Strategic Vision for AirTran Airways?
New Strategy for AirTran Airways?
On September 27, 2010, a merger of AirTran Airways and Southwest Airlines, two major low-fare carriers in the U.S, was officially announced and lead to a nearly-establishment of a “most competitive low-fare airlines”. The U.S Airlines industry had grown in competitiveness since “the deregulation act” in 1978, seeing increasing entry of new carriers into the industry and continuous innovation in operation and service. However, since the beginning of this decade, it has been in a crisis due to the long-term recession of the U.S economy and instable fuel price, which in turn, led to bad performance and increasing debt of many players in the industry, and AirTran was among them.The merger was a result of such situation. The merger, at the current time, is planned to be completed within the next two years, and once complete, all AirTran’s utilities, including aircrafts, pilots, service network, etc.,will be rebranded and served under the name of Southwest. However, this strategy, in which the AirTran brand will be completely disappeared, offers merits to the merged airline, but it certainly has demerits as well. Although merging into one operator would give the two carriers competitive edge to become the largest low-fare airline in U.S and a potential to expand overseas, AirTran’s core competencies including strong hub presence in Atlanta and its unique cost control and advertising techniques would be highly possibly abandoned and adapted to those of Southwest. Besides, differences in cultures and corporate objectives are proved to be a not simple task for the merge. Therefore, instead of this in-planning strategy, what we recommend is a new strategy, in which the brand AirTran will still be maintained and serve majority as an international business unit of Southwest. Following in this report will be our analysis of business environment of the low-fare airline, AirTran Airways, and a discussion and reasoning for a strategy that the airline should adopt. In particular, the report will cover the followings: I. Introduction – Background of AirTran
II. Contextual Environment
III. Transactional Environment
IV. Corporate Competencies and Strategic Problem
V. Strategic Option for Solution
VI. Recommendation and
AirTran Airways is one of the famous low fare airline companies in the United States. The company has grown into one of the largest and most profitable low cost airlines in the industry with service to more than 60 cities coast-to-coast, as well as the Caribbean, and more than 700 flights per day and over 8,500 Crew Members. The airline also has focused on adding unique services for customers, such as inflight Internet service. AirTran Airways also has been one of the three top low cost carriers in Airline Quality Rating study for last three years. However, on September 27, 2010, AirTran Holdings, Inc., the parent company of AirTran Airways, announced its plan to merge with Southwest Airlines, which is the most successful low fare airline company in the United States. This is for further growth and mutual cooperation to compete with severe rivalry in the low fare airlines industry. The merger was approved by the Department of Justice in April, and the integration of AirTran Airways and Southwest Airlines is under progress. From the current situation, several issues related to the merger can be potential strategic problems. Among them, we considered that the losing organizational competence of both sides is the urgent priority. This report will first analyze contexture and transactional environment of AirTran Airways. Then, in organizational competence part, even though AirTran Airways is our main concern, Southwest Airlines’ competence will also be briefly discussed since we see that the urgent strategic problem to be solved is lost of...