Download - Synergy Presentation
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Brittany Williams
Laura Finney
Danatra Taylor
Lucie StraubLorenzo Perez
Synergy
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The U.S. Department of Transportation (DOT) describes regional airlines as companies with revenues less than $100 million that focus on short-haul flights.
Key Competitors are: Alaska Air and Southwest Airlines
Intro to the Industry
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The Industry's Dominant Economic Features
Number of rivals and their comparative size passengers per year market share in the industry
Pace of process and technology change greater amount of seats for economy class
Ongoing process of reducing costs higher flight capacity additional fees to travelers hedging fuel costs
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Key Drivers of Change Low cost regional
competition
Globalization
Internet e-commerce
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Five Forces Impact on Airline Industry
1. Suppliers2. Buyers3. Competitive Rivalry 4. Substitutes5. Entrants (brand recognition of
established airlines)
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Companies in the Strongest/Weakest Positions
Market Cap in Billions
Net income in Millions
10
20 8
4
300
150
SWT
ALK
PIN
SWT
SWT
PIN
ALK
ALK
PIN
SOUTHWEST ALASKA AIR PINNACLE
Revenue in Billions
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Companies in the Strongest/Weakest Positions Cont’d
Revenue/employees Market Cap/employees Net income/employees
200k
400k 200k
100k
20k
10k
SWT
SWT
PIN
PIN
ALK
SWT
ALK
ALK P
IN
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Return on Assets/Return on Equity
Southwest ROA ROE2009 .70% 1.90%
2010 3.09% 7.85%
2011 1.06% 2.71%
Alaska Air ROA ROE
2009 2.47% 15.85%
2010 5.02% 25.40%
2011 4.79% 21.46%
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Leading: Alaska Airlines Service to key locations in the NW Solid cost structure
Moderately Successful: Southwest Great brand recognition Established Model followed by competitors
Struggling : Pinnacle Bankrupt Cost Structure and Business Model- main reasons
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Key Success Factors Cost Structure
Brand Recognitions/Promotion
Route Systems
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AnalysisWill competitive forces strengthen? Yes because the power of the five forces
are high.Will driving forces increase/decrease
profitability. It will decrease profitabilityHow firms can tackle the unattractive
forces in the industry? Efficient cost structure.
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Recommendations
The industry is not attractive. Long term profitability may not be
attainable industry wide. (except for well established companies)
Operating conditions have been declining Profitability has been unstable since 2007
How do you become a millionaire? Start as a billionaire, and buy an airline! -Richard Branson
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Q/A