Report on Situation Analysis and Business Strategy of AirTran Airways America

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Table of Contents
Analyzing the current situation 3
a. The firm 3
b. The industry the firm operates in 3
c. Competition 4
d. Major Challenges the firm/industry faced with 5
Business Strategy of the firm 5
Cost leadership 6
Differentiation 6
Cost Focus differentiation Focus 7
Implications on firm’s economic performance. 7
• External environment: 9
• Internal environment. 9
Evaluating internal and external environment through SWOT Analysis 10
• Rivalry in the industry 11
• Market growth rate 11
• Firm’s market share 11
Criteria Matrix to Evaluate Alternatives 12
Alternatives to Solve the Highlighted Issues or Problems and Recommendation 12
Action Plan and Contingency (emergency) Plan 13
References 14

Analyzing the current situation
The current situation of the airlines industry and the hold of AirTran Airways in it has been analyzed on the basis of the following four parameters:
a. The firm
AirTran Airways is an American airlines that is involved in providing cost effective services to the passengers. It was the first airline who provided Wi-Fi on flights in July 2009. It was adopted in almost all of the Boeing 737 and Boeing 717 jets that are utilized by the airlines. Its most important characteristics is that it provides low fare travel experience to its customers and hence tends to provide an economic solution to the expensive air travelling across different airlines across the United States.
The AirTran Airways is a subsidiary of the AirTran Holdings Inc. where it has been providing its services across the United States. The headquarters of the company is at Orlando, the central and major hub of the flights and operations is at Atlanta. It tends to be the second largest carrier in Atlanta. It had a fleet of about 86 Boeing 717-200 aircrafts, 50 of the Boeing 737-700 aircrafts and with these fleet they offered about 700 flights every day to different cities in US (Byles, 2009).
b. The industry the firm operates in
There has been a tremendous loss in the industry. It can be seen from the declining demand where there was loss of about US$170 billion throughout the airline industry. The loss that has been observed in AirTran is about US$4.7 billion. There has been an entry of large number of cost effective and low fare airlines in 1978 when the US airline industry was deregulated. There was a huge failure in the 1996. However, AirTran was able to recover the losses that had led to the falling in the sales and profits of the company. However, the other companies were not able to adapt themselves as per the falling demands in the airlines industry and those who did adapt, were facing other technical and safety issues. It includes the crash of the flight no. 592 of the ValuJet Airlines where it claimed life of about 110 people (Byles, 2009). It was after this that the ValuJet had to serve a ban of about 4 months by the Federal Aviation Administration. Thus, as a result their image had fallen so much that it decided to merge with the holding company for the AirTran Airways that was known as the Airways Corporation Inc.
c. Competition
There is a highly competitive environment developed in the airline industry. It involves considering the rivalries in the aviation market. The rivalries for the AirTran Airways is the Virgin America, Delta, United Airlines and the Air Canada. They have been adapting changes in their functioning and the products and services offered in a very slow manner. They have not been a pioneer in the field of technological innovation in terms of providing hi-tech products and services throughout the air travel provided by the airlines.
The competition between the AirTran Airways and other airlines can be evaluated through the provision of the air quality rating rankings that have been shown in the below table for 2007 and 2008:

(Byles, 2009).
d. Major Challenges the firm/industry faced with
Maintaining sustainability at economic costs tends to be the major challenge of the Airline industry. It refers to the development of various characteristics that would stand apart in the industry for developing a niche for itself for the AirTran Airways in the glob airline industry. There has been a tremendous loss in the airline industry as the demands have been falling since 2008. The forecasting of the loss amounted to about US$ 170 billion in the airline industry (Byles, 2009).
Business Strategy of the firm
There are various elements that are to be considered while evaluating and analyzing the business strategies of a firm. It has been discussed below:
Cost leadership
Cost leadership refers to the concept of developing a competitive advantage in the respective industry through providing cost effective programs that are one of the lowest costs offered in the industry. The concept was developed by Michael Porter that involves developing a cost effective business strategy that is achieved through the operations of the AirTran Airways.
The quality and cost effective service that is provided by the AirTran Airways as compared to its competitors like the JetBlue, Delta and Southwest airlines tend to serve a major role in the contribution of other elements in the field of the Airline Bag fees that are collected by them has been shown in the table below:

Differentiation
Differentiation refers to the development of business strategies that involves development of an altogether new product or service in the global industry. It is carried out through emphasizing on the innovative element of the strategic management (Tanwar, 2013).
Cost Focus differentiation Focus
The focus of the company refers to the characteristics that the company emphasizes on while development business strategies and other operations across the company. It can either be cost focused or differentiation focused (Tanwar, 2013). Hence, the main element of the industry refers to the development of the services and products by the AirTran Airways through the cost focus business strategy that includes a small inclusion of differentiation. Hence, cost focused strategy of AirTran Airways is visible from the low cost air fares that it provides. However, the differentiation element is observed in the development and provision of Wi-Fi services on the flight to its customers which was one of the most innovative implementation that differentiated them from their competitors.
Implications on firm’s economic performance.
The implication of the business strategy on the economic performance of the AirTran Airways has been provided in the table below:

(Byles, 2009)
Internal Analysis of the Firm from Strategic Management Perspective
From the strategic management perspective there are many factors that are belonging to the external as well as internal environment that is observed for a company in the industry. It has been shown in the following figure:

• External environment:
It refers to the elements that are affecting the business from the external side and the company hardly has any control over it. However, the company can develop strategies for the growth of the business during such times.
• Internal environment.
It refers to the elements that are present in the activities and other operations carried within the organization. It can be completely controlled as it is in the power of the airlines to track the internal elements regarding the performance of the employees and other operations across the system (Tanwar, 2013).
For proper explaining and evaluation of the internal and external factors affecting the business strategy, SWOT analysis has been carried out for the AirTran Airways.

Evaluating internal and external environment through SWOT Analysis
Internal environment factors Strengths:
• Providing cost effective services to the passengers.
• First airline who provided Wi-Fi on flights in July 2009.
• Provides low fare travel experience to its customers Helps in getting an economic solution to the expensive air travelling
Weaknesses:
• Negligence of quality
• Excessive importance on the cost cutting
• Extensive number of flights not available
• Very meagre Global presence

External environment factors Opportunities:
• Increasing exposure to different countries
• Large number of cost effective services
• Number of travelers who are looking for economic air travel across he cities in US has been increasing Threats:
• A decline in the demands of the customers
• Deterioration and loss in the airline industry
• Increasing number of potential competitors
• Competition from the existing rivalries.

• Rivalry in the industry
Delta airlines tends to be one of the most significant competitor for the AirTran Airways. Though, Delta Airlines has a bigger fleet and wide range of operations, it has been provided with a considerable amount of competition from the AirTran Airways. The comparison of the domestic markets available for AirTran Airways and Delta Airlines has been shown in the table below:

(Byles, 2009).
• Market growth rate
There has been a continuous increase in the growth rate of AirTran Airways, except in the year of 2008, when it had suffered loss. There is a stable growth of about 7 – 9% every year in the market revenue generated by the AirTran Airways.
• Firm’s market share
The market share that the firm and other companies have in the US market has been provided in the below table:

(Byles, 2009)
Criteria Matrix to Evaluate Alternatives

Alternatives to Solve the Highlighted Issues or Problems and Recommendation
Thus, it can be recommended that the presence of the Airlines has to be increased throughout the globe by increasing the fleet of the flights and providing flexible services in terms of the options available to the customers for different class of travelling. However, with the cost effective services, it should also increase the number of quality services that contains providing exclusive air travel experience at effective high costs.
Action Plan and Contingency (emergency) Plan
Developing an action plan and a contingency emergency plan involves the following steps to be taken:

1) Business impact analysis:
i) Exercise and maintenance:
(a) Continuous improvement
ii) Disaster Recovery planning
(a) Audit DRP plans and processes
(b) Output to the management
iii) Business continuity plan
(a) Safety management
(b) Security checking at regular intervals
(c) Quality management procedures
(d) Emergency landing and other activities

References
Byles, C. M. (2009). Airtran Airways, Inc. AIRTRAN AIRWAYS.
Tanwar, R. (2013). Porter’s Generic Competitive strategies. IOSR Journal of Business and Management , 11-17.

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Posted on

March 9, 2018

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