accelerating tourism to a great extent.
1.2 Objectives
The Primary objective of the report is to fulfill the partial requirement of the course. The
Secondary objectives of this report are-
Trend of global Airlines industry
Market size and potential of the industry
Recent innovations in Aviation
Key success factors of the industry
Major players both in global and domestic market
Internal and external factors of Airlines industry
To learn in details about United Airways
1.3 Methodology & Limitations
This report has been prepared on the basis of experience gathered during the period of semester.
For preparing this report, information has been gathered from website and related books. The
results are presented by using different chart and tables. Relevant data for this report has been
collected directly investigation of different records, papers, documents, and operational process.
Some renowned articles are reviewed to make literature review. The report is basically written
based on Secondary data. Most of the information has been derived from Company Website and
Annual report. It’s a descriptive report. The case studies are prepared on hypothetical data. The
cases are analyzed with various parameters and strategic tools. The Finding and Analysis are the
result of the Analysis.
No extensive research is conducted for preparing the report. The report is totally based on the
Secondary data, theory and conceptions from many books, journals and internet. So the result
may vary with reality due to the constraints or limitation of the data and the sources.
Civil aviation industry contributes to the social and economic growth across the world. It not
only forms an important and most efficient mode of transportation system but also affects the
lives of numerous household people and is a key employment generator and contributes heavily
to the gross domestic product of the world economy (K. Done et all, 2012). The failure of the
major financial institutions in the past few years led to the global financial crisis which
drastically impacted the world economy. The aviation, one of the fastest growing industries, got
heavily affected by such crisis.
The airlines industry has been subject to a number of legislations and regulations. Wensveen
(2007) emphasizes on the establishment of IATA in 1965 and deregulation in this process.
Deregulation was introduced to provide an international market for all the airlines that would
help in global development, enable the customers to choose from a wide range of options and
also increased efficiency as non-performers will not be fit enough to survive on the global level
(Dunn, 2009). Deregulation on the domestic front helped the LCC’s to emerge and prosper.
The low cost revolution pioneered in the USA by Southwest and in Europe by Ryanair showed
growth consistently. LCC’s struggled to gain grounds in other parts owing to regulated markets,
rising fuel cost, reducing passenger load factors, slow paced regional economic growth, lack of
ability to create a distinctive competitive image, bankruptcy, reducing profit margins (Hardy,
2009). Europe has saturated with number of LCC’s, the number of passengers travelling on
LCC’s increased from 3 million in 1994 to 100 million passengers in 2004 (Doganis, 2006).
LCC’s in Europe exceed by 50% of the market share on some intra-European routes, as
compared to 8% by Asian LCC’s on some Intra Asia routes (Benson, 2008). LCC carried more
than 1/3 of the schedule passengers (Airbus, 2009).
Retaining old customers is as important as attracting new customers towards the company’s
services (Westcott, 2005). Passengers believe low cost airlines could retain their customers and
ensure repeat business. They want LCC’s to provide these services in order to get good customer
service through a wide range of operations; 2) low and Competitive pricing; 3) on time
performance and wider networks; 4) loyalty Programs; 5) increase frequency; 6) provision of
attractive offers and deals. These points indicate that LCC’s should focus on meeting the
Industry Success and Survival factors. A small number of respondents suggested an option to
consider alliance with network carriers. Therefore, the domestic front LCC’s could target
international customers for the country, who want to travel on domestic routes of the same
country at low costs.
With a number of major airlines recording large gains for several years, the industry looks to be
back on track as a major driver of economic growth. The top firms of the global Aviation
Industry are,
The value of international trade shipped by air has increased by 2% to $6.5 trillion. It’s expected
to reach $6.8 trillion in the next year. As air passenger traffic increases, the value of tourism
spending is expected to increase by 5.2% (Chang, Williams & Hsu 2004).
The decrease in jet fuel prices brings opportunities for China’s and the U.S.’s airline markets. As
the demand for air transport in China continues to rise, companies can enjoy the combined
benefits of the increased demand and the decreased operation costs. In the U.S., where people
drive vehicles on a daily basis, a drop in oil prices enables people to spend less money on gas.
This enables people to spend more of their disposable income on high-end purchases such as air
travel.
In all, opportunities and challenges are definitely present in the global airline industry. The air
accidents of late will push governments to implement safety reforms in the airline industry. The
drop in oil prices, coupled with the increasing demand, will spur growth in certain markets.
However, it will make some markets less competitive because of the currency risks.
Over the last decade, the South East Asian nations have been experiencing a boom in the
aviation industry. Bangladesh is no exception. With a population base of 160 million people,
quite apart from commercial and tourism travels, each year an estimated four hundred thousand
people leave the country for employment and more than hundred thousand visit Saudi Arabia for
Hajj. This has made Bangladesh a profitable destination for many foreign airlines, while creating
the scope for emergence of private domestic airlines.
Despite having huge prospects in the airline industry, Bangladesh is lagging behind the fellow
Asian nations. Every year Singapore Airlines carries more passengers than its total population.
Thai Airways and a good number of Indian airlines are also dominating the booming air travel
business. Needless to say that, the airline industry is capital-intensive.
3.2.2 Major Players of Aviation Industry in Bangladesh
More than 20 airlines in Bangladesh operate their business including the national carrier of
Bangladesh in the Hazrat Shahjalal International Airport. There are companies offering airlines
services including international, intercontinental, intra-continental, domestic, and regional
services. The most prominent Airlines operating in Bangladesh are,
• Power of Suppliers
• Power of
Customers
Porter's Five • Entry and Exit
Forces Model of Barriers
Airlines • Rivalry among the
Industry existing Firms
• Threat of
Substitutes &
Comple- ments
Figure: 01
1. Power of Suppliers
The power of suppliers in the airline industry is immense because of the fact that the three inputs
that airlines have in terms of fuel, aircraft, and labor are all affected by the external environment.
The price of aviation fuel is subject to the fluctuations in the global market for oil, labor is
subject to the power of the unions and the airline industry needs aircraft either on outright sale or
wet lease basis usually from Airbus or Boeing.
2. Power of Customers
With the proliferation of online ticketing and distribution systems, fliers no longer have to be at
the mercy of the agents and the intermediaries as well the airlines themselves for their ticketing
needs.
3. Entry and Exit Barriers
The airline industry needs huge capital investment to enter and even when airlines have to exit
the sector, they need to write down and absorb many losses. This means that the entry and exit
barriers are high for the airline industry.
The SWOT analysis enables organizations to identify both internal and external influences.
SWOT's primary objective is to help organizations develop a full awareness of all the factors
involved in a decision. The SWOT analysis of the Airlines Industry will look like the following,
Strength Weakness
1. Increased 1. Aircraft is
propensity to fly expensive
2. Public acceptance of 2. Large workforces
air travel as fast and
safe 3. Airlines have
3. Airline staffs are
difficulty making
highly trained and quick schdule
experienced
Threats
Opportunities
1. Raising Fuel costs
1. Passengers
increasing gradually 2. Exchange rate
fluctations
2. Expansion of
tourism 3. Taxes imposed by
the goivernment
3. Airlines can be
used as Cargo Large number of
players
Figure: 02
4.3 PESTLE Analysis
Airlines usually make us think of luxury and opulence as well as comfort and convenience.
However, beneath the veneer, the airlines worldwide are caught in a cycle of higher operating
costs, lower profits, and decreasing margins because of the various factors discussed in this
article. Though the passengers might not notice these aspects, it is the case that once one
scratches the surface and does some research, it is clear that the airline industry is in a mess and
only, radical restructuring can help revive its fortunes. The PESTLE methodology is a useful tool
to analyze the current state of the airline industry.
Figure: 03
1. Political
The political environment in which airlines operate is highly regulated and favors the passengers
over the airlines. This is because of the fact that the global aviation industry operates in an
environment where passenger safety is paramount.
2. Economic
The global airline industry never really recovered from the aftermath of the 9/11 attacks and the
Great Recession of 2008. This last aspect or the ongoing global economic slowdown has meant
that the already struggling airlines now have to contend with declining passenger traffic,
competition from low cost carriers, high aviation fuel prices, labor demands, and soaring
maintenance and operating costs.
3. Social
In the recent years, the emergence of the Millennial generation into the consumer class has meant
that the social changes of a generation used to entitlement, instant gratification, and more
demanding in terms of service has resulted in the airlines having to balance their costs with the
increasing demands from this segment.
4. Technological
Though it is a fact that the airline industry uses technology extensively in its operations, they are
limited to the aircraft and the operations of the airlines excluding the ticketing and the
distribution aspects.
5. Legal
In recent years, the number of lawsuits against airlines from both customers as well as workers
has gone up. Further, the regulators are being stricter with the airlines, which mean that they are
now increasingly wary of their strategies, and actualizing their strategies only after they are fully
convinced that they are not violating any laws.
6. Environmental
With climate change entering the social consciousness, passengers are now counting their carbon
footprint with the result that they are now more environmentally conscious. This has resulted in
the airlines being forced to adopt “green flying” and be more responsive to the concerns of the
environmentalists.
4.4 CSF Analysis
Key Success Factors describes main parts of Performing that are important for the firm to
achieve its objectives and missions. Top level management absolutely considers these factors
during the setting overall goals. These key success factors give a widespread knowledge for the
entire company. Therefore any actions that the firm commences must make sure constantly
greater performance in these key parts. The key Success factors are described below,
Strong Management
Capable workforce
Service Promotions and In-flight Services
Non-Stop Flying
Financial management
Efficient Management of Costs
Route System
Chapter-05: United Airways
United Airways Limited has been founded by an expatriate airline pilot Capt. Tasbirul Ahmed
with a vision to create a world class Airline in Bangladesh. It was incorporated in 2005 as a
private limited company. The company was reconstituted as a public Limited Company in 2006
offering its shares to expatriate Bangladeshis lining in UK and other parts of the world. Now it is
a listed company in the capital market and a member of Dhaka and Chittagong Stock exchange
Limited.
United airways Limited obtained Air Transport Operating License from Civil Aviation Authority
in 2007 to operate passenger and cargo service in the international and domestic sectors. The
company launched its operation in the domestic routes of Bangladesh on 10 July 2007. Within a
very short span of time, it started its international flight to Kolkata. It is the first private airline of
Bangladesh that flew to London. At Present united Airways operates to 13 domestic and
International destinations constituting it as the largest private airline of the country.
United Airways aim to involve every Bangladeshi including Bangladeshi expatriates to affiliate
with the company as a proud owner of the airline by owning its share. Investors will not only be
a part of a profitable business but will also be contributing in the development of Bangladesh.
The prosperity of this airline will help develop Bangladesh and move it further into 21st century.
For being the Airline of choice in the region, the company is offering its passengers a safe and
comfortable flying experience at excellent value for money.
United Airways Limited comprises a team of dynamic and talented Bangladeshis who are fully
committed to make sure that this vision becomes a successful reality. Involvement in this airline
is an opportunity to become a part of a unique venture that will have a significant impact on
Bangladesh, living a long term legacy for all, United Airways Limited will truly be “ Your
Airline”.
Mission
United Airways Limited is pledge bound to be recognize domestically and internationally by
passengers, shareholders, investors and employees as the best airline in Bangladesh. To provide a
safe and reliable service to the valued passengers, deliver services with a sense of
professionalism, warmth and friendliness. The company will achieve this by operating flights on
time and by offering personalized services on the ground and in the air.
Operational Revenue
The operational revenue of the company for the last three years is,
The earnings per share of the company stood at Tk. 0.31 for the 2014-2015
Dividend
United Airways has proposed 10 % stock dividend in the form of bonus shares for holding 100
shares for the financial year 2014- 2015.
Formation of Capital
The authorized capital of the company is Tk. 1000 crore divided into 100 crore ordinary shares
of tk. 10 each. The paid up capital of the company is tk. 624 crore.
Chapter-06: Findings & Analysis
The report contains information about the history, present scenario and the future potential of the
Airlines Industry. The aviation industry has a long duration of more than 100 years. Technology
and Innovation has enriched the industry to a modern situation. There are a small number of
larger firms are the key players in the global airlines industry. The growth of the industry is
increasing each year. It is creating a large number of jobs and expanding cross national business
globally. The invention of green aircraft is a breakthrough in the modern era. It will most
probably bring about a significant change in the air travel sector. The condition of domestic
aviation industry is not very good. Poor service provided by the state owned company
Bangladesh Biman has not attracted the customers well. Though there is huge demand of
domestic flight in the country but the expansion of the market is not satisfactory. Some private
companies have now focuses on the marketing issues to become the air travel popular among the
customers. Recent security issues have raised a question on the safety of travelling in Bangladesh
with the foreign visitors.
Chapter-07: Recommendations
There are some recommendations that can be drawn for the analysis,
Conclusions
Air travel remains a large and growing industry. It facilitates economic growth, world trade,
international investment and tourism and is therefore central to the globalization taking place in
many other industries.
In the past decade, air travel has grown by 7% per year. Travel for both business and leisure
purposes grew strongly worldwide. Scheduled airlines carried 1.5 billion passengers last year. In
the leisure market, the availability of large aircraft such as the Boeing 747 made it convenient
and affordable for people to travel further to new and exotic destinations. Governments in
developing countries realized the benefits of tourism to their national economies and spurred the
development of resorts and infrastructure to lure tourists from the prosperous countries in
Western Europe and North America. As the economies of developing countries grow, their own
citizens are already becoming the new international tourists of the future
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