(b) Explain how the process of developing scenarios might help John better understand the macro-environmentalfactors influencing Airtite’s future strategy. (8 marks)
(b) Explain how the process of developing scenarios might help John better understand the macro-environmental
factors influencing Airtite’s future strategy. (8 marks)
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3 Airtite was set up in 2000 as a low cost airline operating from a number of regional airports in Europe. Using theseless popular airports was a much cheaper alternative to the major city airports and supported Airtite’s low cost service,modelled on existing low cost competitors. These providers had effectively transformed air travel in Europe and, in sodoing, contributed to an unparalleled expansion in airline travel by both business and leisure passengers. Airtite usedone type of aircraft, tightly controlled staffing levels and costs, relied entirely on online bookings and achieved highlevels of capacity utilisation and punctuality. Its route network had grown each year and included new routes to someof the 15 countries that had joined the EU in 2004. Airtite’s founder and Chief Executive, John Sykes, was anaggressive businessman ever willing to challenge governments and competitors wherever they impeded his airline andlooking to generate positive publicity whenever possible.John is now looking to develop a strategy which will secure Airtite’s growth and development over the next 10 years.He can see a number of environmental trends emerging which could significantly affect the success or otherwise ofany developed strategy. 2006 had seen fuel costs continue to rise reflecting the continuing uncertainty over globalfuel supplies. Fuel costs currently account for 25% of Airtite’s operating costs. Conversely, the improving efficiency ofaircraft engines and the next generation of larger aircraft are increasing the operating efficiency of newer aircraft andreducing harmful emissions. Concern with fuel also extends to pollution effects on global warming and climatechange. Co-ordinated global action on aircraft emissions cannot be ruled out, either in the form. of higher taxes onpollution or limits on the growth in air travel. On the positive side European governments are anxious to continue tosupport increased competition in air travel and to encourage low cost operators competing against the over-staffedand loss-making national flag carriers.The signals for future passenger demand are also confused. Much of the increased demand for low cost air travel todate has come from increased leisure travel by families and retired people. However families are predicted to becomesmaller and the population increasingly aged. In addition there are concerns over the ability of countries to supportthe increasing number of one-parent families with limited incomes and an ageing population dependent on statepensions. There is a distinct possibility of the retirement age being increased and governments demanding a higherlevel of personal contribution towards an individual’s retirement pension. Such a change will have a significant impacton an individual’s disposable income and with people working longer reduce the numbers able to enjoy leisure travel.Finally, air travel will continue to reflect global economic activity and associated economic booms and slumps togetherwith global political instability in the shape of wars, terrorism and natural disasters.John is uncertain as to how to take account of these conflicting trends in the development of Airtite’s 10-year strategyand has asked for your advice.Required:(a) Using models where appropriate, provide John with an environmental analysis of the conditions affecting thelow cost air travel industry. (12 marks)
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