Principles of Management in Aviation

Topics: Strategic management, Low-cost carrier, Qantas Pages: 7 (2419 words) Published: April 26, 2012
Principles of Management in Aviation

Essay Assignment

The Macquarie dictionary defines ‘advantage’ as: “any state, circumstance, opportunity, or means specially favorable to success, interest, or any desired end”, and also defines ‘competition’: “the rivalry between two or more business enterprises to secure the patronage of prospective buyers.” (Macquarie, 2011) From these definitions, one can infer that a company’s competitive advantages are means of setting itself apart from its competitors to gain acceptance and satisfaction from its customers. In other words, how are a company’s services and products superior to what the competition has to offer that will attract customers? Leisure travellers, who constitute two thirds of most airline markets chose flights based on price, therefore are very fickle (Lawton 2002, p.36-37). This shows the importance for airlines to keep costs down and to innovate to set themselves apart. Domestic air travel in Australia has proven to be an indispensible tool for businessmen and holidaymakers across the country. Until the entrance of Virgin Blue in the Australian airline market, the duopoly between Ansett and Qantas kept airfare prices high. This essay will discuss Virgin Blue’s many positive attributes that provide a competitive advantage over its main competitors, Qantas, Jetstar and Tiger Airways: Affordable travel, maintaining a high level of customer service satisfaction through its front-line employees, its reputation and the peculiar company culture often associated with Virgin brands.

The Low Cost Carrier (LCC) business model has been tried and tested by numerous airlines around the world (Lawton 2002, p.5). Airlines such as Ryanair, Southwest, Easyjet, and Virgin Blue, all implement the common cost-cutting strategies in their business models. Virgin Blue was the first truly low cost airline to be established in Australia, offering seats at a much cheaper price than Qantas and Ansett, who at the time were the biggest competitors. In a statement published on their website on August 15 2000: “We are here to make air travel the most simple, convenient and inexpensive way to get around Australia”, Virgin Blue clearly stated their company’s vision for the future, and changed Australia’s aviation industry to the consumers advantage Virgin Blue (2000).

Common cost-cutting strategies used by Virgin Blue and other LCC include: Utilizing only one or few different types of aircraft, cutting out unnecessary luxuries or frills, online reservation systems, fast aircraft turnaround times and so on (Lawton 2002, p.39). Omitting the inclusion of business/first class seats allows the aircraft cabin to be fitted with more economy class seats and can reduce costs by approximately 16% (Lawton 2002, p.40). Since the introduction of Virgin blue, more companies have followed suit in a bid to exploit this new LCC submarket in Australian aviation, thereby further increasing competition within the industry. In response to the competition that Virgin Blue created in the market, Qantas launched its own low cost subsidiary, Jetstar airways (SMH, 2003). Jetstar offers fares which are in direct competition with that of Virgin Blue, using similar cost-cutting strategies and operating a nearly identical network of destinations. In addition, Tiger Airways Australia joined the Australian LCC market in late 2007 (Rochfort, 2007). So how does Virgin Blue differentiate themselves from its low-cost competitors?

In its early beginnings, virgin blue followed a strict cost leadership strategy to differentiate themselves from Qantas and Ansett. But since the arrival of other LCC, Virgin Blue have had to find other ways of discerning themselves to maintain market share. One way they did this in 2007 was to introduce a premium economy class to its fleet of aircraft in an attempt to attract more business travelers (Redorbit, 2007). Virgin Blue also attempted to gain clientele by being the first...
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