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Classic Airlines - Essay Example

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Classic Airlines

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. Last year the company generated $10 million in revenues which seems like a nice figure, but considering the firm generated $8.7 billion in sales its net margin was very low. The net margin of the company was 0.11%. The industry standard net margin in the airline industry is 2% (Dun & Bradstreet, 2011). The shareholders of the company are putting pressure on the management staff to improve the results of the corporation. Due to the weak financial performance of the company the price of the common stock of Classic Airlines has been going down. One of the objectives of any public corporation is to maximize shareholder’s wealth. The company also faces pressures from its customer base. The customers are not very happy with the company. A metric that illustrates the current situation the company is facing is the fact that the firm’s customer loyalty program has lost 20% participation during the last year and the frequency of purchases of the customer has also gone down by over 20%. One of the primary reasons the company’s financial performance has been weak is due to the fact that the company has lost a lot of returning customers. The customer retention rate of a company is a very important marketing metric. The company lacks the service elements, operations procedures, and marketing programs to satisfy the customer’s needs. In the business world the customer is the most important stakeholder group because companies depend on the customers for its revenues. A third stakeholder group that is facing pressures due to the current situation at Classic Airlines is the employees of the company. The firm is currently having major employee morale problems as morale is as low as it has ever been. When employees have low morale they lose their motivation and as a consequence their performance and efficiency suffers. It is important for the managers of companies facing morale problems to demonstrate strong leadership. The low morale of the employees is negatively impacting the customer service function of the enterprise. One of the critical positions in regards to customer service is the flight attendants. Their job is to make the customer feel comfortable during the entire flight. Objectives and Obstacles of Marketing Department The objective of the marketing department ...Show more

Summary

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…
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Classic Airlines essay example
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