Travelling became more common in past few years because of air ticket fares and tours are getting less expensive than before. This is no longer a luxury activity. Airline industry plays one of the most important roles in tourism. This is a study of a low-cost airline in Hong Kong, HongKong Airlines. Task 1
1.1 & 1.2 Analyze the Objectives of HongKong Airlines and Explain Factors that Impact on the Business HongKong Airlines’ objective is to strive to innovate and make the travel experience more enjoyable for passengers. However, the company is facing quite a lot of difficulties on its business. Evaluating the current positioning of HongKong Airlines using the Porter’s Five Forces Analysis. The Threat of Entry
* Airline industry is an expensive business. It requires large sum of money to buy or lease aircrafts in order to run the business. * It needs to staff a lot of professionals like pilots and engineerers. * It is not easy to get approval from the government.
This is difficult to enter the airline industry. The capital is very big. Besides money, it also needs to apply different kinds of licenses or get approval of, for example, flight schedules from the government. There are currently less than 5 local airlines in Hong Kong. HongKong Airlines has less threat of new entrant in the industry.
Threat of Substitutes
* Cruise and bus tour.
* People prefer to take train because it is cheaper.
* Businessmen using conference calls instead of flying to other places for meetings because cutting cost became a trend and it saves time. HongKong Airlines is strong in this Force because it is a low-cost airline. The air fare is cheap comparing to its main competitors, Cathay Pacific Airways and Dragonair. The fare is low so it is affordable to more people. If there is not a big difference between train or ferry fare, people prefer to go by air because it saves time on travelling. On the other hand, travelling by land transport is only possible if going to China or Vietnam. This makes travelling by air almost the best choice. It is deemed to be the only way to go to some farer places, like Europe or North America.
* Travelling became more popular. People start to have more short trips than going a long one once or twice a year. Cheaper fare is an advantage for those who love to travel but with weaker financial background. Thus low-cost airline is their first choice. * Downsize of business travel. Leisure travelers become the main source of customers. They intend to look for more attractive fare. * Local citizens prefer local airlines.
HongKong Airlines maintains a strong competitive buyer force because it provides attractive fare than its main competitor. Since travelling became more common, lower fare is definitely a bargaining power in the industry. Supplier Power
* Fuel price is high.
* Airplanes providers, Airbus and Boeing Company, are likely to offer better options to its bigger customers. * Catering companies provides better products to airlines which are willing to pay more on catering service. * Airline alliances seldom do partnership with low-cost airlines.
Supplier power is weak for HongKong Airlines because it is a low-cost airline. Fuel is the main cost; however, the fuel price keeps going up. It is almost impossible to find substitutes for airplane companies and fuel. The supplier power is a threat for HongKong Airlines. Competitive Rivalry
* Other airlines operate same destinations.
* Competitors offer better services, more frequent flights and loyalty programmes. Airline industry is a high competitive industry because there are many airlines in the world provide the service to same destinations. Customers have plenty of choices. As more choices come up, people become more demanding.
To understand about the strengths and weakness of HongKong Airlines using SWOT Analysis. Strengths
* With the growth of...