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.
Mission Statement Innovative people dedicated to delivering the best flying experience to smart travelers. Every day.
Demographic: Age Generation Xers (Born 1965-1981) vs. Baby Boomers (1946-1964) 3 –Incentive Travel –Locations Generation X: outdoor, adventure environment Boomers: fun in the sun destinations –Baby Boomers generated highest travel volume in 2003 1,2 268.9 million trips Increased travel once retired Generation Y (Millennium) 4,5 –X-Fares (ages 18-22) –Growth potential in business travel
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
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
Sociocultural: Leisure U.S. passenger travel reached its pre-9/11 peak in July 2004 10 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
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
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
Economic Environment: Effects of Deregulation of Industry Created competition which meant lower fares for consumers and lower revenues for carriers 22 1990- economic recession and the Gulf War caused a chain reaction including decreased demand and revenues 22
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
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
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
Technological Environment AirTran Airways Renews Agreement for Navitaire's Open Skies Reservation System 25 AirTran recently added the fuel-efficient Boeing 737-700 aircraft 26 AirTran partners with Outtask and Worldspan 26 AirTran is the first carrier to install XM Satellite Radio on a commercial aircraft 26
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
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
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 737-700 Aircraft Hurricane Impact
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