Airline Industry SWOT Analysis

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12th Jul 2017 Tourism Reference this

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Conducting a SWOT analysis, that is, reviewing the strengths of an organization, its weaknesses, opportunities it can capitalize on for maximum profits, and the threats to achieving its full potential provides very invaluable information to the organization about the market and understanding the industry, as well. The aviation industry is not an exception, it too has its own share of strengths and opportunities which once utilized by an organization can help it grow substantially and weaknesses and threats which the organization must strive to minimize to the lowest possible levels.

Strengths

One of the strengths of an organization in the aviation industry is the growing income levels. The growth in individual incomes increases the amount of disposable income and hence many people are able to utilize the carriers to fly to their destinations

Growth in tourism is also a major strength as it has led to a significant increase in the number of domestic and international passengers with statistics indicating a 50% growth in the number of domestic flyers and a 25% increase in the number of international flyers.

Despite the downturns, air travel has continued to grow over time and is one of those industries that are far away from reaching their peak. This can be partly attributed to the ever growing population and the increase in the propensity of people to fly. With efficient management, an organization in the aviation industry is guaranteed to grow into a big and profitable enterprise.

Air travel has a marked safety record and has been generally accepted as a safe and fast way to travel. Even the low cost growing airlines have safety and speed attributed to them and therefore, a small growing airline shares this strength with big and recognized brand names in the industry which is quite an advantage. Airline staff consists of highly trained personnel, which is a major strength, to any organization in the industry.

Weaknesses

One of the major weaknesses in the aviation industry is infrastructural development. The development of infrastructure has been very slow thus unable to keep up the pace of growth of the aviation sector. It is therefore, a major bottleneck in the industry. A growing airline should therefore, give priority to investing in infrastructure by constructing state of the art airports with adequate runways and ample parking lots for passengers. It should also invest on routes leading to the airports to help reduce passenger delays due to traffic.

Airlines have been known to have a very high ‘spoilage’ rate in comparison with other industries. Once a passenger misses his/her flight, the income/revenue from that seat is lost. In order to avoid or minimize this occurrence, the airline should establish a method of contacting all the passengers prior to departure to remind them of their flight. There should also be a larger time window between the boarding time and the departure of the airbus to cater for those passengers who arrive late for their flights.

Aircrafts are very expensive and running an airline requires a very huge capital outlay. For this to work to the advantage of the airline, proper marketing strategies are required, and careful planning to ensure that returns on investment are greater than the initial investment.

An airline may find it very difficult to compete with other carriers due to their low fares. To survive this, the organization can lower its fares but ensure that they are in balance with the returns to avoid losses. Extensive advertising campaigns on quality can also give it an edge over the low cost carriers.

Airlines have to maintain a huge work force which is spread over an outsized ecological area and which requires constant communication and monitoring. For this to work to its advantage, extensive evaluation of the personnel is required to ensure competence and also the ability of the workers to work under minimum supervision.

Opportunities

There are many opportunities that an airline can capitalize on to reap maximum profits. Expected investment is one of the opportunities that can benefit an airline. The aviation sector is ever growing, and there is an increasing number of stakeholders in the industry willing to invest in air travel. An airline can take this opportunity to increase its capital base so as to be able to enjoy large economies of scale.

Development of new products and services can have a substantial blow on the profits of an organization. In aviation, an airline can introduce mailing services for delivery of mails and parcels across the globe. It can also introduce special fare packages for those travelling to certain destinations for pleasure or business.

Technological advancement and investment in information technology is an opportunity that can greatly help an organization to minimize its operation cost. An airline can rely on information technology to offer more customers friendly services and also provide customers with other services like internet while travelling which would make them pay more for the services hence increasing the profit margins of the organization.

The organization should evaluate end user response to its services to gain information on what areas of its services to improve. This would go a long way in helping the organization acquire new customers as well as retain its old ones who are satisfied with the services being offered.

The organization should also take the opportunity to expand and cover a larger geographical area. It should grow into the untapped markets and offer its products and services in these regions. Having a large customer base would increase its profits.

Acquiring better supply deals, for example, a less expensive fuel supplier would greatly minimize the operation cost of an organization in the aviation industry. The airline can also retain its suppliers but negotiate for better deals with the aim of increasing its profit margin.

Cutting down on delays is very important in the aviation industry. Minimized delays would mean less refunds and minimal compensation due to inconveniences made. It would also help the organization to gain the customers trust thus establishing itself as a carrier of choice for many travelers.

Linking up with other carriers in the industry is an opportunity that should not be ruled out. Linking up with another carrier would increase the passenger volume greatly. This can be done through ensuring a coordinated schedule where the airlines offer their services to various destinations through a sharing agreement. Only one carrier flying to a given destination from a particular location would enable the partnering carriers to avoid the long time taken before an aircraft is filled.

Threats

There are many threats facing organizations in the aviation industry. Travelling for leisure and business is greatly impacted by the global economy. A downturn in the global economy means that less people are likely to travel for pleasure and to do business. This leads to low income to the airline during this period. To minimize the effect of this, the organization should devise a mechanism of lowering its operation cost to the minimum possible levels to avert possible losses due to its operating costs exceeding income.

Some government legislation can also be a major threat to investors in the aviation industry. Intervention by the government can come with it rules which are very costly to adhere to and also competition from unexpected quarters, for example, from international airlines due to liberalization of the market.

Air travel is very vulnerable to environmental changes. Heavy storms are detrimental to flight schedules, and this may mean refunding those customers who opt to cancel their flights all together other than to wait. It can also lead to loss of an asset, for example, the crashing of an aircraft. To minimize the effect of this, the airline should ensure that it is well insured against losses resulting from these weather changes. There should also be an insurance cover for its passengers.

Air travel has a seasonal demand especially where the largest percentage of travelers involves those travelling for leisure. In this case, the highest demand is likely to be during international holidays like the Christmas season and a significant decrease in demand midway through the year. To ensure that there is no considerable drop in customers during the off peak seasons, the organization can come up with a method of encouraging people to travel during this period by, for example, lowering the travelling rates, offering discounts and special travelling packages.

In recent times, air travel has been a target to terrorists, and this has had a very negative impact on the airlines themselves. Frequent fliers have been scared away, and the airline industry has lost a considerable number of customers. To gain back the lost confidence, an organization should carry out an extensive campaign meant to assure customers of their safety when travelling using their airline.

Over the next few years, huge investments are expected to be made in the aviation industry. New airlines are likely to crop up and this will lead to a strain on the available pilots, and airport staff. This will be a limiting factor to the continued growth of the airline. To prevent this, the airline should start training its own pilots and airport staff. This would in future give it an advantage over the other airlines which would be experiencing a shortage of the same. The airline can therefore, transform this threat into an opportunity by selling some of its staff to the other businesses for a profit.

With the increasing number of airlines and aircrafts, there is likely to be a marked shortage of airports and airport facilities. The airline should therefore, invest heavily in its own airports and ensure that they have ample parking bays for its aircrafts.

The organization also faces the threat of being vulnerable to attacks by its major competitors. It should therefore, have all the mechanisms of counteracting this in standby so that it does not fall to accusations from other airlines.

The greatest hurdle facing many airlines today is high fuel prices. A huge upward surge in fuel prices can destabilize an investment in the aviation industry. To counter this, the airline should ensure that it has its own fuel reserve so that it is not immediately affected by the changes in fuel prices as it will have time to adjust while relying on its fuel reserves. With its own reserve, it can benefit from this threat by providing that much needed resource to its competitors at a large profit margin.

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