1. Continental Airlines: The Competitive Arena
Banu Ozkaya
Ben Harris
James Babb

2. Outline Most Direct Competitors Competitor Financial Situations
Competitor Strategies
Charts reflection industry
Industry Trend
Future of the Airline Companies

3. Who are the Competition? (Top 5)
American Airlines
Delta Airlines
United Airlines
Airtran Airways
Southwest Airlines

4. American Airlines (2005) Largest US Airline
Based in Forth Worth, Texas
Not in Chapter 11 Bankruptcy
Serves 150 destinations worldwide
International carrier operating 699 aircraft
Purchased TWA in April 2001
American Airlines’ CASM is 3% higher than Continental
Biggest Concern: Competing on price with reorganized airlines

5. American Airlines Financial Data (2005)
ASM: Billion Miles
RASM: 9.43¢
CASM: ¢
Net Income: $(861,000,000.00)
Load Factor: 78.6%
BE Load Factor 85.5%

6. American Airlines Strategy
Lower operating costs in order to compete with restructured airlines and low-cost carriers
Improve Hub-and-Spoke system to more efficiently serve larger markets
Utilize it’s American Eagle brand as a low-cost alternative carrier to compete with low fare airlines.
Source: American Airlines K

7. American Airlines SWOT
Strengths
Weakness
Strong brand name
Efforts to improve performance
One of the largest airlines in the US
Strong alliances in the industry
Continued losses
Substantial indebtedness
High dependence on travel agents for ticket sale
Opportunities
Threats
Growth in transcontinental market
Reduction in costs through collaborative efforts
Recovery in passenger traffic
Intense competition from low fare players
Increasing fuel prices
Regulations governing the airline industry
Source:

8. Delta Airlines (2005) Based in Atlanta, Georgia
Currently in Chapter 11 Bankruptcy
International carrier operating 649 aircraft
Serves 149 Cities Worldwide
Delta Airlines’ CASM is 14% higher than Continental
Biggest Concern: Competition from low-cost carriers and recently reorganized airlines
Source: Delta Airlines K

9. Delta Airlines Financial Data (2005)
ASM: Billion Miles
RASM: ¢
CASM: ¢
Net Income: $(3,836,000,000)
Load Factor: 76.5%
BE Load Factor 86.9%
Source: Delta Airlines K

10. Delta Airlines Strategy
Strengthen their Domestic Hub and Spoke Network
Increase International Presence in Europe and Asia
Merge SONG (Delta’s low fare airline) into Delta and convert their planes to the class-system
Delta is seeking the higher end customers and adding better entertainment choices and more first-class seats.
Source: Delta Airlines k

11. Delta Airlines SWOT Strengths Weaknesses Opportunities Threats
Global reach through network and alliances
Strong market position
Hub airports
Significant overlap with low-cost airlines
Delta’s low cost carrier Song
Lack of competitive strengths V’s AMR
Opportunities
Threats
Cut in pilot pay would drastically decrease costs
Engage in further alliances
Orbitz Inc.
Low cost competition
Delta’s Regional Jet advantage likely to slip
General industry risks
Source:

12. United Airlines (2005) Based in Chicago, Illinois
Currently in Chapter 11 Bankruptcy
International carrier operating 460 aircraft
Serves 120 destinations worldwide
United Airlines’ CASM is 4% higher than Continental
Biggest Concern: Competition from low-cost carriers, Higher fuel costs, Terrorist attacks.

13. United Airlines Financial Data (2005)
ASM: Billion Miles
RASM: 9.20¢
CASM: ¢
Net Income: $(182,290,000)
Load Factor: 81.4%
BE Load Factor 82.8%
Source: United Airlines K

14. United Airlines Strategy
Appeal to high-end customers through the introduction of enhanced first-class service.
Appeal to low-fare flyers through TED, United’s low cost carrier
Utilize the popular United Mileage-Plus frequent flyer program to attract and retain high value customers

15. United Airlines SWOT Strengths Weakness Opportunities Threats
Global Network
Improved operational performance
United’s membership of Star Alliance
Chapter 11 bankruptcy
Continuous operating losses
Increased taxi time in 2004
Opportunities
Threats
United’s expansion in Central America, the Caribbean and Mexico
Growing traffic in Asia
September 11 law suits
Oil price rise
Uncertainty in demand
Source:

16. Airtran Airways (2005)
Based in Orlando, Florida. Main Hub in Atlanta, GA
International carrier operating 105 aircraft
Serves 47 US destinations as well as flights to Freeport, Bahamas
Airtran Airways CASM is 9% lower than Continental
Airtran is one of only a handful US carriers that has managed to remain profitable

17. Airtran Airways Financial Data (2005)
ASM: billion miles
RASM: 9.09¢
CASM: 9.35¢
Net Income: $1,722,000
Load Factor: 73.5%
BE Load Factor 73.4%
Source Airtran Airways K

18. Airtran Strategy Low Cost
Targets “value oriented” business and leisure travelers
Low-Cost, Self-service ticketing to lower operating expenses
Source: Airtran Holdings K

19. Airtran SWOT Strengths Weaknesses Strong domestic presence
Operates America’s youngest all-Boeing fleet
Report profits when the competitors can not
High costs
No international flight
Opportunities
Threats
Increased usage of regional jets
Improving tourism market in US
Engage in further alliances
Increasing competition
Rising fuel costs
Rising geopolitical tensions

20. Southwest Airlines (2005) Based in Dallas, Texas
Domestic carrier operating 445 aircraft
Serves 61 US destinations
Southwest Airlines CASM is the lowest in the competitive group.
Southwest Airlines RASM was the by-far the highest in the competitive group.
Southwest had the highest Net Profit of all US Domestic carriers for 2005.
Source: Southwest Airlines K filing

21. Southwest Airlines Financial Data (2005)
ASM: billion miles
RASM: ¢
CASM: 8.09¢
Net Income: $548,000,000
Load Factor: 70.7%
BE Load Factor 55.5%*
Highest Revenue per Available Seat Mile from Competitive Group
Lowest Cost per Available Seat Mile from Competitive Group
Highest Profit from Competitive Group
2005 BE factor unavailable. 55.5% from 2001.
Source: Southwest Airlines K filing

22. Southwest Strategy Short-Haul
Point-to-Point (Rather than traditional Hub-to-Hub)
Low Fare
Low Operating Cost
Services smaller, secondary airports
Single aircraft type allows for lower maintenance costs
Source: Southwest Airlines K filing

23. Southwest Airlines SWOT
Strengths
Weaknesses
Market leadership
Low cost business model
Strong financial performance
New services
Code sharing with ATA Airlines
Positive outlook for the US airline industry
Opportunities
Threats
Poor short-term liquidity situation
No established alliances
Declining passenger revenue yields
Increasing fuel costs
Uncertainty in demand
Increasing competition
Source:

24. Continental Airlines SWOT
Strengths
Weaknesses
Strong industry position
Strategic alliances
Strong operating performance
Advantageous location of hubs
Relatively low growth and profitability
Highly leveraged
Opportunities
Threats
Cost-saving agreement with employees
New international destinations
Membership of Sky team alliance
Fleet expansion
Oil price rise
Uncertainty in demand
Poor outlook for US airline industry
Weak US tourism industry
Source:

25. Comparison of Financial Situations of the Companies
American Airlines
Delta
Airlines
United
Airtran
Southwest
Continental
ASM (billion)
176.13
156.79
140.3
15.36
85.17
89.65
RASM (¢)
9.43¢
10.33¢
9.20¢
9.09¢
12.09¢
10.46¢
CASM (¢)
10.50¢
11.60¢
10.59¢
9.35¢
8.09¢
10.22¢
Net Income (million$)
$(861)
$(3,836)
$(182.29)
$1.722
$548
$(68)
Load Factor (%)
78.6%
76.5%
81.4%
73.5%
70.7%
79.5%
BE Load Factor (%)
85.5%
86.9%
82.8%
73.4%
55.5% *

31. Industry Trend
Brand loyalty is decreasing
Trend  low-fare service

32. Future of the Airline Companies?

33. Continental Airlines. (2004). Company Profile. Retrieved from
References
Continental Airlines. (2004). Company Profile. Retrieved from
American Airlines. (2004). Company Profile. Retrieved from
United Airlines. (2004). Company Profile. Retrieved from
Delta Airlines. (2004). Company Profile. Retrieved from
Airtran Airways. (2004). Company Profile. Retrieved from
Southwest Airlines. (2004). Company Profile. Retrieved from