The Financial Performance of Low-Cost and Full-Service...

The Financial Performance of Low-Cost and Full-Service Airlines in Times of Crisis Triant Flouris, Thomas John Walker. Canadian Journal of Administrative Sciences. Halifax: Mar 2005. Vol. 22, Iss. 1; pg. 3, 18 pgs Abstract This paper examines the stock and accounting performance of three major airlines in the United States in the aftermath of the September 11, 2001, terrorist attacks. September 11 (9/11) resulted in dramatic changes in the airline industry and had significant implications for the economic gains and future prospects of most airlines. Our study focuses on the stock markets perception of the viability of low-cost versus full-service business models in the aftermath of 9/11. We choose Southwest Airlines as a typical†¦show more content†¦Lawton (2003) advances the argument that low-cost carriers (LCCs) were in a position to go on the offensive and aggressively exploit the changed industry climate after 9/11 by renegotiating labour contracts, by negotiating lower prices for new airplanes in what had suddenly become a buyers market for new aircraft, and by pursuing aggressive pricing strategies to increase their market share relative to legacy carriers. Legacy carriers, being exposed to a significantly higher overhead burden, were forced into defensive strategies that provided them with little operational flexibility. These developments are difficult to observe in the airlines accounting figures in the short term, but if they are perceived to change a firms future cash flows they should be reflected in the markets valuation of the firms stock. When investigating the impact that the events of 9/11 had on each airlines risk, we consider both the systematic and unsystematic volatility of the stocks returns. This allows us to differentiate between risk factors that affected the market as a whole and risk factors that affected the firms specifically. Although we employ only a small sample, our results are highly consistent.2 We observe that Southwest performed significantly better after 9/11 than its mainstream competitorsShow MoreRelatedGlobal Low-Cost Airline Market To 2018802 Words   |  4 Pagesrevenue of global low-cost airlines market covering 40 countries. Detailed regionwise (Americas, Asia-Pacific, Europe, Middle East Africa) analysis of low-cost airlines key performance indicators such as the number of seats available and seats sold, load factor, average revenue per passenger, total revenues, revenue generating passenger kilometers and passenger kilometers available for the review (2009-2013) and forecast (2014-2018) periods. Brief analysis of global low-cost airlines market and theRead MoreFactors That Affect On Airlines1605 Words   |  7 PagesFactors Outcome Impact on Airlines Rise in crude oil prices Increases the price Aviation Turbine Fuel (ATF) used in the Aircrafts †¢ Increase in fuel prices leads to low demand †¢ If fuel costs are fixed, then it can be leveraged to increase profits FDI in Aviation Industry of India †¢ New Entrants (Joint Ventures) †¢ Mergers with big International Airlines †¢ Increases operational performance Increases competition in LCC’s and FSC’s economy class †¢ Price War †¢ Decreases operating costs Increase in fares inRead MoreThe Cause of Financial Distress in Airlines Industry Introduction According to International Air1400 Words   |  6 PagesThe Cause of Financial Distress in Airlines Industry Introduction According to International Air Transport Association (IATA), global airline industry has a history of 100 years (2014). Today, there were more than 3 billion passengers and 50 million tonnes of cargo reach their destination through the wonder of flight every year, supporting over 57 million jobs and $2.2 trillion in economic activity (IATA, 2014). The airline industry plays a crucial role in economic because it helps in opening upRead MoreAir Asia1129 Words   |  5 PagesNATURE OF BUSINESS Air Asia leading airline was established with the dream of making flying possible for everyone. Since 2001, Air Asia has swiftly broken travel norms around the globe and has risen to become the world’s best. With a route network that spans through to over 20 countries, Air Asia continues to pave the way for low-cost aviation through our innovative solutions, efficient processes and a passionate approach to business. Together with our associate companies, Air Asia X, Thai AirRead MoreAir Asia1116 Words   |  5 PagesNATURE OF BUSINESS Air Asia leading airline was established with the dream of making flying possible for everyone. Since 2001, Air Asia has swiftly broken travel norms around the globe and has risen to become the world’s best. With a route network that spans through to over 20 countries, Air Asia continues to pave the way for low-cost aviation through our innovative solutions, efficient processes and a passionate approach to business. Together with our associate companies, Air Asia X, Thai Air AsiaRead MoreBritish Airwayss Environment1605 Words   |  7 Pages1.0 Introduction British Airways (BA) is the UK’s largest international scheduled airline, operating international and domestic scheduled and charter air services for the carriage of passengers, freight and mail and the provision of ancillary services. The airline flies to over 550 destinations globally and is considered to be a leader in the industry. In order to profitably satisfy customer needs, an organisation must understand its external and internal situation including the customer, theRead MoreStrategy - Ryanair1400 Words   |  6 Pagesitself into Europe s leading low cost airlines with 232 aircrafts flying to 153 destination. Ryan Air s strategic objective has been to offer the lowest possible air fare to its passengers and strive towards becoming europe No.1 Low Cost airlines. In this paper we will explore and analyze Ryanair s competitive position, strategic capabilities and sustainability of its strategies. COMPETETIVE POSITIONPORTER S FIVE FORCES FRAMEWORK; Threat of New Entrants: LOW High entry barrier due toRead MoreEssay about Dogfight over Europe: Ryanair (C)846 Words   |  4 Pagesgoing to be bankrupted. However, it found the way to overcome this crisis by transform themselves from ordinary high-price airlines into the lowest price airline in the EU. They focused on 5 things to rebirth their company. 1. Focused on cut down the costs: Ryanair aggressively cut most of its costs in many ways. Found the routes and airports that charged low landing fees, and low turnaround costs Chose routes to Secondary airports, low airport fee Eliminated all in-flight amenities Used metal stairsRead MoreAir Canada - Risk Management2520 Words   |  11 PagesAir Canada – Risk Management Case Report Industry Overview The airline industry is one of the largest global industries in the world. Airline companies in the airline industry have gone through challenging obstacles in the past decade. Many changes have occurred within the industry and increased regulations have driven up cost for the industry. The attacks on 9/11 left the industry in shock when planes were used in terrorist attacks in the United States. These attacks changed the mentalityRead Moreâ€Å"Managing Operations for Customer Satisfaction and Enhanced Profitability†1778 Words   |  8 PagesEnhanced Profitability† Introduction The role of operations management is the production of goods and services and to ensure efficiency and effectiveness in the operation process, that means use as little resource as needed and meet the customer requirements. Moreover, it is converts inputs (in the forms of materials, labour and energy) into outputs (in the form of goods and services) and aims to increase the content of value-added activities in any given process in an organization. (Meredith