Current Economic Analysis of Virgin Atlantic Essay Example

Current Economic Analysis of Virgin Atlantic Essay Similarly, the economic issues in the industry are also mostly concerned with deregulation. The evolution of industry structure plays an important role in determining the robustness and stability of lower airfares in unregulated markets (2000). Deregulation also keeps airline fares so low as compared to that of other countries. The reason for this is because despite the failure of most entrants since deregulation, investors continue to create new airlines. There is substantial evidence that entry, particularly by low-cost, low-fare airlines, has a substantial effect in constraining fare levels in markets served by the new carriers (2000). The second reason is that some in the industry have argued that financially marginal carriers may act in ways that depress prices below competitive levels, inducing contagion in financial distress (2000). In addition, some industry participants have argued that financially distressed carriers have cut prices in an effort to raise short-term cash, depressing market prices below efficient levels and threatening the financial security of healthy carriers. Another economic concern is the fact that the airline economy of the US is in a huge upset after the September 11 attack. Some of the companies declared bankruptcy while others are still struggling to survive (2003). The contribution of the airline sector to the local and world economy is also another economic issue that should be noted. In UK, one of its contributions to the economy is its role in increasing jobs, whereas it was reported that aviation directly provided 180,000 jobs in the UK in 1998 0. 8% of total employment. 0% of these jobs were in Greater London, where the industry accounted for 2. 1% of all jobs (2002). This has increased over the years as attested by DfT. It reported that the aviation industry now directly supports around 200,000 jobs, and indirectly up to three times as many (2006). The airlines industry also greatly contribute to the GDP of the UK economy as the (2002) reported that the â€Å"total value-added (i. e. the value of its output less the cost of inputs bought in from other industries) by the UK aviation industry in 1998 was estimated to be ? 10. 2 billion in 1998 prices, quivalent to 1. 4% of GDP†. It contributes specifically by region, as it makes a direct contribution as a source of output and productivity growth in its own right (2002). The Oxford Economic Forecasting (2002) also argued that good air transport links are important to encouraging inward investment into the UK and to encouraging firms already located here to base new projects in this country. Furthermore, because it is part of the transport infrastructure, it helps make business transactions faster, creates more options, and provides a boost to the tourism of the country. We will write a custom essay sample on Current Economic Analysis of Virgin Atlantic specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Current Economic Analysis of Virgin Atlantic specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Current Economic Analysis of Virgin Atlantic specifically for you FOR ONLY $16.38 $13.9/page Hire Writer As transportation infrastructure theory posits, improved transport systems can boost productivity growth across the rest of the economy. The economic prosperity that UK currently experience also have some implications on the airlines industry. According to (2003), â€Å"Economic prosperity brings with it greater demand for travel. As people get wealthier, they can afford to travel further and more often†. Currently, half the population of the UK now flies at least once a year, and freight traffic at UK airports has doubled since 1990 (2003). It has been forecasted that air travel in the UK will continue to increase over the years, but (2003) warns that this is somewhat uncertain as they may be negative factors that the industry may encounter along the way. For instance, DfT forecasted that market for air travel might mature more rapidly than expected, causing the rate of growth to slow more quickly than forecast. Furthermore, other economic concerns of the industry include the possible increase of flying costs, for instance, due to rising oil prices or due to the costs of tackling global warming. CURRENT TECHNOLOGIES OF VIRGIN ATALANTIC AIRWAYS: Technological factors include head to head competition in the technological innovations in the industry. Traveling in air is a dangerous task that’s why aircraft engineers have been researching ways to improve security in airlines. Technological advances have resulted in automated cockpit procedures to make up for the human errors that usually occur (2000). Sixty eight percent of crashes are attributed to human error. This may include error during aircraft design, manufacturing, maintenance, or installation. Security breaches that result in terrorist activities can also be attributed to human error. This is the reason why technological innovations in safety are important in the airlines industry. Other technological factors include Customer Relation Management in the Internet. Online solutions alternative to dial-up are also technological factors that may determine competitiveness as an alternative mean can basically cut the cost of the company. According to (2004), a remote access solution could provide significant cost savings by allowing the engineers, who were responsible for maintaining the aircraft, to access essential information on the companys systems from wherever they were in the world, using remote web access. Fault and service assurance solutions are also technologies that airline companies mostly invest. This type of technology provides the network management team of an airline a real-time, consolidated view of the network to help ensure the availability of network-based products and services (2002). Another technological concern in airline services today is the integration of electronic flight bag solutions or EFB. EFB is an electronic display system intended primarily for cockpit/flight deck or cabin use (2003). One of its advantages is that it can display a variety of aviation data or perform basic calculations (e. . , performance data, fuel calculations, etc. ) (Aircraft Electronic Association, 2003). EFB is categorized into two classes: Class 1 and Class 2. A Class 1 EFB can be used on the ground and during flight as a source of supplemental information, while a Class 2 EFB can display flight critical pre-composed information such as charts or approach plates for navigation (2003). CURRENT SOCIAL RESPONSIBILITY: Attention. For airlines, the two most important issues are: the reason for travel (business or leisure); and the class of preferred travel (first, business, or economy). The Frequent Flyer survey in 1997 both business and leisure consumers listed the following ten factors driving overall airline satisfaction: on time performance (22 percent), schedule/flight accommodation (15 percent), airport check-in (15 percent), seating comfort (12 percent), gate location (9 percent), aircraft interior (7 percent), flight attendants (6 percent), food service (5 percent), post-flight service (5 percent), and frequent flyer programs (4 percent) (1998). Today, consumers are more demanding especially in terms of service quality. Fortunately, the airline industry can be considered as the pioneer of customer relationship management as they are the first sector to introduce the frequent-flyers program to increase the loyalty of customers (2002). However, the airlines of today cannot keep up with the pace of CRM. A survey of 17 major airlines around the world reveals that even the most sophisticated among them have only a basic understanding of who their most valuable customers are, or could be, which factors affect the behavior of customers, and which CRM levers are most effective in ensuring loyalty (2002). They stated that most airlines lack the systems and process to implement CRM. (2002) Stressed based on their research, that data aren’t consistently or accurately collected in any of the mediums that airports use. Furthermore, another problem for airlines is that they rarely know how much their customers spend with their competitors. (2002) Stated that building customer database is the key to CRM and should be the easiest part for airlines given that they have loyalty programs. Currently, most airlines still are building or thinking of building data warehouses to store variously sourced databases (2002). Finally, another social factor to be considered is the fact that airlines are still exposed to terrorist attacks. This has a tremendous impact on airline security and economy. This is why two of the utmost concerns of the UK Department for Transport are safety and security (2003). Fortunately, the UK airlines industry has a good record in safety, with accident rates kept low despite the rapid rise in traffic levels over the past two decades. The industry continues to follow a high standard of safety, for instance, regular inspections and maintenance of aircrafts. Safety in the UK airlines industry also improved as a proactive measure on terrorist attacks. For instance, the list of prohibited items in the aircraft cabin has been extended, carrying out secondary searches of passengers and their cabin baggage at the departure gate, requiring UK airlines to fit special intrusion-resistant flight deck doors, and establishing a capability to put covert armed police on UK aircraft where necessary (2003). Service quality is another social concern in the UK airline industry. According to (2003), standards of service are a legitimate element of competition between operators. Airline consumers are now a dynamic part of the industry as they are more empowered than ever, expecting high levels of personal attention and customer service, and more confident in making complaints (2003). CURRENT ENVIRONMENT OF VIRGIN ATLANTIC AIRWAYS: In the local environment, local elections to be held on May this year could made Tony Blair’s concentration in national issues such as health and education shift into local issues such as crime, anti-social behavior and environment (). As a result, transport industries including aviation should consider this early the type of their fuels and fix emission loopholes. They must research oil suppliers that sell environment-conscious fuels and test its efficiency and compatibility with aircraft engines including preparation to possible fluctuations in present fuel costs. In fuel-related issue, the European Union resorted legal action against member countries like France, Germany and Italy of protecting their utility firms against foreign competition (). As a result, prices of fuels failed to obtain efficiencies of competitive industry making oil prices for the transport sector more costly. Local aviation firms should consider this EU action significant disincentive to their cost-effective strategies because UK, unlike the mentioned countries, fosters foreign imports making oil prices for the industry cheaper. If these countries are able to liberalize the energy sector, possible cost strategy is necessary to retain the prior upper hand. Research suggests that rural, metropolitan and London population employed, unemployed or economically inactive dispose most of their weekly budget to transportation along with food and recreation (). Since socio-cultural segment affects economic and political/ legal segments (2003), aviation industry could less be influenced by the latter outcomes despite of their ambiguity (will Blair retain position or will EU countries accept the directive) because consumers are willing to pay with little regard to price, instead, value of service. As a result, it is more strategic to focus on operations than financial structures. Another finding show that 58% of the household population has computers while 49% of which has internet connection with metropolitan areas like London posted the highest incidence (). This information is relevant to most huge firms like Virgin Atlantic Airways who heavily relies in e-business with its interactive website wherein customers can obtain flight schedules and book a flight with their fingertips. The firm through other forms of media can address the other half of the population without computers. In addition, it can also verify through additional scanning the prevalence of Internet cafe in rural areas where household ownership is relatively low.