‘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.
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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.
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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 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
Weaknesses Current fleet of aircraft Current maintenance program Cyclical profitability rather than sustained Low working capital for expansion Slim profits unable to facilitate
Opportunities Significant financial opportunity in expansion of routes Existence of routes currently not served with little or no competition
expansion Extremely low marketing budgets Threats Increased competition within current markets Increased maintenance costs of Beechcrafts
Fig 1.1 – PESTLE Analysis Political Factors Industry Deregulation Political agendas in terms of military contracts Taxation
Technological Factors Aircraft Type Industry move toward e-commerce Maintainence
Economic Factors Demand Forecast Income levels Interest Rates (Loans) Dividend Payouts
Legal Factors Potential for lawsuits (employment, customers) Industry Regulations
Socio-Cultural Factors Choice of routes Management of external stakeholders Cultural diversity of staff Potential Controversies (heart attack pilot, kickbacks) Environmental Factors 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 Current Ratio Return on Sales Return on Equity Return on Assets Debt to Equity
Atlas 2.263 0.034 0.095 0.053 0.097
Industry 2.842 0.003 -0.141 -0.000 0.752
Fig 2.4 – Expenditure Breakdown
Breakdown of Expenditure $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0
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