Download - United Airlines Casestudy
Introduction
October 1st, 2010 was an important date in the history of airline
business industry as two of the World’s best airlines, United Airlines
and Continental Airlines to form the new United Continental
Airlines in order to deliver consequential prosperity and
profitability while maintaining a sustainable long-term significance
to their esteemed stakeholders across the globe.
United Continental Holdings, Inc. is the investment company for
Untied Airlines and Continental Airlines served by more than
86,852 employees and operating the second-largest fleet with 702
aircraft having the headquarter sin Chicago, while its core
operations are from Houston in the United States of America.
United is a beginning member of the Star Alliance, the major airline
alliance in the world, and proposes connections to over 1,000
destinations in over 170 countries worldwide (United Airlines,
2012).
United was the first airline to begin Boeing's new 777 airliner, with
a flight from Washington, D.C. to London on June 7, 1995. It has
also played vital roles in the international market. In 1997, , it
combined with Air Canada, Germany's Lufthansa, the Scandinavian
Aircraft System (SAS), and Thai International (later connected by
Varig of Brazil) to create the Star Alliance to offer a common
network of world-spanning routes. United placed a number of years
of profits in the late 1990s but, because of an economic downturn in
Asia, the airline's increase in profits has decreased. At the end of
the century, United sustained to be one of the most significant
players in domestic commercial aviation (Siddiqi, n.d).
Presently, Jeff Smisek is President and Chief Executive Officer of
United Continental Holdings, Inc., the holding company for both
United Airlines and Continental Airlines. Mutually with their
provincial partners, these both airlines functions a total of
approximately 5,675 flights a day to 372 airports on six continents.
Smisek is also a member of the United Continental Holdings, Inc.
Board of Directors. He became President and Chief Operating
Officer in September 2008 and take for granted the role of
Chairman, President and Chief Executive Officer in January 2010.
He was also selected as Aviation Week’s Person of the Year for
2010("Biography," 2010).
Company Background
Continental Airlines Company was incorporated in the early 80’s of
the 20th century and presently one of the most important airlines
operated in US along with a business range of transporting
passengers, cargo and mail handling operations. On October 1,
2010, UAL Corporation concluded it’s getting hold of of Continental
Airlines and changed its name to United Continental Holdings, Inc.
The airline acknowledged a single operating certificate from the
FAA on November 30, 2011 (FREED, 2011). On March 3, 2012,
Continental and United compound their passenger service systems,
frequent-flier programs, and websites which officially removed the
Continental name and brand as far as the public was concerned
(Riegler, 2012).
Mission and Vision Statement
Vision:
“To be recognized as the best airline in the industry by our
customers, employees and shareholders”
Be carefully analyzing Continental Airlines vision statement,
customers can obviously interpret that they hope on happening the
best in what they do. Continental Airlines aim to achieve the final
level of pleasure from not just its customers, but also from its
employees and shareholders. Its vision statement gives significance
on both its interior and exterior customers cautiously stress their
significance to their successes. Continental has discovered the
reality that many companies be likely to overlook, that is, so as to
be successful in the airline industry they will have make sure the
satisfaction of its employees, who in order will convey quality
services to their customers that will make them to come back for
these services time and again.
Mission:
Although Continental Airlines makes an clear name in the airline
industry, it does not have a predefined mission statement. It has
established a vision, as stated above, and it has a variety of
strategies that it sticks by that make it possible for it to work
towards this vision. However, from a cautious study done on its
overall business operations and its guiding principles and values,
we can assume that Continental Airlines mission is to be the kind of
airline customers want to fly on, and the airline people want to
work for. This also undoubtedly portrayed in their vision, and hence
is a ideal fit as Continental Airlines Mission Statement.
The “Go Forward Plan” Continental’s basic element for success.
This ever changing, four point plans allows the company to prepare
and exceed its goals. Since it’s development in 1995, this has led
the company to much greater heights of distinction in terms of
service and finance.
The “Fly to Win” factor highlights the requirements to reach top
quartile industry margins. This means that they hope to enlarge
their international airline connectivity and go on eliminating non
value added costs.
The “Fund the Future” aspect focuses on developing continental’s
franchises and set the stage for future growth. In addition, it
focuses on their fleet map and drone real state and make sure the
well-built cash flow and financial flexibility.
The “Make Reliability a Reality” element puts forth the principles of
making an industry leader of a product that Continental is arrogant
to present. In addition, they aim on becoming at the top in terms of
on time arrivals, baggage handling, complaints and involuntary
denied boarding’s. They also hope to get better their product every
chance they get, and in turn improving their overall company
reflection.
Finally their “Working Together” element states that they want to
promote a culture where people enjoy coming in for work every day
and are acknowledged for their contributions in the company’s
triumph. In doing so, they want to place an importance on safety,
employee programs and communication.
Following are the Major recognized external opportunities and
threats of Continental Airlines. Identifying these factors help the
company to assess its current position in the competitive market
and encourage the management to analyze the current market in
order to set the strategies and goals also these are they points to
evaluate the industry analysis the external factors evaluation.
Environmental effects
Political-Social-Economic
Political
No Factors Case Issue Finding
1Labor cost. Continental Airline’s labor costs may not be
competitive.Opportunity
2Chapter 11 –
bankrupt protection
Chapter 11 bankruptcy allows airliners to achieve substantial cost reductions through, among other things, reduction or discharge of debt, lease and pension obligations and wage and benefit reductions
Opportunity
3New EU US open skies
treaty
EU-US Open Skies policy would present opportunities to airliners to expand their service horizon.
Opportunity
Social
No Factors Case Issue Finding
1Discouragement to air fly
Terrorist attacks have increased risk and Public health threats are affecting travel behavior. Threat
2Terrorist Attacks
September 11 affected the sales of airliners Threat
3Economic slow down
Global environmental issues are influencing the way airliners conduct their business and operation.
Threat
4More demanding
Nowadays, customers are more demanding in terms of quality service expectations and the advance of ICT has also given customers more buying power and selections
Opportunity
Economical-
No Factors Case Issue Finding
1Competitive force
New Low Cost Airliners present new competitions to Continental Airlines
Threat
2Terrorist Attacks
Additional terrorist attacks or international hostilities may further adversely affect Continental Airline’s financial condition
Threat
3Economic slow down
An economic downturn could result in less demand for air travel.
Threat
4Competitive forces
Low cost carrierOpportunity
5Loss of profit Highly competitive and less attractive domestic
market Threat
The Effect of Economic Crisis
The confusion of the Recession led companies to restrict travel and
forced leisure travelers to tighten their budgets, leaving little
discretionary spending. Volatile fuel prices had a eternal impact on
the airline industry also. Although many experts believe that the
recession is over, there have been concerns regarding double dip
recession. Economic problems in the rest of the world and recent
dismal data regarding jobs, housing and consumer spending have
raised the concerns for another recession.
United has just come out from the bankruptcy. United may not
withstand another recession, yet alone the merger with
Continental. Therefore, united must carefully craft an alternative
strategy to coup with another recession.
S-W-O-T Analysis
Strength
1. The fact that the airline provides customized services in accordance to
the destination it’s travelling to.
2. The company rose to profitability after being hit severe losses for four
years straight.
.
Strength
1. The fact that the airline provides customized services in accordance to
the destination it’s travelling to.
2. The company rose to profitability after being hit severe losses for four
years straight.
Weakness
1. The fact that its ‘Go Forward’ plan does not attend the environmental
issues directly.
2. The airline has faced a decrement in its overall AQR scores.
3. Service quality has also faced a decline.
4. It has been recorded that continental has poor on-time performance,
despites its efforts.
5. Lack of internal training for the employees
Opportunities
1. Continental airlines should consider researching the international make,
as they face intense competition from the local market.
2. The installation of winglets in an attempt to lessen costs.
3. The “EU-US Open Skies’ provides Continental with an opportunity to
broaden its base in terms of connectivity.
4. Growing demand for travel at 3.2% growth in 2011
5. 42% increase in the Hispanic population in US over the last decade.
Main competitors
Southwest Airlines (NYSE): The number one domestic airline
provider with low cost fair flights throughout U.S. The airline was
established in 1967adopting its current name in 1971 and as of
June 5, 2011 is the largest airline in the United States based upon
domestic passengers carried. In May 2011 the airline get hold of
Orlando-based AirTran Airways, with full combination of the
carriers taking place over several years, and on March 1, 2012, the
company was issued a single operating certificate meaning that
from a technical standpoint, Southwest and AirTran became one
airline.
Threats
1. Rise in the fuel costs and domestic competition
2. Elevation is security costs due to the risk of security due to terrorism.
3. The fact that its rival have recovered from bankruptcy and recovered
back much stronger due to their ability to reduce their costs.
4. The introduction of new aircrafts by the rivals and the fact that this
would directly contradict Continentals young and more fuel efficient
aircrafts
5. Entry of international airlines into the domestic services
6. Ongoing pricing competition of budgeted airlines in the market.
7. Airline industry as a whole vulnerable to economic cycles and big swings
in bottom-line performance.
American Airlines (AAL/AA): The fifth largest airline in the world
based on available seat miles and revenue passenger miles on an
average day. AMR is the parent company of American Airlines and
headquarter in Fort Worth, Texas. American was the last of the
remaining legacy airlines in the US to file for bankruptcy, and thus
there are no remaining legacy carriers that have not taken
advantage of Chapter 11.
Delta Airlines (DAL/DL): Delta Airlines is the major airline in the
U.S, headquarters in Atlanta, Georgia. It is the world's largest
airline according to fleet size, and the world's largest airline in
relation to the scheduled passenger traffic. Delta and its
subsidiaries, with approximately 80,000 employees, operate over
4,000 flights every day. Delta is a beginning member of the
SkyTeam coalition and has the allegiance program SkyMiles.
The main financial statement and ratios
Delta Southwest American US Airways Jetblue02468
1012141618
Market Share
Social Responsibility
�As an intern national Airlines, United Airlines’ Corporate
Social Responsibility report - Every Action Counts(SM) -
stress their actions and obligations to business ethics and
leadership, safety, customer pleasure, employee development
and opportunity, community engagement, and environmental
responsibilities.
Every Action Counts(SM) point out the attention to United's
improvement toward making a significant changes in the cities
and communities where its people live, work, travel, and do
business. It demonstrates the company's hard work to attain
industry leadership in safety and customer satisfaction; its
ongoing support to their communities to deal with important
economic and social needs; and the development in executing
accountable environmental proposals that decrease impact in
the air and on the ground.
Recommendations
The overall strategic analysis of Continental Airlines reveals that
current recommendation for the horizontal integration strategy
which in merging in this case would boost the sales over the years
and the company can have a significant control over the entire air
transport operations in the domestic airline market of United States
as well as in the international airline operation as well. The
expected growth of company will definitely become a threat for
many of the domestic air carriers in the United States and it will
increase the overall market share of the company in the coming
years.
Reference
United Airlines. (2012, April 21). In Wikipedia, The Free Encyclopedia. Retrieved 17:45, April
23, 2012, from http://en.wikipedia.org/w/index.php?
title=United_Airlines&oldid=488485681
Siddiqi, A. (n.d.). United airlines. Retrieved from
http://www.centennialofflight.gov/essay/Commercial_Aviation/UnitedAirlines/Tran16.htm
Biography. (2010). Retrieved from http://ir.unitedcontinentalholdings.com/phoenix.zhtml?
c=83680&p=irol-govBio&ID=204741
FREED, J. (2011, November 29). Pilots: United gets single operating certificate. Retrieved
from http://news.yahoo.com/pilots-united-gets-single-operating-certificate-
231520061.html
Riegler, P. (2012, March 04). United and continental complete computer system and web site
merger. Retrieved from http://www.frequentbusinesstraveler.com/2012/03/united-and-
continental-complete-computer-system-and-web-site-merger/