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Airtran Airways Situation and Environmental Analysis Mbengone Ayivi-Guedehoussou Corey Butler Tanea Chane Evan Nix.

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Presentation on theme: "Airtran Airways Situation and Environmental Analysis Mbengone Ayivi-Guedehoussou Corey Butler Tanea Chane Evan Nix."— Presentation transcript:

1 Airtran Airways Situation and Environmental Analysis Mbengone Ayivi-Guedehoussou Corey Butler Tanea Chane Evan Nix

2 Context The objective of our analysis is to draw conclusions about how trends in the external environment affect the entire airline industry as well as Airtran. Our goal is to evaluate these external trends, uncover threats and opportunities, and discover which trends deserve the most attention.

3 Agenda Mission Statement Demographic environment Sociocultural environment Economic environment Regulatory environment Technological environment Natural environment SWOT Analysis Conclusion

4 Mission Statement Innovative people dedicated to delivering the best flying experience to smart travelers. Every day.

5 Demographic: Age Generation Xers (Born ) vs. Baby Boomers ( ) 3 –Incentive Travel –Locations Generation X: outdoor, adventure environment Boomers: fun in the sun destinations –Baby Boomers generated highest travel volume in , million trips Increased travel once retired Generation Y (Millennium) 4,5 –X-Fares (ages 18-22) –Growth potential in business travel

6 Demographic: Health Business class vs. Economy fare 8 Flight induced Deep Vein Thrombosis (DVT) is minimal Risk factors for DVT: 7 –40 or more years of age –Pregnancy –Certain surgical procedures –Cardiac conditions –Obesity Airlines circulating germs? 6 –Newer planes rely on re-circulated air –HEPA filters are used

7 Demographic: Marital Status Married vs. Single 9 –Married households account for 62% of trips taken, single (never married) represent 22% –Married travelers with children under 18yrs. plan to spend more Romantic Travel –Most frequently occurs with married couples –Common among Baby Boomer generation

8 Sociocultural: Leisure U.S. passenger travel reached its pre-9/11 peak in July U.S. Airlines decrease domestic flights but increase international travel –Increase in International bookings –Terrorists attacks Domestic fares increase along with increase in travelers 11 Conserve fuel 14 Frequent Flyer Programs 12 –A decrease in reward travel –Decrease in availability

9 Sociocultural: Business Rise in global economy along with an increase in business travel 17,18 Business travel accounts for only 18% of total volume, yet contributes $153.2 Billion in expenditures Increased usage of low cost carriers Legacy carriers reduce their fares –17% decline in business travel fares –Loosened restrictions Reduced interest in Frequent Flyer Programs

10 Economic Environment: High Fuel Prices Hurricane Katrina Every penny increase per gallon of gas costs the industry $190 million in extra expenses 19 Airlines have resorted to taking away of or charging for amenities American Airlines reportedly would have made a profit in 2005 without the increase in fuel costs 20 Provided a way for airlines to raise prices 21

11 Economic Environment: Effects of Deregulation of Industry Created competition which meant lower fares for consumers and lower revenues for carriers economic recession and the Gulf War caused a chain reaction including decreased demand and revenues 22

12 Regulatory Environment: Deregulation Original concern of this back in 1978 was that airlines would set fares too low, not be able to make a profit, and ultimately lead to degradation of safety and service 22 Shift to hub-and-spoke – this is more attractive to business travelers who are willing to pay more money 22

13 Regulatory Environment: “Open Skies” 23 Would allow US airlines to fly to any of the 25 European nations and any European airline could fly to anywhere in the US Already have developed separate Open Skies agreements with 15 European countries Tied together with foreign ownership Supported by United and Delta; not supported by Continental Decision expected this summer

14 Regulatory Environment: Foreign Ownership Currently airlines limited to 25% foreign ownership or no more than 1/3 of the board of directors 23 New agreement would allow for up to 49% foreign ownership 24 Fears that would result in loss of American jobs 23 Debate on real reason for this idea 24 –Cash-infusion to help US airline industry –To help Open Skies get passed Could cause a problem during war-time 24

15 Technological Environment AirTran Airways Renews Agreement for Navitaire's Open Skies Reservation System 25 AirTran recently added the fuel-efficient Boeing aircraft 26 AirTran partners with Outtask and Worldspan 26 AirTran is the first carrier to install XM Satellite Radio on a commercial aircraft 26

16 Natural Environment The storm warnings as well as the Hurricanes affected 51% of Airtran's normal traffic and also its bookings. 27 Their Orlando headquarters and aircraft hangar in Orlando suffered damage and further harmed operations due to the hurricanes. 27

17 SWOT Analysis Strengths Weaknesses Opportunities Threats Low Cost Structure Atlanta Operations Youngest All-Boeing Fleet Online Services Dependence on Atlanta Rising Maintenance Costs Cost Reduction Geographical Expansion Inorganic Growth Volatility of Fuel Prices Strong Competition Economic Condition * Source 28

18 Conclusion: Significant Factors Baby Boomers Have Significant Impact On Air Travel Passenger Travel Reached Its Pre-9/11 Levels High Fuel Prices Foreign Ownership Fuel-efficient Boeing Aircraft Hurricane Impact

19 References 1.Schneider-Levy, Barbara. (2005) Travel afoot; Today’s globe-trotting baby boomers need more than just a pair of comfortable walking shoes. [Electronic version]. Footwear News, 61, Iss. 47; 36 2.Koco, Linda. (2004) For some Boomers, income planning and travel planning go together. [Electronic version]. National Underwriter. Life and Health, 108, Iss. 25; 24 3.Ligos, Melinda. (1998) Incentives for the ages. [Electronic version]. Successful Meetings, 47, Iss. 6; 49 4.Mutzabaugh, Ben. (2006, April) JetBlue targeting ’20-somethings.’ USA Today. Retrieved from 5.“The industry handbook-The airline industry.” Retrieved from 6.Polk, Caroline. (2002) Can flying make you sick? [Electronic version]. Government Executive, 34, Iss. 14; 64 7.Hannapel, Coriene E. (2002) Flight risk. [Electronic version]. Dermatology Times, 23, Iss. 12; 17 8.The torture of second-class travel. (1997) The Economist, 343, Iss. 8021; 91 9.TIA – Travel Statistics and Trends. (n.d.) Retrieved April 9, 2006, from 10.McCartney, Scott. (2006) The middle seat: What’s new in air travel for 2006; higher domestic fares but better deals overseas; prepare to pay for soda. Wall Street Journal, D.5 11.Shifrin, Carole. (2005) US leisure travel on the up. Airline Business, 21, Iss. 9; Thompson, Jackie. (2006) What price loyalty? Airline Business, 22, Iss. 3; Travel Brief – AirTran Holdings Inc.: Charge of $2 is added to fares to offset rising fuel costs. (2004, May) Wall Street Journal, B.4 14.Spohr, George. (2004) High oil prices test low-care air carriers. The Business Journal – Central New York, 18, Iss. 44; 3 15.Rovito, Rich. (2004) Midwest grapples with jet fuel costs. The Business Journal, 21, Iss. 37; A3 16.Hecker, JayEtta Z. (2004) Commercial Aviation: Despite industry turmoil low-cost airlines are growing and profitable. Retrieved from 17.Shifrin, Carole. (2005) Price fights. Airline Business, 21. Iss. 7; Lehane, Mark. (2005) The rise of the smart business traveler. Global Finance, 19, Iss. 8; 38

20 References 19.Mergent Online. Aviation: North America. Retrieved April 5, 2006, from 20.Koenig, D. (2006). Analysts: 2006 Pivotal Year for Airlines. Associated Press Online. Retrieved April 5, 2006, from LexisNexis Academic database. 21.Zich, J. Airlines raise base fares sharply, still fill planes. USA Today. Retrieved April 12, 2006, from 22.Meyer, J.R., and Menzies, T.R. Airline Deregulation: Time to Complete the Job. Retrieved April 12, 2006, from 23.Adams, M. Protectionism door threatens to slam on Open Skies. USA Today. Retrieved April 12, 2006, from 24.Grossman, D. The Open Skies: A foreign-ownership quagmire. USA Today. Retrieved April 12, 2006 from 25.http://www.navitaire.com 26.http://www.airtran.com 27.“AirTran and JetBlue may suffer financial consequences from Hurricane Frances” Retrieved from 28.“AirTran Airways SWOT Analysis” Retrieved from


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