Virgin Australia Holdings Ltd Situational Analysis
Previously known as Virgin Blue, and came to the Australian market in year 2000. Virgin is part of Virgin Group consisting of 400 other companies and founded by Richard Branson.
At fiscal year end June 2012, flights operated reached 162,817 and 19,468,929 people were carried to 52 destinations. Revenue is $4,175 million with 5,300 employees. Virgin operates globally but domestic operations are the main income stream. Product line for short haul and long haul international flights as well as domestic include saver lite, saver, flexi, premium saver, premium, business saver, business.Strategic business units Virgin holdings limited provide international and domestic flights, as well as tourist package deals.
Virgin’s main competitor is Qantas airlines in all strategic business units, SBUs. BCG matrix finds that Qantas is bigger than Virgin in all SBUs in respect to market share by triple the size. Virgin’s growth rate is approximately equal in difference between international, domestic and tourism with domestic being the highest standing at 5. 23%. This report will uncover the situational analysis strictly at a management level with links to marketing theories and concepts.
Situational analysis Internal Environment Product * Saver lite, saver, flexi, business saver and business are passenger types of air travel available. * Difference of products is categorized through changes of rights to a consumer. This includes booking changes, booking cancelations, in-flight entertainment, food and beverage, checked baggage, advance seat selection, extra legroom, priority check-in, priority boarding, and lounge entry. * Advance seat selection category is the only option available to all five-passenger types. * Business saver and business are offered all the categories equally.
Saver lite, saver, and flexi are offered lesser categories, however these categories are available for purchase, except priority check-in and priority boarding. Also, saver lite cannot add a bag after or during purchase. Price * Prices of domestic fares vary upon categories chosen, one-way or round-trip as well as destination. * Changes and cancellation fees fall into two categories. One, change of flight fee, and second is complete cancelation fee.
Business saver and business are not charged with a fee for cancelation of flight.Also, flexi is included in fee for flight change to be only the fare difference. * $7. 70 is booking fees through credit or debit card for the five passenger types. $35 is also for all passenger types who attempt to change, make or cancel a booking through the Virgin Guest Contact Center or Airport Service.
* All cancelation and change fees are per booking, per person. Place * Bookings are made available through Virgin’s website, local agents or others online such as Expedia and many more websites. * Bookings are also available through the airport services as well as Virgin Guest Contact Center. In all, booking, changing or canceling flights are available through phone, in person, and online. Promotion * Agents can offer lesser prices for ticket bookings, and can alert consumers of sales.
* Lower prices happen during low travel times to encourage people to fly. However, holiday special offers still exist. * Price discounts or package specials include flight tickets, travel, and through partners such as car renal, hotels, cruises, activities and more. People * Customer service is provided through Virgin Guest Contact Center as well as others, including online and local agents.Contact varies by email, phone, or in person. * Employment at Virgin varies at all levels of skills, ranging from corporate to operations.
* Employee sick leave, annual leave, long service leave and benefits. Process * Consumers purchase tickets via available resources and bring electronic or mailed ticket to the airport. Luggage is weighted and processed, and the Virgin receptionist confirms the ticket. Physical Environment * Comfortable lounge facilities are provided at the airport with couches, food, drinks and Internet access but are not available to all five-passenger types.External Environment Markets * People, subsidies and mail.
Competitive environment * Key competitor is Qantas. * Qantas competes with Virgin by cutting prices and focusing on customer service to target the corporate/business travelers. * Competition is based on service and price. * Substituting air travel for ground, such as trains and cars usually due to lower cost. * Eco-cars can also be considered more sustainable and eco-friendly travelers may use that as a preferred method of travel. Economic environment * Carbon tax introduction impacted Virgin with $24.
4 million during early 2013.Virgin reported this cost as a loss as they were unable to recover. Reporting a loss of $45 to $50 million. * Fuel prices continue to increase. Operating fuel is hedged at 87% for the worst rate standing at a price per premium barrel of AUD108. * Tax costs for transformation and restructuring.
Resulting to loss of $95 to $110 million expected. * Investment in Skywest airline acquisition reported a pre-tax operating loss of $5 to $10 million. 100% acquisition of Skywest as of April 2013. * 60% acquisition of Tiger Airways Holdings Limited. * Inflation and unemployment decrease consumer will to travel.
Demographic environment * Increase in frequent flyer memberships is an advantage to Virgin. An increase of approximately 500,000 members occurred at end of year 2011 and now standing at 3. 5 million. * Consumer change in spending, perception and preference. Also, terrorist attacks, war threats, natural disasters and weather.
Social and cultural environment * Sustainability issues attract attention. However, efficiency has been gained as an advantage to Virgin over the years 2010 to 2013. Cost sustainability delivered $25 million and is projected to reach $60 at fiscal year end. Sustainability i. e. Jet fuel from renewable resources and carbon neutral flights.
* Improvement of tourism locations can increase desire to fly. Political and legal environment * Introduction of new tax such as Carbon Tax. * Errors by cabin crewmembers such as the case in Emirates airlines, where the bag fell and hit a passenger’s head, therefore resulting in a lawsuit. * Future political instability in Australia will cause decrease in demand to fly unstable destinations. Technological environment * Technology creates a perception on standards.
Expectations of consumers rise because of ease of online comparison and provided information about competitors. * Numerous promotions available online. SWOT Analysis Strengths| Weaknesses| * Strong employees and diligent culture * Employee benefits * Customer service * Promotion and lesser prices * Expensive assets * Options to purchase on product categories * Availability options for purchase * Ease of processing * Successful sustainability * Acquisitions| * Depreciation of expensive * Service is widely provided/corporation size is demanding for monitoring/ communication| Opportunities| Threats| Physical environment i. e. lounges expansion to more airports * Increase market share * Sustainable technology and processes * Tourism expansion * Technology improvement| * Consumer preference i. e.
consumer using train or car, etc. * Tax and other government actions * Fuel * War * Inflation| BCG Matrix BCG Paragraph Qantas is the major competitor for Virgin Holdings, which is placed in first place. Qantas is three times bigger than Virgin Holdings in respect to market share.At all three areas of operation, including domestic, international, and tourism Virgin is in second place but not far in market share to other competitors. Most of Virgin Holdings’ income is from domestic operations, approximately triple the international operations income and about eight times more than the income of tourism.
My SBU of choice will be domestic operations because it shows 5. 23% growth rate. Domestic is the highest growth rate out of the three SBU compared to Qantas, and all market share differences are about the same (triple the size).