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Classic Airlines is a company in the airline industry with over 25 years of experience. The firm has an operation that includes 2300 daily flights across 240 cities. The firm has a global workforce of 30,000 employees…
The airline industry is an oligopoly. Oligopolies are characterized by having a limited numbers of participants in a market structure that has a medium level of price elasticity. Since there are few competitors companies tend to react to changes in prices of other airlines. The airline industry has been in a cost savings mode for several years. Since 2002 the number of people working in the airline industry has been reduced by over 150,000 workers (Plunkett Research, 2011). The revenues generated by the industry in the United States are significant. According to the USTA the airline industry in the United States generated $704.4 billion (Plunkett Research, 2011). It would be in the best interest of Classic Airlines to increase its market share in the lucrative US travel marketplace. In the past Classic Airlines made the mistake of pursuing an aggressive price discount strategy. The results of the lowering the price strategic approach were not favorable. Drastic price reductions in an oligopoly place the entire industry at risk of a price war. In a price war all the participants lose due to the fact that the profit of the entire industry goes down. Internal and External Pressures Classic Airlines is currently facing a lot of pressures from different stakeholder groups. The company has stayed profitable, but its margins are extremely thin. ...
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