Ownership Structure of Airlines - Assignment Example

Topic: THE AIRLINE STRUCTURE (Name) (Tutor's Name) (Course Subject) 21/04/2008 Introduction Airlines are used in transportation services for passengers or freight. The Airline should acquire a license or recognized certificate of operation to be allowed to carry out these services. The Airlines have got their own aircrafts or they lease the aircraft to carry out these services. Some form partnership with other airlines to enable them carries these services effectively. Some airlines have services of carrying mail passengers or cargo. In airline services, it can be categorized as being intercontinental, intercontinental, or domestic and can operate on scheduled services or charter. Intercontinental airline services carry out their services from one continent to another. Intercontinental services operate mainly within the continent while the domestic type operates within the country. Schedules airlines operate on fixed timetable from one destination to another. Some examples of scheduled largest airlines in the world are southwest Airlines, America airlines, Delta airlines, United Airlines, Lufthansa airlines. An International Associations between the airlines have been formed to assist the airline companies to have uniform charges and also to achieve lawful competition. Example of this association is the International Air Transport Association formed in 1945. It has over 240 members with more than 140 nations throughout the continents. The international associations have divided the globe in three categories. a) South, Central and North America b) Europe, Middle East and Africa c) Asia, Australia, New Zealand and the island of the Pacific Ocean. We shall look at different types of ownership structure among aviation industry in different countries. The Spain Airline Industry The airline industry has grown since it was inoculated. The freedom it has on decentralized way of management has changed the way the airline operates. The structure in the Spain has made it achieve its goals. The aircraft carry passengers and cargo on the scheduled and charter flighty domestically and internationally. The airline contributes to Spain economic growth in both passenger and cargo services. Spain carrier provides almost 50% of scheduled services and 94% of charter services between the country and the rest of the world like United States, Europe, and the Pacific Rim. (John, 2006) In the market, the demand is seasonal with peak month air traffic being roughly twice that of low demand the market also affects the economy of Spain airline industry. Small traffic increase or decrease can result in dramatic increase in profit or losses. The airline cost structures are affected by size of aircraft with smaller aircraft costing more per seat than larger aircraft. The long distances are more cheaply compared to shorter distances and the cost per passenger declines as the percentage of seats available is filled. (John, 2006) The fare in Spain airlines depends on demand. It also depends on responsiveness to the price of air travel as first class passenger, businessmen, leisure passenger and infrequent travelers. There is also discount accord to the fare with the first two tickets being more expensive while the last is the lowest unrestricted fare. The airline here is also characterized by regional affiliates and international alliances. This development accounts two factors, that is, consumer preferences and profitability. It seems that consumer prefers larger carrier, which serves many points, than smaller carrier. They also prefer large air carrier which can take them anywhere in the country. Domestic ownership restricts the foreigner to own more than 25% of the voting stock of domestic airlines. (John, 2006) Spain airline carries are competitive with the major European air carrier only because of the foreign ownership restriction, without these restrictions, an independent air European and Spain airline international would not be possible in deregulated international environment. Singapore Airline Singapore Airlines operates a hub at Singapore Changi Airport. It has a strong market of south East Asia, East Asia, South Asia, Trans Pacific route, Europe and Oceanic. The Singapore government investment and holding company Temasek Holdings has 54% shares in the Singapore Airlines. Though the government claims that it does not participate in the management of the Airline, there are some restrictions from the government basing on the management of the Airline, this has some negative effect on airline. The Singapore Airline group comprises of 25 subsiding companies, 32 associated companies and two venture companies. It has also diversified in ground handling aircraft leasing, aviation engineering, air catering and tour operations. Singapore airline has tried to invest in other airlines to expand its business though it has had negative results. The airline has also introduced branding method example Singapore Girls as means of advertisements and publications. It has also received awards for the quality of the services; it provides premium and economic classes. It has upgraded its cabin in its in-flight services. (www.siaholidays.com.au/) The 60 years of innovation and services has allowed Singapore Airlines to grow from a regional airline into one of World’s leading airlines. It offers in-flight telecommunications and unparallel in-flight luxury and it is the first airline to operate the world’s largest aircraft that is Airbus A380. Currently, Singapore airlines offer services to the 90 destinations. It offers the first class, Raffle class and economy class to enhance the travel experience of the passengers. (www.siaholidays.com.au/) Singapore and Belgium have recently concluded a revision to their Air services agreement for cargo services. The agreement includes the Seventh Freedom Traffic Rights which allow the Singapore international airlines to operate flights between third world countries without originating from, or returning to the Singapore. This has reduced the cost if transport services and delay of transportation. This makes it to give efficient services to their customers. In March 20, 2008 it formed a partnership agreement with Wildlife Reserve Singapore on freightage of live animals. This has promoted wildlife conservation; boost the gene pool of endangered animals. This will boost the tourist system.( www.siaholidays.com.au/) Malaysia Airline The Malaysia Airline operates its flights from its home base, Kuala Lumpur International Airport, its secondary hub in Kota Kinabalu. It operates in South East Asia, East Asia, Middle East and on Kangaroo route; Transatlantic. The Malaysia Airline has two subsidiaries, that is, Firefly and Maswings. The firefly has services between Penang International Airport and tertiary cities on schedule while MASwings operates on inter-Borneo flights. The airline has suffered losses in the past years due to mismanagement and fuel price increment. It improved its business after the BTP (Business Turnaround Plan) in February 2006 which made some profit. (Simon, 2004) The airline has diversified in the related industries and sectors like ground handlings, aircraft leasing, aviation engineering, air catering and tour operation systems. It has also changed operational units as fully owned subsidiaries to stick on its core business as passenger airlines. It has 20 subsidiaries with 13 of them owned by Malaysia Airline cargo sdn Bnd, Maswings sdn Bhd, MAS Golden Holdings sdn Bhd, MAS Academy sdn Bhd etc. Currently, the Malaysia airline is working on profit as in 2007; it was awarded the Phoenix by Penton Media’s Air Transport World. Malaysia Airline uses its flights attendants to promote the airlines. It does this through hospitality and friendliness. It also trains its cabin and flight crew for better services to the passengers and cargo. It provides first class, Golden club class, economy class services. The aircrafts are as Airbus 330, Boeing 747-400, Boeing 777-200 ER. The Malaysia Airlines has partnership with 25 airlines, four from Sky Team, two from one world and seven from Star Alliance. From January 2008, the airline planned to form a network that resembles an alliance without joining an alliance. It has also planned this year to sign another two-code-share agreement with jet airways and Turkish Airlines from India and Turkey to enable it operate with Central Europe and India Market. This will make the market of Malaysia to expand thus promoting its economic. Japan Airlines Japan airlines co-operation is the largest airline operation in Asia based in Shinagawa, Tokyo, Japan. It offers International and domestic services on scheduled or non-scheduled basis. We have two companies operating under the Japan airline limited. These are Japan international airline and Japan airlines domestic. The Japan Airline domestic operates within and outside the country. (Christine, 2003) Japan airline international has largest fleet of Boeing 747s in the world, which operates with Malaysia airline, Air China, Emirates airline and flies to Mexico City, New York Los Angeles. The Japanese airline consists of Airbus A300-600R, Boeing 737- 800 etc. It offers the first class shy sleeper solo, executive class seasons shell flat seat and economy class. Japan airline has got mileage bank which is the largest frequent flyer program of Japan airlines. The airline also offers frequent flyer partnership with air France, Emirates airlines, China Eastern airlines and Mexican de aviation. The fly on program is used to promote the airline system by its members winning the fly on points, elite qualifying miles and Elite qualifying segments. (Christine, 2003) It uses the JALCARGO brand for its freight services. It has painted all its aircrafts with tropical-influenced livers titled Resocha which is a marketing abbreviation for Resort Charter. In the past, it had some features as Tokyo Disney land and Tokyo Disney Sea as official airline for Tokyo Disney Resort. It operates with JALPAK International USA, Inc to establish business activities and also to take care for the passengers. JALPAK International Gift for food and other gifts from America. (Christine, 2003) British Airways British Airways is the UK’s largest International scheduled airline, flying to over 550 destinations. The British airway consists of British Airways PLC and a number of subsiding companies’ example British Airways Holiday Limited. British airways operate in different parts of the continent. Many towns and cities can be reached through the airlines. Due to scattered structure, they provide vital links to many destinations also on the Island. British is one of third largest airline alliance all over the continent. It offers a high degree of co-operation in scheduled, ticketing, code sharing, flight transfer operations, reduced costs, frequent flyer benefits. (Keith, 2004) The alliance formed based on one world whereby the management is centrally based. It has a managing partner who reports to the alliance board made of chief executives. The chairmanship is made on rotational basis. The Global project Director, Airport and customer experience, public relations, IT and Functional heads for commercial reports to the managing partner. The members also work together across the engineering and maintenance departments. They buy the products in bulk to reduce the cost and share the spare parts. (Keith, 2004) The Airline compromised of BOAC and BEA which was dissolved to form British Airways. The aircrafts operating the Airways are Boeing 787s, Airbus A380. This has enabled the British Airways to give good services to its customer, cargo and mail thus making it to expand more. (Keith, 2004) British Airways engineering plays a role of maintaining of subsidiary of British airways and also provides support services to British airways and other airlines. This has made sure that customers are well protected daring the flight and minimized the number of accidents occurring on the way thus expanding their business boom as many customers are increasing preferring the British airways. British airways have adopted new livery this was done on back called tail-fin art/utopia or world art tailfins. Air France It is based in the Paris and is subsidiary of Air France KLM Group. It offers the passengers services, cargo services to 83 countries and 185 destinations. Most of the air France is international flights operate from Paris Charles de Gaulle. It has also united flights from London-Heathrow’s to Los Angeles. They have aircrafts like airbus A318-100, airbus A319-115LR, airbus A330-200. Air France has three classes on international services thus are first class, business class and economy class. It also offers entertainment via video on demand. This will encourage the passengers and boost their demand. (Roy, 2007) The current livery is a Euro white comprising of white fuselage with blue air France titles, a white tail with parallel blue and red lines streaking across the tail at an angle and finally a European flag at the top. Air France and KLM joined on May 5, 2004 this has enabled easy operation in cargo freight between the countries and making quick dispatch of cargo to the destinations thus promoting business and expanding the airways. (Roy, 2007) Easy Jet The operation team of Easy Jet is collectively in a team. It consists of strategy, planning and day-to-day running of the company. The operation Team and its associates include aircraft crew and management team at each airport. They have expert, experiences operation which ensures that the operation of the business is well and effective to the passengers and cargo services (Charles, Mark and Pauline, 2003) They train, support, recruit its employees providing a distinct and innovative environment. They achieve to provide quality services by: Recruiting the highest qualified cabin crew and pilots provide an excellent standard of pilot and cabin crew training. Provide standards, procedures and policies by which they supervise the flying operation. The management policy provide to crew ensure consisted like managements. They provide support functions such as crew help desk and crew room support. The ground operations team is guardian who ensures that safe and secure ground operation across the entire network of easy jet network. This is done by good management of airport and ground handling relationship. The central support team, made up of services development and performance functions-role in this team include internal auditors, administrators, analysts and project development. (Charles, Mark and Pauline, 2003) Apart from central support team, they have the delivery team which is responsible to overseeing and operate day-to-day work. Whenever there is a flight, there is an accountable manager responsible for ensuring that the operation is conducted to the high standard to meet the customers demand. (Charles, Mark and Pauline, 2003) This had made the easy jet to grow and expand in the businesses of the quality services provided to passengers and well handling of the cargo. On the other hand we have quality, safety and security team that ensures that safety performance, monitoring the risks which the easy jet may encounter during its operations. They maintain the relationship with external organizations ensuring an adequate response to any operations crisis example aircraft accident. They manage the training programmes within the airline to give the quality staff in security details. They also have network management center which looks into flight monitoring and fleet control, ATC flight planning and slot management, crew control, airport communication, operations pre-planning. Working closely with other department, this department has ensured that the daily flying operations takes place effectively. Air Finland The air Finland was established in 2002. It is owned by five individuals. It offers a scheduled and charter services to Europe, Asia and Africa. It has taken different measures to ensure its proper management in the Airline. The ground operations team plays a role in ensuring a well performance in the company to provide a standard service to the customers. During the flight the network group ensures that time to precede is met according to the schedule without any delay to give the customers a proper service. (Paul and Jennifer, 2005) On the other hand we have the security details which ensure that the entire airport has been protected without any risk of accidents, theft or bombs. The high security the air Finland has promoted the business between Finland and the entire region of Europe, Asia and Africa. The well established department of engineering ensures that all the air crafts are on standards to avoid any risk of accident on the way. In the engineering department we have also maintenance group to ensure that all the equipment essentials for well operations of the Aircrafts is met. They ensure that proper network in communication is done on time to avoid any risk. (Paul and Jennifer, 2005) On higher level, air Finland is managed by qualified teams which make the airline meet its goals. Examples of the airline operating in air Finland are Boeing and Airbus. China Airline Services For the China airline services to expand its market opportunities, it has plans to launch an air fright data exchange platform. This will enable to exchange information on house bills, cargo tracking. About 60% outbound cargo airway bills is using this data exchange platform. (Langhorne, 2006) China was ranked 7th in the world in terms of international air cargo traffic among IATA members because China operates the largest B747 freighter fleet in the world with 15 B747-400F aircraft. Airline in China provides warm-hearted, quality, safe services in China. This has expanded its business with the entire world because of care it takes on its customer and cargo handling. A department in charge of the Nation’s civil aviation industry called The Civil Aviation Administration of China (CAA) has opened around 1,000 domestic airlines that cover 140 cities with Beijing in the center. In China we also have 130 International airlines and 21 regional airlines radiating to 60 cities and 40 countries. (Langhorne, 2006) The airlines has got quality finest aircraft and equipped with the world’s best available facilities in the airport. It has high security in the airport thus providing security to the cargo and to its passengers. It’s operates with Boeing and Airbus aircraft, it has signed with more than 100 airlines around to provide best overall services to its passengers and cargo. It delivers the cargo to most destinies in the world. China airline has also taken measures in training and maintaining high qualified skilled and specialized staff. Example is well trained engineering to maintain the airport and the aircraft to have safety to its customers. China airline is also ensuring that airlines is using it’s expertise to automate company offices and to build a global information network to serve its customers. This enables communication; this is done in website, magazines and promotional vehicles. This has boosted the expansion of China Airlines. (Langhorne, 2006) On the other hand, China has invested in subsidiaries to broaden its commercial horizons. These investments have increased China airlines business operations assuring its prosperity into the future. CONCLUSION The structure of management of Spain should be used as an example of management in other Airline to ensure effective and the best way the Airlines can give. This is through the decentralization means of management to achieve their goals. The government should also not strictly control the Airlines by buying big shares in the companies but should leave them to govern themselves independently. On the other hand the Airline should recruit qualified staff by training them, should provide standards and policies on flying and cargo handling operations. The management on the other side should be of high standard to meet their goals. The departments in the Airline should work together to avoid high costs encountered in the operations. The Airlines should also make some efforts agreement between them to reduce the cost as we saw the agreement between Singapore and Belgium. In summary the Airlines in Asia and Europe are developing very fast and we hope they will do better than this. References Charles D, Mark L, Pauline S. (2003), Malaysia Singapore and Brunei (New York, Rough Guides) Christine, G. (2003), Japan Business. (New York, World Trade Press) Jeremy A (2002).Southeast Asia Travels (London, OUP) John A. (2006). Arriving By Air Spain, (New York, McGraw-Hill) Keith, R.(2004),Bibliography of British History. (London, Oxford University Press) Langhorne, W. (2006), Wings of an Embattled China. (London, Lehigh University Press) Paul H, Jennifer B. (2005), Air Finland (New York, Prentice Hall) Robert, C. (1999), the MIT Encyclopedia of the Japanese Economy. (New York, MIT Press) Roy, R.(2007),World Airline Record, (London, Roy R & Associates) Simon, R. (2004). Malaysia, Singapore & Brunei. (New York, McGraw-Hill) Air Nippon, Available from, www.bootsnall.com/internationalairfare/airlines/air_nippon.shtml (Retrieved April 20, 2008) Singapore Airlines Available from, www.siaholidays.com.au/(Retrieved April 20, 2008) Read More