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Continental Airlines: The Competitive Arena

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Southwest Airlines (2005) Based in Dallas, Texas. Domestic carrier operating 445 aircraft ... Southwest Airlines CASM is the lowest in the competitive group. ... – PowerPoint PPT presentation

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Title: Continental Airlines: The Competitive Arena


1
Continental Airlines The Competitive Arena
  • Banu Ozkaya
  • Ben Harris
  • James Babb

2
Outline
  • Most Direct Competitors
  • Competitor Financial Situations
  • Competitor Strategies
  • Charts reflection industry
  • Industry Trend
  • Future of the Airline Companies

3
Who are the Competition?(Top 5)
  • American Airlines
  • Delta Airlines
  • United Airlines
  • Airtran Airways
  • Southwest Airlines

4
American Airlines (2005)
  • Largest US Airline
  • Based in Forth Worth, Texas
  • Not in Chapter 11 Bankruptcy
  • Serves 150 destinations worldwide
  • International carrier operating 699 aircraft
  • Purchased TWA in April 2001
  • American Airlines CASM is 3 higher than
    Continental
  • Biggest Concern Competing on price with
    reorganized airlines

5
American Airlines Financial Data (2005)
  • ASM 176.13 Billion Miles
  • RASM 9.43
  • CASM 10.50
  • Net Income (861,000,000.00)
  • Load Factor 78.6
  • BE Load Factor 85.5

6
American AirlinesStrategy
  • Lower operating costs in order to compete with
    restructured airlines and low-cost carriers
  • Improve Hub-and-Spoke system to more efficiently
    serve larger markets
  • Utilize its American Eagle brand as a low-cost
    alternative carrier to compete with low fare
    airlines.
  • Source American Airlines 2005 10-K

7
American AirlinesSWOT
Strengths Weakness
Strong brand name Efforts to improve performance One of the largest airlines in the US Strong alliances in the industry Continued losses Substantial indebtedness High dependence on travel agents for ticket sale
Opportunities Threats
Growth in transcontinental market Reduction in costs through collaborative efforts Recovery in passenger traffic Intense competition from low fare players Increasing fuel prices Regulations governing the airline industry
Source http//web105.epnet.com
8
Delta Airlines (2005)
  • Based in Atlanta, Georgia
  • Currently in Chapter 11 Bankruptcy
  • International carrier operating 649 aircraft
  • Serves 149 Cities Worldwide
  • Delta Airlines CASM is 14 higher than
    Continental
  • Biggest Concern Competition from low-cost
    carriers and recently reorganized airlines

Source Delta Airlines 2005 10-K
9
Delta Airlines Financial Data (2005)
  • ASM 156.79 Billion Miles
  • RASM 10.33
  • CASM 11.60
  • Net Income (3,836,000,000)
  • Load Factor 76.5
  • BE Load Factor 86.9

Source Delta Airlines 2005 10-K
10
Delta AirlinesStrategy
  • Strengthen their Domestic Hub and Spoke Network
  • Increase International Presence in Europe and
    Asia
  • Merge SONG (Deltas low fare airline) into Delta
    and convert their planes to the class-system
  • Delta is seeking the higher end customers and
    adding better entertainment choices and more
    first-class seats.
  • Source Delta Airlines 2005 10-k

11
Delta AirlinesSWOT
Strengths Weaknesses
Global reach through network and alliances Strong market position Hub airports Significant overlap with low-cost airlines Deltas low cost carrier Song Lack of competitive strengths Vs AMR
Opportunities Threats
Cut in pilot pay would drastically decrease costs Engage in further alliances Orbitz Inc. Low cost competition Deltas Regional Jet advantage likely to slip General industry risks
Source http//web105.epnet.com
12
United Airlines (2005)
  • Based in Chicago, Illinois
  • Currently in Chapter 11 Bankruptcy
  • International carrier operating 460 aircraft
  • Serves 120 destinations worldwide
  • United Airlines CASM is 4 higher than
    Continental
  • Biggest Concern Competition from low-cost
    carriers, Higher fuel costs, Terrorist attacks.

13
United Airlines Financial Data (2005)
  • ASM 140.3 Billion Miles
  • RASM 9.20
  • CASM 10.59
  • Net Income (182,290,000)
  • Load Factor 81.4
  • BE Load Factor 82.8
  • Source United Airlines 2005 10-K

14
United AirlinesStrategy
  • Appeal to high-end customers through the
    introduction of enhanced first-class service.
  • Appeal to low-fare flyers through TED, Uniteds
    low cost carrier
  • Utilize the popular United Mileage-Plus frequent
    flyer program to attract and retain high value
    customers

15
United AirlinesSWOT
Strengths Weakness
Global Network Improved operational performance Uniteds membership of Star Alliance Chapter 11 bankruptcy Continuous operating losses Increased taxi time in 2004
Opportunities Threats
Uniteds expansion in Central America, the Caribbean and Mexico Growing traffic in Asia September 11 law suits Oil price rise Uncertainty in demand
Source http//web105.epnet.com
16
Airtran Airways (2005)
  • Based in Orlando, Florida. Main Hub in Atlanta,
    GA
  • International carrier operating 105 aircraft
  • Serves 47 US destinations as well as flights to
    Freeport, Bahamas
  • Airtran Airways CASM is 9 lower than Continental
  • Airtran is one of only a handful US carriers that
    has managed to remain profitable

17
Airtran Airways Financial Data (2005)
  • ASM 15.36 billion miles
  • RASM 9.09
  • CASM 9.35
  • Net Income 1,722,000
  • Load Factor 73.5
  • BE Load Factor 73.4
  • Source Airtran Airways 2005 10-K

18
Airtran Strategy
  • Low Cost
  • Targets value oriented business and leisure
    travelers
  • Low-Cost, Self-service ticketing to lower
    operating expenses
  • Source Airtran Holdings 2005 10-K

19
Airtran SWOT
Strengths Weaknesses
Strong domestic presence Operates Americas youngest all-Boeing fleet Report profits when the competitors can not High costs No international flight
Opportunities Threats
Increased usage of regional jets Improving tourism market in US Engage in further alliances Increasing competition Rising fuel costs Rising geopolitical tensions
20
Southwest Airlines (2005)
  • Based in Dallas, Texas
  • Domestic carrier operating 445 aircraft
  • Serves 61 US destinations
  • Southwest Airlines CASM is the lowest in the
    competitive group.
  • Southwest Airlines RASM was the by-far the
    highest in the competitive group.
  • Southwest had the highest Net Profit of all US
    Domestic carriers for 2005.
  • Source Southwest Airlines 2005 10-K filing

21
Southwest Airlines Financial Data (2005)
  • ASM 85.17 billion miles
  • RASM 12.09
  • CASM 8.09
  • Net Income 548,000,000
  • Load Factor 70.7
  • BE Load Factor 55.5
  • Highest Revenue per Available Seat Mile from
    Competitive Group
  • Lowest Cost per Available Seat Mile from
    Competitive Group
  • Highest Profit from Competitive Group
  • 2005 BE factor unavailable. 55.5 from 2001.
  • Source Southwest Airlines 2005 10-K filing

22
Southwest Strategy
  • Short-Haul
  • Point-to-Point (Rather than traditional
    Hub-to-Hub)
  • Low Fare
  • Low Operating Cost
  • Services smaller, secondary airports
  • Single aircraft type allows for lower maintenance
    costs
  • Source Southwest Airlines 2005 10-K filing

23
Southwest AirlinesSWOT
Strengths Weaknesses
Market leadership Low cost business model Strong financial performance New services Code sharing with ATA Airlines Positive outlook for the US airline industry
Opportunities Threats
Poor short-term liquidity situation No established alliances Declining passenger revenue yields Increasing fuel costs Uncertainty in demand Increasing competition
Source http//web105.epnet.com
24
Continental AirlinesSWOT
Strengths Weaknesses
Strong industry position Strategic alliances Strong operating performance Advantageous location of hubs Relatively low growth and profitability Highly leveraged
Opportunities Threats
Cost-saving agreement with employees New international destinations Membership of Sky team alliance Fleet expansion Oil price rise Uncertainty in demand Poor outlook for US airline industry Weak US tourism industry
Source http//web105.epnet.com
25
Comparison of Financial Situations of the
Companies
American Airlines Delta Airlines United Airlines Airtran Southwest Airlines Continental
ASM (billion) 176.13 156.79 140.3 15.36 85.17 89.65
RASM () 9.43 10.33 9.20 9.09 12.09 10.46
CASM () 10.50 11.60 10.59 9.35 8.09 10.22
Net Income (million) (861) (3,836) (182.29) 1.722 548 (68)
Load Factor () 78.6 76.5 81.4 73.5 70.7 79.5
BE Load Factor () 85.5 86.9 82.8 73.4 55.5
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31
Industry Trend
  • Brand loyalty is decreasing
  • Trend ? low-fare service

32
Future of the Airline Companies
  • ?

33
References Continental Airlines. (2004). Company
Profile. Retrieved from http//www.datamonitor.co
m American Airlines. (2004). Company Profile.
Retrieved from http//www.datamonitor.com United
Airlines. (2004). Company Profile. Retrieved
from http//www.datamonitor.com Delta Airlines.
(2004). Company Profile. Retrieved from
http//www.datamonitor.com Airtran Airways.
(2004). Company Profile. Retrieved from
http//www.datamonitor.com Southwest Airlines.
(2004). Company Profile. Retrieved from
http//www.datamonitor.com
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