Air Transport Industry includes Airplanes and other avionics equipment which give rise to the need of managing such supplies and other related channels in an effective manner. Due to this reason, management of Aviations Operations is one of the crucial business aspects of airline sector. This presentation aims to provide a detailed account on commercial and strategic aspects of airlines along with requirements, considerations which influence global airline development. For this purpose, Virgin Atlantic has been taken into account to demonstrate such aspects in a efficient manner.
Virgin Atlantic is a British Airline which was established in 1984 headquarter in Crawley, United Kingdom. Initially, it served a single route between London and Falkland Islands. The airline is 51% owned by Virgin Group and 49% by a US company named Delta Airlines. In February 2019, the company entered into a new acquisition venture by introducing Flybe and Stobart Air operative under the Virgin Brand.
Various Aspects of Airlines
Airlines, today, have gained immense prominence and are not seen as a mere medium of transporting passengers. Today, they are used to serve different purposes such as transferring cargo, industrial or consumer-based, from one place to another in the form of shipments as well as passengers. For this purpose, it may enter into an assortment of alliances which help in increasing their efficiency as well as save operational costs and time for the airliners. Keeping this in mind, various aspects of airlines can be mainly bifurcated into Commercial and Strategic perspectives. These have been explained as under:
From a business perspective, it is crucial for an airline to be profitable as well as quality driven. The commercial aspects of airlines talk about the various components or elements which ensure the operational profitability and help the airliners gain increased volume in terms of passengers and revenues alike. It is important to note that an airline's commercial success can be measured by its Revenue passenger Miles (RPM), Passenger Mile Yield, Cost per seat available and Load Factor. Apart from these they may also include customization, maintenance and relocation activities undertaken by such operators.
Explaining these terminologies
Number of Revenue Passengers * Distance Travelled by passengers. (Ascertains Demand and majorly influenced by Macro-Economic Factors)
Passenger Mile Yield
Passenger Revenue / RPM (Usually taken as the average price).
Cost per seat available
Operating cost per Average Seat Mile (measurement of capacity).
ASM = number of seats available * distance travelled in a period.
Number of seats occupied/ total number of seats (Measures Capacity Utilization).
For Virgin Atlantic, its fleet size includes 44 Boeing wide-body aircraft as well as Airbus. It operates on a three-class cabin configuration viz. Economy, premium and Business class. With the advent of environment friendly solutions, Virgin Atlantic has also made some changes in its commercial and aviation fuel. Recently, the airliner has made a major breakthrough in creating a commercially viable and sustainable low-carbon aviation fuel. Thus, reducing their overall operational costs in near future.
Every airliner aims to serve their passengers in the most optimal manner by providing them with best air travel experience. The strategic aspects of airlines are concerned with the alliances or actions that result in enhancing customer experience, engagement and values. It is important to note that an airline's strategic success can be measured by its ability to adapt to challenging situations that continually arise in its business environment. In comparison to the commercial aspects, these are more inclined towards business strategies which includes partnerships, joint ventures and mergers & acquisition.
In July 2017, Virgin declared its intentions to establish a Joint Venture with Air France-KLM. As per their contractual conditions, the latter would acquire a 31% stake in Virgin Atlantic. This agreement came to fruition in March 2019 where KLM,. Air France and Virgin entered into a code-share partnership. Thus, opening 58 new routes from 18 UK airports for the British airline. Such an arrangement helps the companies to collaborate and enhance customer experience for their passengers from initial to ending point of the travel.
Requirements and Considerations influencing Global Airline Development
The Aviation industry has undergone a lot of changes in the recent decades. In order to cater to such needs in an effective manner, it is important for the operators to keep in check certain requirements and considerations which arise due to the changes occurring in the industry. Development of airlines on a global scale are influenced by certain variables which have been enumerated as under:
- Changes in political or legal factors:Changes in political or legal factors may impose certain restrictions or relieve a certain area, thus, resulting in either contraction or expansion of the global airline development in a critical manner.
- Developments in competitive landscape:With millennials, airfare spend per ticket has increased by 13% for business travels solely. This has resulted in the change in competitive landscape on a global scale. As a result, discounted prices, airline packages have increased in present-day scenario.
In order to meet these requirements in a timely fashion, it is important for airline operators such as Virgin Atlantic to take the following variables into account:
- Demand Forecasting;
- Connectivity at the Hub;
- Aircraft Availability;
- Matching the competition
This is due to the fact without these variables, any changes made in lieu of political or legal upheavals would result in the inaccurate implementation of business strategies which are crucial for the aviation development in both domestic and international context.
For exercising proper managerial control over Aviation Operations, ensuring that various commercial and strategic aspects are maintained and utilised to their full potential is a crucial step. Also, it is important for the managers to possess highly technical knowledge and skills so as to enhance efficiency under a fully controlled and safe environment which results in development of airline industry in a substantial manner.
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