Post on 22-Mar-2016
description
‘Luxury Travel Has a New Name’
Contents Introduction ....................................................................................................................................... 1
Executive Summary .......................................................................................................................... 2
Inherited Strategy .............................................................................................................................. 3
Our Initial Plan .................................................................................................................................. 4
Our Strategic Vision & Mission Statement ..................................................................................... 5
Our Business Objectives ................................................................................................................ 6
Strategic Evaluation .......................................................................................................................... 7
Consistency ................................................................................................................................... 7
Uniqueness .................................................................................................................................... 8
Offensiveness ................................................................................................................................ 8
Profit Potential .............................................................................................................................. 8
Robustness .................................................................................................................................... 9
Adaptability ................................................................................................................................... 9
Operational evaluation ..................................................................................................................... 10
Marketing .................................................................................................................................... 10
Operations ................................................................................................................................... 10
Machinery ............................................................................................................................... 10
Fuel ......................................................................................................................................... 11
Route Selection ........................................................................................................................ 11
Service quality ............................................................................................................................. 12
Human Resources ........................................................................................................................ 12
Financial Evaluation ........................................................................................................................ 13
Overall Performance .................................................................................................................... 13
Ratio analysis .............................................................................................................................. 14
Unprofitable Q4........................................................................................................................... 14
Expenditure ................................................................................................................................. 15
Teamwork Evaluation...................................................................................................................... 15
Team Leadership ......................................................................................................................... 15
Decision Responsibilities Within our Group ................................................................................ 16
Donnacha- Fleet & Routes: ...................................................................................................... 16
Colm- Marketing: .................................................................................................................... 16
Liam- Fares: ............................................................................................................................ 16
Nuala- Corporate: .................................................................................................................... 17
Mark- Financing: ..................................................................................................................... 17
Meetings & Final Decisions ......................................................................................................... 17
Lessons Learned .............................................................................................................................. 17
Key recommendations for future Management Team taking over ................................................. 17
Observations on Airline Industry & your Organisation ................................................................. 18
What you & team would do differently ........................................................................................ 19
Appendix ........................................................................................................................................ 19
Fig 1.0 – The SWOT Analysis ..................................................................................................... 19
Fig 1.1 – PESTLE Analysis ......................................................................................................... 20
Fig 1.2 – Key Success Factors ..................................................................................................... 20
Fig 2.0 – Stock Price.................................................................................................................... 21
Fig 2.1 – Income & Expenditure .................................................................................................. 21
Fig 2.2 – Net Profit ...................................................................................................................... 21
Fig 2.3 – Ratio Analysis .............................................................................................................. 21
Fig 2.4 – Expenditure Breakdown ................................................................................................ 22
References....................................................................................................................................... 22
Introduction
It was two years ago today that Atlas Airways were involved in a complete overhaul of its
management team. The existing company was at a crossroads and was in desperate need of
decisive decision makers and a decisive strategy.
This report charts the fortunes of Atlas Airways from a humble regional airline to one of the
industry’s leading luxury airlines. Atlas Airways have grown exponentially over the last 8
quarters and within this report we hope to outline how and why this was possible.
Executive Summary
Upon takeover our airline was operating within regional area to towns and cities that were
deemed ‘unattractive’ to larger airlines due to low population figures and the limited facilities
attributed to the local airports in which the company operated.
The environment in which the company currently resides is facing increased competition
however there does exist viable opportunities for growth in serving new routes. The current
situation had been described as a crossroads in which there exists credible potential in
expansion of markets. A lack of capital and unsuitable aircraft represented significant
obstacles. As a result a key challenge for our management team was to craft a successful
expansion in terms of routes, fleet and service quality while remaining conscious of our lack
of working capital.
In terms of strategic choices made by our management team we attempted to make each
decision in accordance with our set out business objectives which you will see later in this
report. Each strategic decision throughout the our management of Atlas Airways was made to
optimise our chances of building a successful airline exhibiting the most complete service in
the industry in terms of quality and reliability. The only restriction placed on this investment
was to do so without compromising on sustainable profits.
Contained in this report you will find details of our initial strategic plan the strategic tools
used to develop it. Following this we will outline our airlines mission, vision and business
objectives. Our report will then discuss an evaluation of how our decisions aligned to this
strategy and we will focus in on decisions made in specific aspects of the business. Finally
this report will outline our financial performance over the 8 quarters in addition to an
evaluation of team performance and our lessons learned.
To give a brief outline of our performance, please refer to our appendix which outlines gross
profits, revenues, stock price etc. In terms of our final position Atlas Airways exhibited
consistent profits over the two year period (with the exception of Q4) and finished as the 3rd
most profitable airline in our industry.
In terms of the future direction for Atlas Airways we feel that our performance over the last
two years will enable future management the perfect platform with which to launch a
luxurious airline into worldwide markets. Our service quality and reliability was highest in
our industry and with these service offerings in addition to a substantial cashflow and
enormous lines of credit available we feel there is no reason why our airline cannot dominate
the high end market in the future.
Inherited Strategy
With the company at a crossroads in terms of expansion potential yet a lack of necessary
resources to capitalise we felt it prudent to conduct both SWOT, PESTLE and analyses to
better determine our strategy in moving forward and these can be seen in the appendix. It is
important to note that in conducting a SWOT analysis it is imperative that action is taken
using insights derived. An effective SWOT analysis cannot simply be a list it must be the
basis for action (Thompson & Strickland, 2001).
Following this analysis of both the company and its environment we looked at identifying
what we deemed the Key Success Factor’s for the airline. Again these can be seen in Fig 1.2.
With the help of these strategic tools we would form a logical basis for our strategy in
moving Atlas Airways forward.
Our Initial Plan
In utilising the various analyses techniques available to us to formulate our strategy we
collectively agreed to pursue a differentiation strategy for Atlas Airways. This strategy is
centred round creating a uniqueness of service which cannot be easily replicated and will
enable us to charge a premium price for our service in multiple markets (Thompson &
Strickland, 2001). Such was the level of opportunity present in expansion following our
SWOT analysis we collectively felt avenue the most suitable to pursue in eliminating cyclical
profit trends and facilitating real growth.
A differentiation strategy is fundamentally linked to our core competencies and in order for
us to create a sustainable competitive advantage it became clear that our strategy must be
driven towards improving these core competencies. We knew that creating unique
differentiation through improving our core competencies would take substantial investment
but also time. As a result we felt that in order to position Atlas Airways as a luxurious high
quality flying experience for our customers we would need to put in place the required
infrastructure necessary before entering the realms of premium pricing.
Our Strategic Vision & Mission Statement
In strategic management there exists five interrelated stages to be followed to enable a
successful strategy formulation and implementation and it all begins with developing a
strategic vision and mission statement (Thompson & Strickland, 2001).
An organisations strategic vision acts as their roadmap to perceived success and thus reflects
the management’s aspirations for the business (Thompson & Strickland, 2001). Its creation is
to outline the long term direction of the business, answering the simple yet imperative
question ‘where are we going?’. The vision must display realistic and credible credentials
should engage and energise people (Nanus, 1992). Another important aspect in the creation
of a strategic vision is to satisfy two key requirements; to illuminate the company’s
directional path and to provide a reference point in making managerial decisions (Thompson
et al, 2010). With these points in mind we have generated our strategic vision as such:
To successfully exhibit an airline defined by its unrivalled flying experience and customer
service. We are wholeheartedly committed to providing the greatest and most prestigious
flying experience on the market.
In terms of our mission statement it was necessary to cultivate something more than just
achieving profitability. Making a profit is a common misconception of what a mission
statement should be (Thompson & Strickland, 2011). An effective mission statement should
incorporate three distinct elements where possible; Customer needs, customers groups and
the company’s activities, technologies and competencies (Thompson & Strickland, 2011). An
effective mission statement should also indicate its differentiation from other competitors
(Thompson et al, 2010). Again in following these critical guidelines we have developed our
mission statement as follows:
To strive to provide a quality of service that ensures our corporate customers who believe a
flying experience should be more than just A to B need not question their choice of airline.
Our Business Objectives
With a specific focus on our KSF’s identified in Fig 1.2 we quickly realised that our success
in incorporating a differentiation strategy in terms of luxury would be based around achieving
closely linked objectives. Effective business objectives should be utilised to convert an
overall strategic vision into specific performance targets (Thompson et al, 2010). It is
important to note however that while business objectives are centred round results, these
parameters should be as specific as possible rather than relying on vague, generic targets like
increasing sales or decreasing costs (Thompson et al). In addition effective business
objectives should outline not only a performance target but also in timeframe in which to
achieve it (Thompson & Strickland, 2001). Our business objectives for Atlas Airways are as
follows:
1. Long term substantial investment in service quality while maintaining our growth
and profit margins.
2. Full fleet overhaul in order to better reflect our mission statement while allowing
for continual growth
3. An expansion of routes to cater for all customers looking for a superior flying
experience within one year of operations
4. Creation of an integrated service worthy of premium pricing within one year of
trading
5. Investment in vibrant marketing and promotional functions in a gradual yet
sustained manner to attract more customers in the short, medium and long term
6. Introduction and continual expansion of Sales Force capable of significantly
stimulating demand
Strategic Evaluation
Consistency Atlas Airways have performed consistently well over the past 10 quarters, both in terms of
implementation of business plan, and the end performance of the company. As said
previously, our aim was to create a competitive advantage with quality and luxury, which
would enable us to charge a premium price. We consistently held fast to this strategy, by
increasing quality and training budgets continuously over each quarter, developing the
amount of routes we entered and entering routes that were the right fit for us (e.g. flights to
major business hubs for our globally minded business clients and holiday destinations for
those clients who want a holiday in style). We were also consistent with our business model
in continuously increasing the amount and quality of our fleet. Revenues consistently grew
throughout starting at $1.235m increasing to $7.596m by quarter 8. As previously mentioned
we felt fare price was another important aspect of our business plan. We felt that it was
important to build a really high quality foundation by investing heavily in quality and
training, which will allow us to charge premium price, which we consistently increased in
line with our quality budget. Our motto was the higher the quality, the more customers will
come, regardless of the price, so along with high quality and training budgets, we had to
ensure that our employees will adhere to our high standards and uphold our philosophies by
compensating them appropriately. Finally, possibly one of the main indicators of our
adherence to our initial business plan and consistency over the quarters is our high stock
price, from a starting point of $20 per share we gained a high share price of $48.07 with a
final share price of $38.17, almost double the price when we started.
Uniqueness In order to achieve uniqueness within our service we felt the need to assess our value chain,
optimising our primary activities to provide our customers with an experience not easily
replicated. To achieve competitive advantage in terms of value organisations must understand
where value is created and lost (Johnson, Scholes & Whittingham, 2006). Porter (1985)
outlined primary value added activities as incorporating inbound and outbound logistics,
operations, marketing and sales and service. In order to create our unique value proposition
we focused on the improvement of these areas with particular attention paid to service and
marketing and sales.
This uniqueness has shone through with an excellent 8 quarters for us with high share price,
healthy profits, and an excellent reputation for customer service.
Offensiveness According to Thompson & Strickland, (2001) a competitive advantage is always achieved in
utilising offensive strategic moves. Effective offensive strategies exist in both the short and
long term and in terms of our strategic plan we focused on a long term competitive
advantage. As a result of committing ourselves to quality and reliability in the long term we
have enjoyed the benefit period of this offensive strategy, clearly shown in our industry
performance.
Profit Potential Due to our aims of reaching the highest price point by having the best quality etc., we had a
high potential for profit. While we did make healthy profits, there were times where we
didn’t reach our potential for profit. For example in quarter 4, we made such a huge loss (-
$688,929) that it affected cashflow, stock price, reputation etc., but once we realised our
mistakes we corrected them immediately and return the next quarter with a massive
$566,241, which shows the importance of sticking to the plan laid out at the very beginning
and being clinical and ruthless in decision making. Quarter 8 held much the same type of
market conditions as quarter 4 did. By learning from our mistakes in quarter 4, we decided to
be ignorant to demand forecasts because once you have the quality the customers will come.
Possibly the greatest comparison and contrasting of our profit potential is these two periods
where there was a difference of $1,000,000, which shows that we created an excellent plan
for profit potential that was effective when implemented and enforced.
Robustness Again a compare and contrast exercise shows just how robust a business plan we had all
along even if we did not implement it correctly. As above we thought we were leaving
ourselves open to market conditions with low demand forecasts in quarter 4 and tried to
counteract it with sales. This confused the customer and gave us massive losses. The
robustness of the initial plan is shown in quarter 8 where we ignored similar market
conditions to quarter 4 and made a $447,490 profit. This clearly shows we created a very
robust business plan that would have been able to withstand almost any market condition.
Adaptability Because our business plan was aimed at the high end non- price weary customers, our plan
did not have to stray from the original intentions of high quality profit, high revenue. We
knew that whatever happened we could keep to our strategy and not have to fundamentally
adapt it. Continuous improvement in overall service quality continuously aligned itself to
profitability. The only adaptation required was in route selection policies and fleet
improvement.
Operational evaluation
Marketing Within our SWOT analysis we had identified a weakness in terms of our current activity in
this area. As a result we felt it of immediate importance to increase our advertising and
promotional budget. Our long term commitment to an increased presence within our industry
resulted in an overall increase in budget of 300% from Q1 to Q8. With this increase we have
enjoyed an increase in our share of the market even during times of fluctuating demand.
As was in our initial strategic plan we slowly increase the fare per mile from 38c on the
medium scale to 51c per mile on the high end scale. We chose this pricing strategy as slowly
move into the luxury market, we made the increase slowly so as to not intimidate customers
with previous knowledge and experience with the firm. In addition to this, market knowledge
was provided to us that extreme fluctuations in our pricing strategy would be likely to
generate a less than favourable financial outcome.
The pricing strategy we choose was important as we chose a differentiated strategy and where
our incline in quality may not have been perceived by new customers or unknowledgeable
clients the pricing strategy was a way of signalling value of the service (Thompson et al
2010).
Operations
Machinery
Upon takeover our fleet was clearly unequipped for exhibiting a luxury airline. Our
Beechcrafts were inadequate in terms of size, range, comfort and customer service. As a
result a priority was a swift and significant upgrade of our fleet. A lack of working capital
and our teams reluctance to secure a long term loan forced us into a leasing strategy.
Our Beechcrafts were quickly sold and in return leases were placed on larger aircraft such as
the Embraer Brasilia & ERJ135, which provided us with a higher quality service. While a key
business objective was to upgrade our fleet we felt a staggered approach in line with our
financial performance was the most desired decision. These upgrades also allowed an
expansion to larger and more profitable routes. Throughout our management our leasing
strategy allowed us to avail of a very dynamic strategy for combating fluctuating demand.
In terms of maintenance it was agreed that a large proportion of our budget would be
designated to ensuring safe and reliable operations. We agreed to commit to continually
spending maximum amounts on maintenance to help achieve our business objectives.
Fuel
We initially continued on the practice of the airline in buying the fuel on the spot at its cost
price but after Q4 when there was a major rise in the price of fuel, we began by buying 50%
of the fuel on contract and 505 on the spot pricing. As we received both stability in the
knowledge out the fuel expenses and cost savings we decided to continue on this practice of
buying the fuel on contract, at least until a time where there could be beneficial savings in
buying the fuel on the spot.
Route Selection
We had identified our target market as business orientated clients looking for a high quality
flying experience and as such we have primary market E. In viewing long term perspective of
the business we decided not to be exclusive in these routes as passengers wishing for the
highest quality would exist in other markets. As a result we wanted to offer our unique
service sporadically in various different markets, ensuring a presence in these markets for
future expansion.
In employing an offensive strategy in terms of building an airline with unrivalled customer
service a goal of ours was to serve as many routes as our budgets could allow in order to
capitalise on our competitive advantage. This can be seen with a rapid expansion of routes
from 5 in Q1 to serving 14 in Q4. We also attempted, where viable to directly compete with
our biggest rival Arcadia who, for large proportions were the only industry rival sustaining
higher profits than ourselves.
Service quality Between quarter one and quarter 4 the training and quality budget had increased 1000% to
60,000 this lead to the increased quality scored rating, which continued to be one of the
highest in the industry. In keep with this image of quality we increased our spending on the
in-flight meals, we also offer free drinks, free magazine and hors d’oeuvres before or during
all flights. Increasing our perception of quality along with offering real quality service to our
customers follows our strategy to attract business traveller who would be willing to spend
extra to have a higher quality service for their clients as well as themselves.
We never decreased our training and quality budget as we felt that it was consistent with our
plan to always offer a better service to our clientele. We believed that by never decreasing
this budget we would always be consistently offering a better service to our customers that
they could rely on which would increase their brand loyalty. This was a priority for our
business from the beginning of the take-over, we learned that as we invested more in the
training and quality budget we gained better scoring and our profits increased.
Human Resources As it was in our best interest to retain the pilots and other employees whom we had already
heavily invested in by training, we decided that is was inherent in the strategy that these
employees needed to see the immediate advantage to staying with the firm, that was chosen
to be given in the form of giving better wages than the industry norm.
It was decided to increase the number of sales persons as we were re-launching the airline
and aiming at a different clientele. Additions to our sales force were frequent throughout our
management. It is important that our sales force reflect the business environment they are
selling in.
In the special incident report it was decided not to hire competitors staff. The basis of this
decision centred round ourselves adapting to our current situation. At the time of this decision
some of our employees had expressed their displeasure at their current salaries. To help
negate this de-motivational trend we wanted to exhibit ourselves as providing a preference
for current staff in terms of promotion, rather than hiring externally. We feel that taking the
decision to promote from within was also better served in maintaining our integrity as an
employer.
Another human resource issue arose when we had to decide on hiring a new station manager,
it was decided that the candidate with five years’ experience as an assistance manager with
good recommendation from former employee was chosen. It was felt that as he was available
to fill the position immediately and because of his experience that he had the relevant know
how to understand and implement our strategic vision.
Financial Evaluation
Overall Performance As we have previously outlined we have been performing well over the last 8 quarters. We
have seen our revenues, profits and cash on hand all rise overall after the 8 quarters. At the
end of quarter 8 we ended with a cumulative net income of $1,053,451 and a stock price of
$38.17. We had 7 out of 8 profitable quarters with the highest income coming in quarter 5
where it made $584,572. In terms of overall income and expenditure (Fig2.1) we have
achieved total gross revenues of $34,024,819 due to a large fleet and luxury prices; it also
subsequently had a total operating expenditure of $29,061,308 in order to maintain the
quality and reliability required to align to our overall strategy. One key set back we suffered
was in Q4 which will be communicated in greater detail a little later. We have continuously
made steady quarterly profits thus breaking past management’s trend of cyclical profit and as
a result we find ourselves in a great financial position. We are currently the 4th most valued
company in its industry and is ranked 3rd by means of overall net income.
Ratio analysis As seen in Fig 2.3 our current assets ratio is 2.263 this is just slightly lower than the industry
average and is a good indicator of how we can meet our short-term financial obligations.
Next is our return on sales which is 0.034 this is much higher than the industry average of
0.003 and indicates we are in a better position than some of our competitor at performing in
our industry. Again our return on equity is also much higher than the industry average this is
good for the ordinary shareholders as they can receive a good return on their investment.
Likewise our return on assets gives a similar indicator. Finally our debt to equity ratio is very
low as we balance our financing while growing with a good mixture of debt and equity.
Unprofitable Q4 As seen in Fig 2.1 income and expenditure Quarter 4 was the only quarter we were not
profitable. The reasons for this are as follows:
Offering sales: In this quarter we conducted different sales on all our flights.
Together with our comparatively low fare price for a luxury airline (48 cents) this had
a huge detrimental effect on our revenue.
Marketing decisions: Again we made a poor decision by not increasing our
marketing budget for this quarter, this is the only time we did not raise our budget and
had an adverse effect on us.
Another reasons for the poor performance in this quarter was due to the lower
demand i.e. the business index was 99, and Winter weather wreaked havoc on airline
schedules this quarter.
Expenditure As seen in Fig2.4 our fuel and maintenance were very high over the 8 quarters. While this
was an inevitability given our chosen strategy we do feel that in hindsight closer management
of these costs could have increased our bottom line further. Another high expense was lease
payments however we feel these costs to have been unavoidable as any decision to purchase
our fleet would have caused financial ruin. For the “Other Expenses” these include
Depreciation, Interest Expenses, Market Research costs, Social performance budget, training
costs, additional employee compensation amongst others all of which we felt were minimised
while adhering to our strategy.
Teamwork Evaluation
Team Leadership
Donnacha was assigned as our team leader, as we felt he had the best organisational skills
and he had an interest in the airline business. He fulfilled he role extremely well, letting us
know about any issues that arose or any change of meeting times. As the team leader he was
ultimately responsible for gathering all of the decisions made by the team and making sure
the decisions are entered correctly. In addition, he was also responsible for locking in all of
our decisions for every week. Donnacha assigned everyone in the group a particular position
which they were to focus on and we could meet and put all of our decisions together and see
if they were feasible.
Decision Responsibilities Within our Group
Donnacha- Fleet & Routes: The routes decisions focus on the markets / routes we serve and
whether or not to provide a sale fare for a particular route. In addition, to help estimate the
fleet capacity necessary to serve these routes, the number of daily flights to provide must also
be decided upon by choosing particular aircraft for each flight. Fleet decisions were focused
on issues having to do with acquiring, maintaining, and fuelling our fleet of aircraft. We felt
that the fleet decisions were probably the most important part of our operating strategy as it
would be crucial that the type and number of aircraft in our fleet would be aligned with our
markets and routes decisions.
Colm- Marketing: Marketing decisions Colm faced included promotion and advertising
budgets, a cargo marketing budget, sales personnel hired or fired, and whether or not we
would offer an in-flight magazine. Airlines advertise through various media: billboards,
magazines, television, radio, websites, and newspapers. The particular choice of ad
placement and media reflect the market routes and fare structure selected. Salespersons are
generally trying to expand your company’s presence by calling on travel agents. Another
decision was whether we would produce an in-flight magazine, at a price of $500 per aircraft
per quarter.
Liam- Fares: Another crucial aspect of our road to success. As our KSF’s outlined our pricing
strategy would be extremely important. This responsibility fell to Liam who did an excellent
job of ensuring that our value proposition remained consistent. Upon completion of our two
years in management we felt that this area of the business had been optimised in terms of our
revenue growth. Liam decided that any fare increase would have to be easily justified before
being put in place.
Nuala- Corporate: Nuala’s role was to establish a Social Performance Budget, as we felt that
social responsibility is an important aspect of any business. While it would be difficult to
ascertain a cost benefit for this budget item, we believe that supporting the communities in
which we were operating would only increase our business.
Mark- Financing: When everyone had decided what to do in their particular areas, we would
discuss all options at our meeting, and Mark would crunch the numbers and see what options
were financially feasible. He would also keep a close eye on what we were spending and
what we were making to ensure we were not overspending in any particular area.
Meetings & Final Decisions
We set our meeting at a fixed time of two o clock every Wednesday to make our decisions for
the week. We would assess last week’s results and see what areas we could improve or
expand on heading into the next week. We would all have ideas as to what to do in our areas
and we would talk through them and advise our teammates as to where they could make
changes. We would work through the financial aspects of our decisions and then Donnacha
would lock in the decisions we all agreed upon. We would then watch the “special incidents”
video together and read about it before coming up with a solution to the problem. I feel we
worked extremely well together as a team and everyone put in the necessary work to make
our airline an undoubted success.
Lessons Learned
Key recommendations for future Management Team taking over
For management taking over in the future we would recommend them to simply stick with
the luxury airline strategy and don’t be tempted into taking cheaper or easy options to try and
increase sales or profits. We feel that we have certainly handed over the airline in a much
better position than where we started. With the current platform in place we would encourage
the new management to partake in more aggressive expansion in terms of fleet and routes.
We would also suggest that as a luxury airline employing sales strategies are unlikely to yield
successful results. For example the quarter we had our sale proved to be a disaster. We now
feel that sales only work with low cost airlines, as with a luxury airline such was ours it can
be difficult to reduce the costs enough to make a sale profitable. We would also recommend
to future management not to simply rest on their laurels, they should always be looking for
areas to improve and expand in. For example our advertising and promotion budget was
raised significantly and it proved successful in increasing our sales, but instead of just leaving
it we continued to increase the amount put into it every quarter, even if it was only a small
amount. As well as advertising and promotion we would also recommend future management
to use this kind of strategy in the areas of quality & training, cabin service and maintenance.
Observations on Airline Industry & your Organisation
We feel that the airline industry is one of the most diverse, dynamic and perplexing in the
world. It is fast-evolving, labour intensive, capital intensive, hyper-competitive and highly
susceptible to the ebb and flow of business cycles. One of the things that struck us the most
was the unpredictable nature of the industry, “Forecasting what will happen in the airline
industry is about as unpredictable as forecasting the weather”. (CityWire 2012) For example
it can be difficult to estimate the demand for a particular quarter, despite the forecasts
provided. With demand being so hard to figure out, it is almost impossible to have the correct
number of planes and the correct number and types of routes. A perfect example of the
unpredictably of the industry is the varying fuel prices. Buying fuel on the spot can work out
much dearer or even much cheaper than buying it on contract or 50/50. You can try to make
research based decisions but with fuel prices being so hard to predict, you can get it wrong
quite easily.
What you & team would do differently
Looking back the eight quarters we feel that having got the company’s stock price from $20
in quarter 1 up to $38.17 in quarter 8 there is very little we could have done differently or
much better. The primary problem which arose has already been well documented – our Q4
sales. The results of the sale were extremely poor, as we did not cut our costs enough and
quarter 4 was the only one in which our company reported a loss, and as well as that our
stock price dropped dramatically. In addition looking back at the ease in which we eliminated
cyclical profits for sustained ones, our reluctance to resort to external financing in terms of
loans, selling stock etc could have reigned in profitability figures that were actually possible.
In terms of financing at least, we were risk adverse and only desired to pay off existing debts
however looking back, fuelling our fleet expansion quicker could have enabled us to lead the
industry.
Overall we feel we did an excellent job in managing Atlas Airways over the last two years
and we are very satisfied at how the company has developed. We hope that future
management will take head of our experiences and advice and grow Atlas Airways into the
industry’s leading airline.
Appendix
Fig 1.0 – The SWOT Analysis Strengths Weaknesses
Well known and reputable airline within smaller communities
Sizable line of credit available Addition of 1/2 planes to fleet with
little/low additional overheads
Current fleet of aircraft Current maintenance program Cyclical profitability rather than
sustained Low working capital for expansion Slim profits unable to facilitate
expansion Extremely low marketing budgets
Opportunities Threats Significant financial opportunity in
expansion of routes Existence of routes currently not
served with little or no competition
Increased competition within current markets
Increased maintenance costs of Beechcrafts
Fig 1.1 – PESTLE Analysis Political Factors Economic Factors Socio-Cultural Factors
Industry Deregulation Political agendas in
terms of military contracts
Taxation
Demand Forecast Income levels Interest Rates (Loans) Dividend Payouts
Choice of routes Management of
external stakeholders Cultural diversity of
staff Potential Controversies
(heart attack pilot, kickbacks)
Technological Factors Legal Factors Environmental Factors Aircraft Type Industry move toward
e-commerce Maintainence
Potential for lawsuits (employment, customers)
Industry Regulations
Fuel Expenses CSR policy Seasonal Disruption
Fig 1.2 – Key Success Factors
Key Success Factors Quality of Fleet
Quality of Customer Service Significant investment in Marketing and Sales functions to stimulate demand
Choice of routes to serve Adapting strategy to fluctuating market conditions
Stock Price Reliability
Pricing Strategy aligned to Value Proposition
Fig 2.0 – Stock Price
Fig 2.1 – Income & Expenditure
Fig 2.2 – Net Profit
Fig 2.3 – Ratio Analysis Ratios Atlas Industry
Current Ratio 2.263 2.842 Return on Sales 0.034 0.003 Return on Equity 0.095 -0.141 Return on Assets 0.053 -0.000 Debt to Equity 0.097 0.752
Fig 2.4 – Expenditure Breakdown
References Thompson, A et al (2010). Crafting and Executing Strategy. 17th ed. New York: McGraw-Hill/Irwin. p25-30.
Thompson, A.A. & Strickland, A.J. (2001). Crafting and Executing Strategy - Text and Readings. New York: McGraw-Hill.
Nanus, B. (1992). Visonary Leadership: Creating a Compelling Sense of Direction for your Organisation, San Francisco: Jossey-Bass
Johnson, G. Scholes, K. & Whittingham, R (2006). Exploring Corporate Strategy. 7th ed. England: Prentice Hall. p136-138.
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Breakdown of Expenditure