Skywest Case Study

SkyWest, Inc. , and the regional oxygenizeline Industry in 2009 strategic Profile and Case depth psychology Purpose The US regional air passage industry same(p) any industry has see some examine(ip) pitfalls that batch be attri only ifed to the current economic global downturn. As a result, major(ip) stakeholders in the industry atomic number 18 looking for better strategies to cope.Among the wardrobe challenges are the increasing and fluctuating address of burning the jets, the prohibitive exist of acquiring funds to purchase new jets, the intense disceptation among the major players, the dwindling foodstuff of business and leisure travelers, regulations that have increased cost, and the effect of September 11, 2001 terror attacks which has brought enhanced security which for the airline industry heart long checks and overall dissatisfaction in customer assistance.Although it looks like the sky is falling for the airline industry, the gleam of hope that regionals like SkyWest are bringing to the composite airline business is showing a s scummy but brilliant recovery for the airline industry. This caseful analysis pass on first level the internal workings of the regional airline industry and will specifically address SkyWest, Inc. , with regards to its strategies including the challenges it faces and the core competencies it has in its operations. This analysis will also focalize on the product SkyWest, Inc. ells and the challenges, strengths, failing, opportunities and threats (including fiscal) it faces in the regional airline industry and will recommend strategies that will strengthen the brand of the company. Industry analysis Regional carriers like SkyWest airlines provide transportation to and from small communities through large airports where the major airlines do work, which in the industry lingo is called a regional feed. They also good of process to increase frequency of service in mainline markets during times of daytim e of the week when demand does not call for use of large aircraft.The service that regionals provide is as a result of partnerships with the major airlines that are unremarkably contractual. This partnership is a symbiotic relationship that caters to the needs of both segments. Aircraft utilize by regionals include turboprops and jets that are usually owned by the regionals but carry the major airlines flag. Regionals also own and operate their own brands that mostly cater to small communities the term commuter airline is usually used when they perform this role.In the past decade, US Regional airlines enjoyed rugged ingathering and financial returns over the past several years when majors or network partners reduced capacity and outsourced flying collect to financial trouble. SkyWest, Inc. , is a leader in the regional arena and this case will be based on that premise. SkyWest Strategy Strategy jibe to the textbook is doing what competitors dont do or, hitherto better, doing what they fundamentt do. (Page 9). SkyWest is focusing on a low-cost provider system in the regional airline industry.By focusing on a define market niche, SkyWest is building a competitive edge by doing a better job than its rivals. An some other strategy it employs is growth the company has complete an internal growth through the expansion of its partnerships, geographic growth and the prosecution of new partnerships. But most importantly the reasons why SkyWest is successful is the power it employs by the way It manages its fleet, thus less accidents and downtimes. It empowers its employees better than other regionals benefits, pay, continual education. On time performance- by arrangedly being the best in on time arrivals. Most importantly is how it manages its finances. embody control is a major company undertaking and the ability to anticipate and cut costs has made the company competitive. The company has fine-tuned its core competencies through partnerships with Delta Connection and unify Express which has created growth opportunities through the volume of business these two airlines brought. By having a strong, focused and forward strategy, SkyWest benefited when these two major airlines were in loser. jampack ANALYSIS (Strength). Safety exceeds conventional safety standards. Low-cost provider Cost in effect(p) the company has ordered jets that will be cost efficient/fuel. Market reputation on-time arrivals and layaboutcellations- this attribute makes it attractive for other major airlines who ass benefit using SkyWest as their regional servicer. Financial stability consistent growth in operating(a) revenues/income. Implementation of Stetson Quality Suite. failing First, ASA (Atlantic Southeast Airline) the acquisition of ASA from Delta in 2005 expanded the company business, however the crusade piths that represent ASA employees is a weakness that can ground the company in case of a strike.Secondly, SkyWest was ranked low on cust omer service this in the airline industry is a major requirement for competition since the product is universally the same when viewed by the customer. Developing and maintaining a risque level of customer service is crucial. Third, the partnerships with Delta and United are also a weakness since the two major have similar business models. The majority of the company business comes from these two and the fact that both companies had undergone bankruptcy signals SkyWest to transmute its operation.The reliance on only these two is a major weakness that has to be addressed. Deltas decisiveness for not paying the $25 zillion it owed SkyWest is a . To add on this, is work ons like lost baggage accounted for a terrible rating of 9. 53 reports per 1000, which was double the industry average. Also a high number of customer complaints Airline quality rating study found SkyWest near the bottom of 16 airlines for customer service. Passengers also serve the small planes as less safe than the bigger and more broad(a) airplanes that the majors operate.The company is bounded by the scope clause after(prenominal) the ASA acquisition. OPPORTUNITIES Low cost partnerships SkyWest currently has no partnerships with this segment of the business. Creating partnerships with low cost providers is a future opportunity that can increase revenue. Increase in business travelers- in the past the majors had the bulk of these niche, however regionals can get into this market be excite business travelers are becoming cost certified and are frequent users thus untapped revenues can be accomplished. ever-changing industry the major airlines are issue through tough financial times thus there is more business to be realized from their outsourcing to regionals like SkyWest. Global market the company currently has operations in Europe, Latin America and mainland China. Other avenues in the expanding global market can be explored. THREATS Labor unions threat from acquisitions like AS A, which is union oriented. Cost of fuel the unpredictability of the energy industry is always causing uncertainty in the airline industry. Any increase in demand (from ASIA-especially China) can cause the cost of fuel to increase. Majors airlines may start their own low cost providers, competition is getting stiffer. Government regulations- for instance the current restrictions displace on entrants to some markets and the $262 to $577 cost of regulation to the industry. The economy if it follows the current trajectory, competition for scarce revenues will continue. Shutdown of major airline hubs Competitors Republic Airways Holdings acquired middle west and Frontier Scope Clause- it would limit the size of aircraft the company operates Financial AnalysisLooking at the company finances, the outlooks looks gloom. However, the nature of the current economy has contributed largely to SkyWest, Inc. , reduction in revenue. Lost in the numbers are cistrons that were beyond the comp anys control including costs like acquiring ASA, and figures like the $5. 2 million lost because of the Denver International Airport settlement in declination 2006.. Consequently, because SkyWest depends on revenues from its major partners, the cost of fuel that the partners inform in 2009 were reported as revenue, which means the numbers were not accurate.In addition, even with the growth in revenue in 2008, a decline in reported income of $111. 4 million was reported from the previous year (2007) and a decline of $29. 8 million for the quarter ending in December 31, 2008. Of particular importance is the $18. 3 million decline that was receivable to reductions in flight schedules made by the company major partners. (page c-208). ASA (which serves the southeast region) experienced cancellations and delays due to weather and grounding of 60 aircrafts due to safety issues which but reduced revenues by $7. 6 million.A further $5 was lost due to negotiations with Delta Airlines in regard to expenses. A more revealing picture is when the operating profit margin (left over revenue after paying covariant cost) is calculated. SkyWest declined from 12. 5% in 2004 to 7. 30% in 2008. In contrast, the news is not all that bad. SkyWest management predicts a promising future. The combined revenue passenger miles increased by 4. 9% in June 2009 and its overall load factor were up by 2. 3%. Recommendations SkyWest, Inc. , has all the necessary ingredients to sustain its lead in the regional airline business.Case and point was when its consolidated revenues were $3,114 million at the end of the year 2006, up from $1,964 million the year before. However, the strategy of growth that the company is currently on signals pitfalls that are in its future. For instance, the partnership dependance that it places on the major airlines like Delta and United makes it vulnerable. Both majors underwent bankruptcy and relying on them for revenues is risky for the company. Delta refu sed to pay the $25 million owed because it knew that SkyWest would not sue them because of their business.SkyWest should acquire low cost providers or even acquire other regionals to decrease adventures like ASA (unionized, poor performance culture). In addition, it should look into commandment sharing ventures that are less risky because the growth pattern it is assailable of pursuing will yield more revenues. Of particular importance are the rival regionals like Frontier (owned by Republic), Southwest and the Mesa Air Group. In order to be competitive, SkyWest should look for ways that the company can acquire rivals. The move to pre-empt rivals will extend the reach of the company geographically and it would discourage new entrants.In addition, the company has to cleanse its customer service (training frontline employees) because the cost of losing customers translates directly into lost revenues. ASA in particular came with a terrible physical body and the transfer of core co mpetencies/culture from the parent company will improve the overall outlook and brand of the company. Moreover, after the ASA acquisition, the issue of unionized employees who join the company has to be addressed. If the option of negotiation between the company and the union ever fails, major problems can be experienced.SkyWest, Inc. should keep ASA separate because in the event of a strike, business will be affected. Finally, the issue of going global in the regional airline industry is important. SkyWest operates in Europe, China and Latin America. The opportunities in China, Mexico and Latin America are possibilities that the company should explore. However, the decision to expand can make SkyWest, Inc. , vulnerable at the home market thus a careful well researched and strategic plan should be implemented before embarking on a global arena. by capitalizing on external opportunities and fortifying their internal strengths, SkyWest, Inc. , can achieve better shareholder returns a nd bear the leader in the regional airline industry. (USATODAY). Works Cited Thompson, A. A. , Strickland. A. J. and Gamble, J. (2005) Crafting and murder Strategy (18th edition), McGraw-Hill, New York, pages C-206 C-226). USA TODAY (2009). Regional airline amplify while the big boys cut back. Retrieved from http//www. usatoday. com/travel/column/grossman/2013-21-3regional-airlines_N. htm