Skywest Case Study

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Brandon Cisco
15 March 2013
GBA 490 Case Analysis
SkyWest, Inc. Competitive Analysis

Table of Contents

1. Executive Summary………………………………………………………………………...3 2. Competitive Analysis……………………………………………………………………….5 3. Recommendations………………………………………………………………………….7 4. Appendix…………………………………………………………………………………...9 5. Sources……………………………………………………………………………………22

Executive Summary
This report examines the factors pertaining to SkyWest, Inc. (referred to in this document as SkyWest) and its response to all forces present in the airline industry. Analytical tools used in this report are: * An analysis of the airline industry macro-environment

* A Five-Forces model of the pressures in the airline industry * A study of the drivers of change and industry dynamics * Identification of SkyWest’s main rivals
* The airline industry’s key success factors
* A strategic group map of the industry
* An analysis of SkyWest’s strategy and business model including financial performance * An identification and critique of SkyWest’s strategy
* A comparative weighted assessment of SkyWest’s competitive advantage * An analysis of SkyWest’s strengths, weaknesses, opportunities, and threats (SWOT) Conclusion: This report concludes that SkyWest is a strong industry leader because of excellent reputation for being efficient and agreements with other airlines. However, because of contracts with the other airlines SkyWest is not immune to the same issues that affect the industry as a whole. As of 2009 SkyWest primarily operated through partnership contracts with major airlines. As the major airlines faced bankruptcy SkyWest’s revenues became less predictable and more risky, even though the majors began to outsource routes to SkyWest. The bankruptcies also highlighted the risk within contracts with other airline companies. SkyWest had tried to partner with more major airlines; however those relationships have since ended. SkyWest made an acquisition in 2005 that allowed them to expand geographically. Considering the company’s limited domestic presence SkyWest had been undertaking efforts to expand its operations outside the United States. SkyWest has a strong operational network and a strong aircraft fleet but will lose ground to competitors if it fails to focus on increasing maintenance costs and extensive governmental regulations. The four major threats to SkyWest are; completion, increasing fuel prices, strict governmental regulation and increasing maintenance costs on aging aircraft as discussed in Exhibit 8.

Analysis
Despite the challenges and reduced revenues in the first five months of 2009, the future of SkyWest and the airline industry looks promising. SkyWest’s combined revenue passenger miles increased by 4.9 percent in June 2009, and its load factor improved form 80.0 percent in June 2008 to 82.3 percent the next year. SkyWest has benefitted from expanded partnerships in their current business relations with U.S. Airways, Alaska Airlines and American Airlines as referenced in Exhibit 9.

The main competitors of SkyWest, Inc. include Mesa Air Group, Inc., Republic Airways Holdings, and American Eagle as laid out in Exhibit 9. The competition is fierce over the contracts with few major airlines. In order to acquire these partnerships each regional airline is required to: develop and maintain high levels of customer service, develop and maintain a strong safety image, maximize on-time arrivals, and acquire new aircraft. SkyWest had been known to be an industry leader in customer service factors like baggage handling. However, as discussed in Exhibit 2 each of SkyWest’s major competitors have really stepped up their performance in that area and have made SkyWest’s advantage almost disappear. SkyWest will be challenged to create an advantage in other areas if they are to continue as an industry leader. The drivers of change in the industry have created more competition amongst rivals....
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