Ansett Airlines
This report will compare corporate strategies of Santa Airways and Unseat Alertness from the period since deregulation of airline industry in 1990 up until 2001 when Unseat collapsed. First part of the report will focus on Santa Airways business strategies since 1990. Second part of the report will analyze the success of Santa Airways strategies. Finally, this report will discuss impact that Santa Airways strategies had on Unseat and also explore the possible strategies that Unseat should have had in place to counter Santa strategies.
Santa strategies since deregulation of Australian Airline Industry and its success. Since deregulation of Australian airline Industry Santa has pursued series of strategies that helped this airline expand Its International and domestic network and gain gallants market share. Before Santa was publicly floated, government legislated In favor of Santa expanding Into domestic market via acquisition of Australian Airlines .
Unseat, which was traditionally a market leader on domestic routes already, lost significant portion of its market share to Australian Airlines, which prior to Santa takeover renewed its fleet and reinvented its business class product. Once Santa entered domestic market its first strategy was to lock in and settle its market share. This was largely achieved by not tackling Unseat and creating airfare confrontation that would lead to loss of revenue but instead operating in a duopoly.
This approach was obvious In silently coordinated pricing and scheduling strategies of both airlines.
Product differences offered by the two alertness were minor and Insignificant. However, a consensual strategic position of Santa operating both International and domestic services was the ability of Santa supporting Its domestic operation by Hubbell passengers from its international outwork into domestic network. This alone created sustainable competitive advantage for Santa where this airline had further reach, wider network, better exposure and therefore more competitive supporting products such as Frequent Flyer program.
Also Santa could support its less performing domestic hubs such as Brisbane, Melbourne and Perth via passenger spill from the international operations.
Another significant strategy was increasing barriers to entry for any new competitors (such as Compass) through its dominant position at Australian airports. This has been done In a full coordination with their duopoly Unseat. Years on both domestic and international networks has prompt Santa management to invest into new strategies that will differentiate the airline from its competitors.
These new strategies have spilled from international to the domestic market. They included long term investments into new aircraft, increased frequency especially on trunk routes (an example would be Cutlery ) and continuous improvement of in-flight services.
Furthermore, the company has managed to expand its regional operations through Sanitation by reducing the cost of the airfares significantly . In response to constantly changing external environment Santa recognized the importance of airline alliances and late in the became the member of Narrowed alliance.
The first major test for Santa Management was in 1997 with the Asian currency crisis. The effects were savage as the economies of many countries in the region went into meltdown and airline traffic disappeared virtually overnight. The response of Santa management was to cease its operations to most of the Asian cities and look for opportunities in the more profitable markets such as North America and Europe and to re-deploy its capacity to new domestic routes .
It can be argued that the current position that Santa holds in both international and domestic airline industry is a testament of success of its business strategies in recent years.
Impact on Unseat and possible counter strategies. Lack of strategies rather than strategies implemented by Santa appeared to be the main reason of the airlines rapid decline. While its competitor Santa was using every opportunity to expand its network Unseat was forced to deal with problems such as: Declining share of high yield corporate market
Thirty seven subsidiary companies many unrelated to the airline industry- Old fleet with wide range of aircraft types Lack of desire by Air New Zealand to invest into the company and its aging fleet – High labor costs- almost double those of new low-cost airlines – Inflexible labor unions and culture of excess and arrogance developed over the decades. Position. A partial explanation as to why management failed to devise sound business strategies can be seen from Unseat? ownership structure, which has changed too rapidly and too many times and always in a wrong direction. Wineries strategy lacked strategic ensue, which was seen in involvement with British Airways.
The only strategically sound ownership option that Unseat had available was Joining with Singapore Airlines. Instead, when Unseat finally merged with another carrier it was taken over by smaller and weaker Air New Zealand. Although under Rod leadership reasonable financial strategies of restructuring cost base was achieved in Unseat it was too late.
Unseat has already entered what is known as spiral?C,-1?0 where ageing fleet is increasing operating costs and also affecting product appeal and decreasing revenue low, while the overall value of the company is becoming too low to Justify further borrowings. In other words cost was increasing, revenue was falling and Unseat could not generate the money to fund the replacement of its aging fleet from its own cash flow, and no one would borrow them money at economically viable interest rate.
Santa strategies helped decimate Unseat by the sheer force of competition.
Santa has done this through the volume of its network and now also better product. But Santa has also done it through its knowledge base, where expertise in international operation has been transferred into domestic market. Unseat strategies should have initially focused on cost structure and simplification of its business model while there was still time. Strategy of expansion into international market and diversification of the operation while their core operation was facing exponential cost increase in the future was utterly wrong.
The restructure of core business and protecting domestic market share on trunk routes should have been primary strategy. In many ways strategies should have been exact copy of Santa strategies only implemented sooner while Unseat still had competitive advantage against Australian Airlines. Conclusion It can be seen as ironic that in deregulated environment and innovative private case, however, importance of strategic business planning for sustainable competitive advantage.
