The U.S. regional airline industry makes most of its money on basis of partnerships with major U.S. airlines. The whole market is characterised by a strong competition, a trend for consolidation and financial problems especially of the major airlines following the terrorist attacks on 09/11/2001. Analyzing the competitive situation the forces of suppliers, rivalry among competitors and especially buyers (customers, and contract partners) turn out to be strong. Several factors will cause change indicating severe impacts on the whole industry. SkyWest Inc. turns out to be a key player in the U.S. regional airline industry and is a candidate for further acquisitions. On the short run the price of growth is an increase in debt and a decreasing net profit margin due to rising operating costs. Several recommendations could help SkyWest Inc. to further extending the Group's leading edge over its competitors.
Table of Contents
1 Introduction/Problem Definition
2 Objectives
3 Methodology
4 Main Part
4.1 Dominant Characteristics of the US Airline Industry/Relationship Between National and Global Airline Industries
4.2 Application of Porter´s Five Forces Model
4.2.1 Rivalry Among Competing Sellers
4.2.2 Firms in Other Industries Offering Substitute Products
4.2.3 Buyers
4.2.4 Potential New Entrants
4.2.5 Suppliers
4.3 Factors causing change for the regional airline industry – impacts of change
4.4 Key Success Factors (KSF) Determining Success in the Regional Airline Industry
4.5 SkyWest Inc.: Strategy and competitive advantage
4.6 SkyWest Inc.: A SWOT-Analysis
4.6 SkyWest Inc.: Analysis of Financial Data
5 Recommendations and Conclusion
6 Appendix
7 ITM Checklist
7 Bibliography
Objectives and Research Focus
This academic assignment provides a comprehensive strategic analysis of the U.S. regional airline industry, with a specific focus on SkyWest Inc. as a leading market player. The primary research goal is to evaluate the competitive environment, operational challenges, and strategic positioning of regional carriers in a market characterized by consolidation and financial pressure.
- Analysis of the U.S. regional airline industry structure and its relationship with major global airlines.
- Application of Porter’s Five Forces Model to assess competitive intensity and market dynamics.
- Evaluation of key success factors (KSF) and internal strategies employed by SkyWest Inc.
- Financial performance analysis of SkyWest Inc., including growth, profitability, and debt management.
- Formulation of strategic recommendations for sustainable market leadership.
Excerpt from the Book
4.1 Dominant Characteristics of the US Airline Industry/Relationship Between National and Global Airline Industries
After a freefall following the terrorist attacks on 09/11 most airlines started 2006 with serious financial problems. Within six years from 2000 to 2006 cost drivers like fuel, wages, services and landing fees caused an increase in cost of roughly 100%. During the same period a capacity of roughly 120.000 FTE was “downsized” (ATA, 2011). Governmental regulation such as increased security standards led to additional costs for the airlines. An increasing number of business customers which formerly had been known as less cost sensitive had begun to travel on low-cost carriers. At the end of Quarter 3 in 2005, six out of ten selected airlines were facing net losses at a total amount of more than 3 B$ (Lohmann, 2008). From 2001-2009 US passenger airlines realized a massive deficit of 65 B$ net losses (ATA, 2011). Major airlines such as United Airlines, US Airways, ATA, Northwest and Delta had filed for bankruptcy. A few airlines (United, Northwest, Continental, Delta) dominated the market with a share of more than 80%. The whole industry offered significant overcapacities (ATA, 2011) laying the basis for a hard fought price war. Major airlines were forced to establish low-cost airlines to respond to the loss of revenues caused by low-cost competitors. Mergers between airlines became a normal routine offering the chance of reducing cost and excess capacities. On the other hand the M&A activities led to higher debt increasing the risk of further destabilization (Lohmann, 2008).
Chapter Summaries
1 Introduction/Problem Definition: Outlines the state of the mature and consolidating U.S. airline market and sets the stage for a strategic analysis of SkyWest Inc.
2 Objectives: Lists the elementary strategic questions the assignment aims to answer, including market characteristics, competition, and financial analysis.
3 Methodology: Explains the reliance on a specific business case study supplemented by external industry sources to validate conclusions.
4 Main Part: Conducts a detailed strategic evaluation using Porter’s Five Forces, identifies industry success factors, analyzes SkyWest’s competitive strategy, and examines its financial data.
5 Recommendations and Conclusion: Proposes strategic actions for SkyWest Inc. to maintain its market edge, such as improving customer service and diversifying partnership risks.
6 Appendix: Provides detailed financial tables, including income statements and balance sheets used for the analysis.
7 ITM Checklist: Summarizes key considerations across economics, HR, marketing, financial management, and leadership within the context of the airline industry.
7 Bibliography: Lists all academic and industry sources cited throughout the assignment.
Keywords
SkyWest Inc., Regional Airline Industry, Porter’s Five Forces, Strategic Management, SWOT-Analysis, Competitive Advantage, Financial Analysis, Airline Consolidation, Feeder Airlines, Low-Cost Carriers, Operational Costs, Market Share, Risk Diversification, Merger and Acquisition, Aviation Industry.
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment focuses on the strategic management of SkyWest Inc. within the U.S. regional airline industry, examining its business model, competitive environment, and financial health.
What are the central themes covered in the analysis?
Central themes include the consolidation of the U.S. airline sector, the economic impact of industry cost drivers (like fuel and wages), and the strategic response of regional feeder airlines.
What is the core objective of the research?
The research aims to provide a comprehensive analysis of SkyWest's competitive advantage and to determine the factors that lead to success in the regional airline sector.
Which methodology is utilized for this study?
The study is primarily based on a structured business case analysis, complemented by quantitative data from financial statements and qualitative data from industry-specific reports.
What topics are discussed in the main part of the document?
The main part covers the application of Porter's Five Forces, identification of Key Success Factors (KSF), a SWOT-analysis of SkyWest, and a detailed look at the company's financial data from 2002 to 2006.
Which keywords best characterize this work?
The work is characterized by terms such as Strategic Management, Competitive Advantage, SWOT-Analysis, Airline Consolidation, and Financial Analysis.
How did the acquisition of ASA impact SkyWest's financial position?
The acquisition of ASA significantly increased fixed assets and debt, which contributed to a decrease in the net profit margin and a shift in the company's debt ratio.
Why is the regional airline industry so dependent on major carriers?
Regional airlines operate primarily as "feeder" carriers, deriving most of their revenue from partnerships and contracts with major airlines, which leaves them susceptible to the major carriers' financial stability and operational decisions.
What strategic recommendations does the author provide for SkyWest?
Recommendations include improving customer service, diversifying partnerships to reduce risk, keeping operating costs low, and preventing workforce unionization to maintain operational flexibility.
- Arbeit zitieren
- Holger Bodenmüller (Autor:in), 2011, SkyWest and the US regional airline industry, München, GRIN Verlag, https://www.grin.com/document/271651
