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- 1. SkyWest, Inc. California State University Stanislaus Melanie Embry Management 4900 Dr. Marjorie Chan Desarae Emerick Spring 2012 Ebony Mims
- 2. SkyWest, Inc. Introduction • 316 aircraft • More than 11,000 aviation professionals • More than 1,700 flights each day • 159 destinations throughout North America http://www.skywest.com/about-skywest-airlines
- 3. SkyWest, Inc. Introduction • A leading air service provider offering global access to millions of people each month • Partners with United Airlines, Delta Air Lines, US Airways and Alaska Airlines • Known for its industry-leading workforce, exceptional leadership team, and continued solid operational and economic performance http://www.skywest.com/about-skywest-airlines
- 4. Question #1 Discuss the five forces of competition in the regional airline industry.
- 5. Competitive Rivalry • Competition is intense • A regional carrier has to: • Develop and maintain high levels of customer service • Develop and maintain a strong safety image • Maximize on-time arrivals • Have the ability to acquire new aircraft
- 6. Threats of Potential New Entrants • New entrants are always a threat to existing airlines • A few airlines are making an attempt to enter the American domestic air travel industry • Many foreign competitors to the United States' international airlines are starting to look into the possibility of extending flight operations on American soil
- 7. Power of Substitutes • With increased efficiencies in modes of transportation, greater threats to the airline industry present themselves: • Railway • Oceangoing Vessels • Motor vehicles • Consumers' price-performance evaluation and the industry wide price elasticity have led to a more complex travel industry
- 8. Power of Suppliers • Two main suppliers (92%): Boeing and Airbus • Little rivalry and a lack of industry intensification • Vertical integration with Boeing or Airbus
- 9. Power of Buyers • Overall bargaining power of buyers is weak to moderate • Switching one's ticket from one airline to another is fairly high • Airlines set ticket prices without allowing consumers to barter on price • Websites such as Travelocity and Kayak receive ticket information from all airline websites • Nearly all consumers search on price
- 10. Question #2 Discuss the driving forces in the regional airline industry.
- 11. The Driving Forces • Operating Constraints and problems • Over booking flights • Not allowing enough time to load and unload passengers and luggage • Flight cancellation • Outsourced routes from major airline partners • Pressure to cut cost
- 12. Question #3 Discuss the key success factors in the regional airline industry.
- 13. KSFs • Strong Management • Capable workforce • Service promotions and In Flight services • Non Stop Flying • Financial Management • Efficient Management of Cost • Route system
- 14. Question #4 Discuss SkyWest’s strategy.
- 15. SkyWest’s Strategy is • To be the airline of choice • Employer of choice • The investment of choice • Expand current partnership and geographic growth
- 16. Questions #5 Discuss the following for SkyWest: A. Internal strengths B. Internal weaknesses C. External opportunities D. External threats
- 17. Internal Strengths • Branding- Skywest has • Sole Operator Routes- operated a reliable Skywest is the sole permitted conventional airline service to airline operator on the all of Western Australia’s Coastal Network major regional airports for • Resource and Mining more than 45 years. Industry- The robust mining • Stability of earnings- boom in Western Australia Currently more than 59% of has led to significant Skywest’s earnings are opportunities for Skywest derived through air charter • Geographic- Western services to the mining Australia is the largest state in indusrty Australia
- 18. Internal Weaknesses • Relies heavily on United and Delta • Ranked near the bottom of the list of 16 airlines for overall customer service • Acquired a company that had one of the worst customer service records in the industry and also had a unionized workforce • Generic mission/vision as stated in its 2004 annual report
- 19. Weakness Cont. • weaknesses include increased multiple-stop destinations, minimal flight attendants per flight, increased plane turnaround times and short-term union contracts.
- 20. External Opportunities • SkyWest can now compete for more business. • SkyWest does not have any partnerships with low-cost airlines • The IATA predicted that worldwide passenger revenues would rise by 5% • More business travelers are now traveling on low-cost airlines
- 21. External Threats • Competition is fierce • Very sensitive to the state of the economy • More demand of fuel • Increased government regulations • Labor unions • More major carriers
- 22. Question #6 Assess SkyWest’s financial performance.
- 23. Operating Profit Margin (%) 2004 2005 2006 2007 2008 12.52 11.22 10.89 10.21 7.30 -1.30 -0.33 -0.68 -2.91 • Measurement of what proportion of a company's revenue is left over after paying for variable costs • Gives analysts an idea of how much a company makes on each dollar of sales Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 24. Net Profit Margin (%) 2004 2005 2006 2007 2008 7.09 5.72 4.68 4.72 3.23 -1.37 -1.04 +0.04 -1.49 • Measures how much out of every dollar of sales a company actually keeps in earnings Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 25. Return on Total Assets (%) 2007 2008 3.99 2.81 -1.18 • Measures earnings before interest and taxes against its total net assets • Indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 26. Return on Equity (%) 2007 2008 12.78 8.85 -3.93 • Amount of net income returned as a percentage of shareholders equity • Measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 27. Current Ratio 2007 2008 3.04 3.16 +0.12 • Measures a company's ability to pay short-term obligations • Gives an idea of the company's ability to pay back its short-term liabilities with its short-term assets Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 28. Debt-to-Assets Ratio (%) 2007 2008 43.42 41.89 -1.53 • Measures a company's financial risk by determining how much of the company's assets have been financed by debt Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 29. Debt-to-Equity Ratio (%) 2007 2008 1.39 1.31 -0.08 • Measures a company's financial leverage Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases Investopedia.com
- 30. Question #7 What recommendations would you make to SkyWest’s management to strengthen the company’s competitive position and improve its financial performance?
- 31. Recommendations • Continue to add new partnerships and expand its current ones to include new routes and additional • Look into expanding its operations outside the United States • Continuing to seek approval of scope clause liberalization Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases
- 32. Works Cited About. (n.d.). Retrieved May 6, 2012, from SkyWest Airlines: http://www.skywest.com/ about-skywest-airlines Gamble, J.E., Peteraf, M.A., Strickland III, A., & Thompson, A.A. (2012). Crafting and Executing Strategy: The Quest for Competitive Advantage – Concepts and Cases (18th ed.). New York, New York, United States of America: McGraw-Hill/ Irwin. (n.d.) Retrieved May 6, 2012, from Investopedia: http://www.investopedia.com E.L. & C. Baillieu Research. Skywest Airlines Limited. March 30, 2010, from www.bailleu.com.au MBA Lectures. Key Success Factors of Airline Industry. November 1, 2011, from mbalectures.com