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What is the most consistently significant faced challenge faced by the airline managers in the 21st century??
The economy of a country is substantially been determined by its quality of air transport. So the managers face several challenges ahead. In 90s everyone talk about the subsequent growth of the economy pace but there was recession of 1970 too, which faced severe low demand in airlines. The airline industry had been growing by leaps n bounds in terms of customer service. There have been tremendous changes in the airlines sector in the last quarter of 20th century and so brought changes and new challenges which were faced by the airline managers. The managers in airline sector faced severe challenges in 21st century also because of the wide micro economic instabilities produced earlier. Managers saw various losses in third fourth quarters and majorly on 2007-08.
After an interval of growth, there come some of the challenges which grasp the airline industry and it's management.
The managers should strive for managing the challenges coming from :
High aviation turbine fuel prices, shortage in supply of the skilled laborers and their increased cost, high burden of debt, excess of capacity lying, and intense of price competition.
The industry is experiencing drastic increase in the number of passengers, driven by privatization of airlines industry and introduction of low cost carriers like Deccan airline, go air, spice jet etc. However, rise in prices of aviation fuel and the economic slowdown creates negative impact on the industry and thereby posing serious challenges on the part of managers to manage these threats.
There have been various social challenges faced by them. As operations of religions and national carriers scaled down, many airline managers became redundant. Various airlines had to forma their own subsidiary airlines in order to compete.
Due to globalization there have been continuous fall in relative costs for airline transport and thereby a steep fall in generated incomes, managers feel serious resource constraint.There has been serious competition after globalization. Many companies are interested in inviting private investors in this field.
Countries like Latin America, Africa n Europe has increasingly blowing wave of privatization.
Better efficiency was there with the initial experience but managers felt extreme financial burden on their shoulders. This involves major staff retrenchment which may need careful execution on the part of managers.
Another challenge may faced by them is changing customers requirements. Needs of customers are dynamic and evolutionary. They are never constant and keep changing.
Managers have to adapt them to keep them updated to the changing needs and scenarios.
Managers must try to develop low cost barriers and full services.
So, it becomes a challenge for the airline managers to self enable themselves so that they are stimulated enough to think about the totally new ways of serving and satisfying their customers.
Managers may feel challenged from infrastructural constraints also. There is challenge to monitor the performance and prepare international practices.
Restructuring in a best possible way is a challenging task. Managing infrastructure is one of the major constraints that managers may face.
Inviting investments from the private sector should b done in order to manage its infrastructure.
Another challenge can be the green house gas emission by aircraft. These emissions have been continuously increasing and effecting according to few environmental studies. Studies say that these may continue increasing for next 20 years and so increasing challenges in front of the airline managers
The most significant challenge is creating a seamless airline market by taking all the advantages from all the information revolutions.
Airline deregulation act was passed in response to the increasing demands for comfortable and better airline services .It created a better environment for the new entrants to exist.
There have been serious variations and volatilities in fare prices of the airlines. The airline managers have challenges about setting up the fees. After deregulation the managers have to find way for competing with one another in open markets.
So, the most consistent significant challenge that comes in the way of airline managers is the financial constraint. Reaching to a fair cost to survive in the high competition regime and to maintain the growth so as to keep the momentum growing is a challenging task. To manage the business relating to air transportation pricing decisions are really important.
High prices increase the airfares, decrease the air traffic and thereby reduce the profits. The matters which need to be considered while setting up of the prices of fare and freight can be pressure of increased inflation, mounting competition, demand and supply imbalances etc. The price should have features like: flexibility, differentiation, discounts and allowances. The whole industry is plagued with high ATF prices which need to be managed by airline managers as due to the global slowdown, maintaining fares at low levels would be extremely difficult. Managers need to look at consolidation in order to avoid the problem of excess capacity. In case of excess capacity it is really difficult to manage to keep the fares at low level but increase in fares lead to lowering of profits. So the managers face a trade off. A manager not only needs to focus on designing engines which are fuel efficient but also developing fuels which are sustainable in order to reduce the vulnerability of profits.
Managers also need to focus and manage excess and heavy debt burdens. Airline industry resorted to heavy amount of borrowings from banks and other financial institutions to finance their extension plans due to their increasing profits and increasing passenger traffic. Airlines like kingfisher airlines, jet airways and air India have cumulative burden of about $8 million. Restructuring the amount of debts will be challenging for the managers. The managers also face the challenges of excess capacity.
The airline pricing is highly volatile and distorted. Similar as public utilities, airlines are subjected to government regulation as US airlines .Various factors need to be considered while setting up of fares. Distance is the most evident factor which needs to be considered by the managers. Moreover various infrastructural, geographical barriers and the competitive atmosphere are also important aspects in setting up of airline fares. Managers need to look upon the infrastructure and government regulations in order to reduce the transportation costs for the industry. There are evidences stating that by inducing heavy investments in the infrastructure and by focusing on the betterment of the regulations, at here have been huge reductions the costs. But, it still remains a challenge for the managers as costs are mostly influenced by exogenous factor called distance.
15% of the costs have been reduced by improving the infrastructure from 25 to 75%, during a sample taken and studied.
Managers have to look upon the issue of an ever increasing oil price .It has been sky rocketing.
Managers need to take steps. They have taken steps like issuing of the e-tickets, charging customers for the snacks provided in airlines and cutting routes to lower down their loses.
They have been suffering from high ATF rates due to which they resorted to charging high fuel sub charges.
There has been almost doubling of ATF rates. Almost 80% of the operating costs are constituted on account of ATF rates hike.
For cost cutting managers need to constantly keep managing about the development of sustainable bio fuels. Managing about the redesigning of aircrafts, using more of air dynamic oriented designs, lighter materials and better engines in order to reduced the fuel burn. Managers need to constantly engage themselves in investing more on development of new technologies and evaluation of new and improved fuel alternatives. Managers may resort to movements like: reducing the prices of the fare tickets for those who buy frequently, online auctions for selling the tickets, increasing the capacity of aircraft, betterment of staff involved. Managing such aspects would lead to betterment of economic stability of the respective airline industry .Manager should, in long run, must be able to sustain the growth of its airlines.
Managers try to increase their prices and decrease its discounted fares as low cost airlines had cost advantages over high cost airlines. Managers may feel challenged from infrastructural constraints also. There is challenge to monitor the performance and prepare international practices. Restructuring in a best possible way is a challenging task. Managing infrastructure is one of the major constraints that managers may face.
In order to withstand competition there is a need to identify the willingness of its customers to pay for the travel.
And deciding upon creating a low cost airline or come in the major airlines networks. Low cost airlines usually aim to seek and provide cost effective advantage to its customers. Pricing methods need to be improved and upgraded continuously as there have been continuing changes in technological advances also.
Thus, airline managers had been facing serious challenges in 21 century which includes skyrocketing prices of fuel, slashed corporate budgets, slowdown of economic growth. Excess of capacity and infrastructural constraints keep plaguing the industry and challenging its management capability.