Indigo Airlines - a successful Domestic

Airline
An airline company headquartered in Gurgaon, Haryana, Indigo positions itself as a low-cost
carrier. Established as a private enterprise in the year 2006 by Rahul Bhatia, Indigo listed
publicly in the year 2009.
In addition to domestic flights to various Tier 1 and Tier 2 cities across India, Indigo also flies to
international locations like Dubai, Malaysia, Singapore, Bangkok, Kathmandu, Sharjah, and
Doha. Indigo is currently India’s largest passenger carrier and in the year 2018, it has registered
a market share of 58.6 %.

The company operates a fleet of 274 aircraft flying them to 87 destinations. The company
registered an annual turnover of 6222 crores and employs around 23,531 employees.

I Management Outlook
During FY 2021, Indigo has taken several actions to mitigate the impact and risks associated
with Covid-19. This period was utilised as an opportunity to strengthen the airline in key areas
such as cost reduction and liquidity enhancement, customer preference, network
optimisation and experimenting with new revenue models.

● Minimise net cash burn: making the fleet more efficient by substituting older CEOs with
NEOs and prioritising flying with NEOs over the older CEO aircraft given that CEOs have
higher operating cost, driven by higher maintenance cost and higher fuel burn
negotiating better prices and terms with its partners, introducing staggering pay cuts,
and leave without pay,
● Adding connectivity in Tier2 and Tier 3 citiess constrained from growing internationally
and turned its full attention on to the domestic network and is strengthening it further by
opening new stations and increasing its penetration into smaller cities.
● Bolstering liquidity:
○ Acquiring NEOs financed through operating lease
○ Securing favorable credit terms from suppliers
○ Sale and lease back of unencumbered assets
○ Obtaining moratorium towards principal repayment for aircraft on finance
leases.
○ Working capital loans from banks
● Enhancing CarGo business and new revenue models learned valuable lessons about the
demand and scope for cargo during this lockdown, giving strong insights for augmenting
its cargo operations in the years ahead. For this purpose, your Company has entered a
freighter program under which it will source 4 freighters and is expected to take the
delivery of its first freighter in the first half of CY 2022
 ● Ensuring health and safety of passengers and employees:
● Improving the customer experience IndiGo remains committed to deliver a hassle-free
experience, especially during tough times. Exemplary customer service is the core of
your Company’s values. Due to enhanced focus on customer service, IndiGo’s NPS
scores are higher than the pre-pandemic levels
● Exceptional variation in fuel prices: Aircraft fuel expenses are the most significant
expense of our total cost. The price of fuel cannot be accurately predicted because of
numerous economic and political factors and events that govern them.
● Adverse movement in foreign exchange as a large proportion of our expenses are
exposed to foreign exchange rate risk Indigo’s costs including aircraft and engine lease
rentals, aircraft and engine maintenance and aircraft insurance are denominated in
foreign currency. Adverse movement in foreign exchange may negatively impact our
profitability.
● Airport Infrastructure constraints and increased airport costs in India As Indigo expand
our fleet, our growth is dependent on adequate airport infrastructure in India to support
our operations

II Environmental Factors

SWOT analysis of Indigo

1. Strengths:
○ Positive Image: IndiGo has carved an image of being the most efficient low fare
operator not just in the domestic market but also globally. This image of a low-cost
carrier that provides high-quality services has resulted in making it the preferred travel
option for many frequent travelers.
○ Services: Indigo offers a wide gamut of services such as multi-channel direct sales,
online flight booking, round the clock customer support through call centers and
airport counters, online flight status checking, a user-friendly IndiGo app for Android
etc.
○ High stakeholder engagement: Through a robust customer interface Indigo ensures
that it keeps track of customer needs and also communicates to every customer on a
regular basis. Indigo also has a high level of employee satisfaction and has been
consistently voted into India’s best places to work in.
○ Highly drive workforce: Indigo is a hassle-free place to work in and this has ensured
that they have a highly motivated and self-driven [Link] has deployed the i-
fly facility where their new employees are given complete real-time training on how to
deliver the best customer service. This has been considered as the best training facility
in this domain. In addition to this, the company also ensures that their employees
enjoy a stress-free environment with a proper work-life balance.
○ Corporate Social Responsibility: The Corporate Social Responsibility (CSR) initiative of
the airline named as IndiGoReach has undertaken a lot of initiatives for the upliftment
 and well being of children, women empowerment, and environment. Their social work
encompasses not just cities but extends to remote locations as well.
○ Fleet Strategy: The fleet strategy of Indigo has always focused on ensuring that the
average fleet age in four years. The airline has also ensured that it purchases its fleet
at prices much lower than what a seller would sell them for. This has helped the airline
maintain its low costs consistently.

2. Weaknesses
○ Sustaining profits: Indigo is positioned as a low-cost carrier and thus pricing for the
airline needs to be as low as it can be managed. At the same time, the costs need to be
maintained as low as possible. However Indigo has often been unable to sustain its
profits consistently and this can be a weakness for the company.
○ Over-dependence on volumes: In order to sustain profits the company needed to
ensure that the volumes were always high and business could not be affected by
fluctuations in demand. This means that the business needs to ensure that sufficient
steps are taken to ensure consistent volumes and this required an additional
investment.
○ The grounding of aircraft: After the safety of Pratt & Whitney aircraft became
questionable, DGCA had to make a decision to ground these airplanes owned by Indigo.
This scandal affected the goodwill and trust of the customer.

3. Opportunities
○ Growing demand for foreign travel : There is a surge in the number of people in India
who need to travel to foreign locations both for business and pleasure. This means that
there is a huge scope for the airline to expand to more foreign destinations.

4. Threats

● Competition: The airline faces a lot of competition from brands such as Jet Airways,
Indian Airlines, Air India, Singapore Airlines etc.
● Costing: The key components of cost in an airline is the fuel which is highly fluctuating
and in order to manage the pricing in accordance with the dynamics of fuel prices is a
threat today and even in the future.

PESTEL Analysis for Indigo Airlines

Political Factors
● Highly regulated operations: A myriad of tight regulations and oversight stifle the
industry. Push the Ministry of Civil Aviation to restructure and relax certain policies
● Government Bailout: State-owned carrier Air India is dependent on a taxpayer bailout
to handle its losses and debt. The airline, due to the safety net provided by the
government, adversely impacts competition in the already crowded aviation sector.
● Union Budget 2019: Relaxation in 2020 Budget allowed foreign investment over the
previous ceiling of 49% stake. Management should welcome foreign investment keeping
 in mind that the positioning of the brand should not change as a result of a potential
foreign majority in stake.
● Reforms for the MRO market: The Indian civil aircraft Maintenance, Repair and
Overhaul (MRO) industry is only 1% of the global MRO market with the lower taxes in
neighbouring nations forcing Indian airlines to perform their repairs overseas.
● UDAN scheme: Under this regional connectivity scheme, the government plans to add
around 1 crore airline seats annually, by operationalizing routes which connect
previously unserved airports. Major airlines can utilize these schemes to expand their
domestic network.

Economical Factors
● ATF (Aviation Turbine Fuel) prices: Though ATF (purchased with a weak rupee) prices
jet fuel in India being about 40% of the operational cost of airlines and 40% costlier than
in the rest of the world.
● Leasing: In India, 75% of the commercial fleet is leased. Due to Jet Airways and Air India,
the risk premium for the Indian market is bound to rise, which will affect total lease
costs.
● Forecasted Growth of the Aviation Industry: 6.6% per year on average over the next 20
years, so as the pie increases, Indigo which is enjoying a near 50% market share will
benefit.
● Rising per capita income: Inflation-adjusted per capita incomes are expected to increase
to almost 31,000 in 2036, more than double the current level, which gives Indigo an
advantage as an LLC (Low Cost Carrier) airline.
● Foreign exchange fluctuations impact the financing and leasing aircrafts.

Social Factors
● Demographic: There is an increase in the number of younger and lower income
passengers, who are more price-sensitive. The travel boom fuelled by Indian millennials'
focus on work-life balance, status and convenience has prompted many people to shift
from other modes of transport to flights.
● Pilot shortage: Skill shortage in the Indian labour market forces airlines to hire
expatriate commanders, leading to higher wage expenses. The projected 10-year
growth in capacity and airport expansion, show that airlines will have to hire 17,164
more pilots, which will lead to a 14% shortfall in commander pilots and a rise in the
wage bill, the second biggest cost chunk after fuel
● Indigo’s brand image has suffered recently due to the widely public altercations
between staff and customers. To restore the brand equity it has built through years of
effort, timely and appropriate action on customer complaints should be ensured by the
airline.

Technological Factors
● Indian airlines rely on foreign-made planes. With growing technological capabilities and
rise of entrepreneurial ventures like Thrust Aircraft Company, domestic plane
manufacturing can revolutionize the Sector.
● The addition of 250 Airbus 320 neo aircrafts, with airframe improvements and addition
of winglets will give fuel savings of up to 15%.
 ● Cybercrime is an increasing threat to airlines. Many computerized parts like flight
control systems, GPS based navigation, fuel measurement systems and maintenance
computers are potential targets
● Dynamic pricing through AI and data analytics helps price services at the optimum price
point at all times, maximizing profits for the company.

Ecological Factors
● Aviation is responsible for about 2% of the world’s annual carbon emissions. New
aircrafts would have to abide by the regulations of the International Civil Aviation
Organization (or ICAO), including a CO2 emission standard, putting further strain on an
industry with thin margins.
● There is a need to find sustainable alternative energy sources for fuel, which would
reduce fuel costs in the long run and limit the pollution caused. The industry has
committed to stabilising its CO2 emissions in preparation for a 50% reduction by 2050,
which will increase costs.
● The smog issue in North India during winters has not been resolved and creates delays,
leading to a domino effect and slowing down the company’s operations

Legal Factors
● Regulatory bodies: The growth in the airline industry has led to a demand of
strengthening the regulatory bodies like DGCA, AERA and the Bureau of Civil Aviation
Security towards a stronger oversight, likely to be welcomed by the stakeholders. These
consumer-friendly regulators lead to hefty fines and slow down the industry’s growth.
● Route Dispersal Guidelines (RDG): Airlines are mandated to fly a certain percentage of
flights in loss-making air routes to remote airports, which decreases their profitability.

III Planning Aspect

1. IndiGo has made sure that its average fleet age remains four years till 2032. It was a well
thought-out fleet strategy that was made 10 years back, and not something done a
couple of months ago. The last plane of the three bulk orders of 530 aircraft that IndiGo
placed will come in 2026 — 100 Airbus A-320 in 2005, 180 A-320 Neos in 2011 and 250
A-320 Neos in 2015. IndiGo’s bulk buying helped negotiate better rates. We buy planes
at a lower price than what a seller would buy for. We gain right at the beginning — this
is netted against our rentals and brings our cost down.
2. Once all airplanes are delivered, IndiGo will not have a fleet of 530 planes — this is due
to the ‘buy, sell and lease back’ strategy. At peak we will have 330 planes. Once the
order is placed the planes are sold to lessors at market price. The planes are then leased
back for the next six years — which means for the first six years IndiGo receives a plane
every month.
3. Every month a plane goes out of IndiGo’s fleet and a new aircraft joins, thus reducing
the average fleet age, and with an average fleet age that is low the cost of maintenance
is also lower. In 2011, IndiGo was the first customer for Airbus to order the new range of
fuel efficient A-320 Neo planes. Neos help in saving 10-15% of the overall fuel cost. Fuel
makes up for 50% of a carrier’s cost.
 4. Because of the six year lease back plan, with the next two-and-half years one-third of
IndiGo’s fleet will be Neos, and in the next six years it will have an all Neo fleet. There is
a straightaway positive impact of 7% on the company’s bottomline because of of the
Neos. People can copy our food, our advertising, our buses, and other things but they
cannot replicate the fleet we have.
5. With orders in place, IndiGo is planning to increase its presence in the number of cities it
flies to — adding two to three cities to its portfolio every year. In the next eight and half
years it plans to have presence in 56 airports compared to 33, now. Regional flying is not
on the radar, and neither are smaller planes. We do not have any plans to induct smaller
planes into our fleet. Nobody in this world has been able to implement a two-model
strategy.

IV Management Aspect
the Board comprised ten (10) members with an appropriate mix of Non-Executive Directors,
Executive Director, and Independent Directors, which is in compliance with the provisions of
the Act, the SEBI LODR Regulations and is also aligned with the best practices of Corporate
Governance

● the Board appointed Mr. Gregg Albert Saretsky as a Non-Independent Non-Executive

Director, as an Additional Director on Board, liable to retire by rotation. Mr. Saretsky
will hold office till the ensuing Annual General Meeting (“AGM”) and is eligible for
appointment as a Director of IndiGo.
● Mr. Jiten Chopra was appointed as the Chief Financial Officer of Indigo with effect from
February 22, 2021,
No of meetings of Board Members; The Board met twelve (12) times during FY 2021.
Committees of the Board the Board had the following five committees:
01. Audit Committee
02. Nomination and Remuneration Committee
03. Risk Management Committee
04. Corporate Social Responsibility Committee
05. Stakeholders Relationship Committee
The Board has constituted a Fund Raise Committee at its meeting held on May 10, 2021, for
raising funds through a QIP under the provisions of the SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2018, as amended.

V Leading the corporate in testing time

The Covid-19 crisis
As with the world aviation industry, the Covid-19 pandemic has had a massive impact on the
Indian aviation industry. According to DGCA, passengers carried by domestic airlines fell by 56%
for CY 2020 compared to the previous year. With the gradual abatement of the first Covid-19
wave, India was witnessing a sharp ‘v’ shaped recovery in domestic traffic in the period
through February 2021. Further, based on these demand trends the Government also gradually
increased the limit of capacity deployment in the domestic markets to 80%.

In response to the severe impact on revenues, IndiGo took the following actions:
● Its primary focus was on the cash position. Company’s fixed cash burn was around Rs.
400 million per day in March 2020. Cash burn was gradually reduced to Rs. 150 million
per day in the December 2020 quarter due to the various cost reduction initiatives and
cash contribution from operations. Unfortunately, with the demand erosion due to the
second wave of Covid-19, average daily cash burn increased to Rs. 190 million in the
March 2021 quarter.
● Company has also taken cash enhancement measures such as acquiring NEOs financed
through operating lease, refinancing the unencumbered aircraft and engines, and
securing credit lines with several banks. As a result of these measures, IndiGo’s free cash
balance stood at Rs. 71.0 billion as on March 31, 2021.
● Company has looked for opportunities for generating revenues through newer streams
such as repatriation flights, charter flights and cargo in cabin. The contribution from
these flights has helped in managing the cash position.
● Company has increased the efficiency of its fleet in terms of fuel consumption by
replacing CEOs with the more modern NEOs. NEO aircraft are 15% more fuel efficient
than CEO aircraft
● With the reduction in departures, IndiGo unfortunately had no option but to implement
pay cuts and layoffs. As a result, its employee costs during the year reduced by 30% as
compared to the previous year.
● Even with lower capacity, IndiGo continued to increase its penetration into the smaller
cities and towns of India. During this Covid-19 period we announced 7 new domestic
stations.

VI Controlling the Business in Downturn

IndiGo, India’s largest private airline has been taking several strategic initiatives to re-organize
and sustain itself. The airline very effectively used the downturn period for working out a new
strategy for attaining growth, once the pandemic subsides.

As on March 31, 2020, the airline had a fleet of two hundred and sixty-two (262) A320 aircraft.
At that time IndiGo was operating 1,674 daily flights to sixty-two (62) domestic destinations and
twenty-four (24) international destinations. The airline has a market share of sixty per cent
(60%) in domestic sectors.

Some key strategic decisions that have been taken by the airline board:
1. New director on Board: InterGlobe Aviation appointed Albert Saretsky, the former CEO
of the Canadian airline WestJet, as a non-executive non-independent director on the
board of IndiGo. Saretsky will be providing strategic directions to the organization and
well as for financial management of the company.
2. Billing and Settlement using IATA Financial Gateway: On November 5 the airline
announced that IndiGo has started using IATA -Billing and Settlement Plan acceptance in
 Overseas Point of Sales. The objective is to increase distribution and make the sales
process seamless.
3. A Large Airbus Engine Order; These engines will power IndiGo’s new one hundred and
fifty (150) A320neo aircraft. The order is worth well over $10 billion. The airline is the
world’s largest customer for A320neo with about 700 planes on order.
4. Conserving Cash During Downturn: The airline remains cash-rich with over $2.4 billion
in cash reserves as on September 30. Also, it is noteworthy that IndiGo has not
renegotiated delivery of the new aircraft with the manufacturers and is accepting new
planes as per the original schedule.

The airline hopes to fully recover by early 2022 on the domestic side and by 2023 on
international sectors. A ray of hope in a struggling aviation market.
United Airlines
United Airlines, Inc. (commonly referred to as United) is a major American airline headquartered at
Willis Tower in Chicago, Illinois. United operates a large domestic and international route network
spanning cities large and small across the United States and all six continents. Measured by fleet size and
the number of routes, it is the third-largest airline in the world.

Important Statistics :
● 238 domestic destinations
● 118 international destinations
● 48 countries
● 5 COntinents
● Fleet of 834 aircrafts
● Additional 49 aircraft planned or on order

I Management Outlook
Management Team of United Airlines :
Scott Kirby Chief Executive Officer United Airlines

Brett J. Hart President United Airlines

Josh Earnest Senior Vice President and Chief Communications Officer

Torbjorn (Toby) J. Enqvist Executive Vice President and Chief Customer Officer

Theresa (Terri) Fariello Senior Vice President, Government Affairs and Global Public Policy

Kate Gebo Executive Vice President, Human Resources and Labor Relations

Gregory (Greg) Hart Executive Vice President, Strategy and Planning

Linda Jojo Executive Vice President Technology and Chief Digital Officer

Gerald (Gerry) Laderman Executive Vice President and Chief Financial Officer

Andrew Nocella Executive Vice President and Chief Commercial Officer

Jonathan (Jon) Roitman Executive Vice President and Chief Operations Officer

II Environmental Factors
● SWOT analysis of United Airlines :

Strengths Weaknesses

1. One of the largest aircraft fleets 1. Operational troubles because of merger

2. Wide serviceability & reach of United & Continental Airlines
 3. Customer experience through loyalty 2. United’s leadership problems
program & member lounges 3. Weak work culture
4. Strong brand image through marketing & 4. Heavy dependence on third-party service
strategic alliance with their airlines providers for customer service,
5. Flexibility in fleet planning maintenance, fueling operations, etc

Opportunities Threats

1. Growing US airline industry and tourism 1. Intense competition from low cost
can help boost the business of United airlines offering discounted prices can
Airlines in the international & domestic lead to loss of margins for United Airlines
sectors 2. Rising fuel prices is a challenge for the
2. Strong US economy will ensure higher aviation industry as it reduces the profits
purchasing power of people willing to 3. Persisting risks of recession and
invest in travel pandemics across the globe can decline
3. Increasing partnerships with international the demand for air travel
players, trying to reach to newer &
unexplored destinations

● PESTEL Analysis for United Airlines :

1. Political Factors
● Transition of Government and Changes in Policy – There is consistency in policy making from
one government to another. Secondly governments from all parties adhere to the treaties made
by the previous governments.
● Judiciary Independence – In the matter of commercial and business decisions, the judiciary of
the country is independent to a large extent. Businesses do face problems when the conflict is
between public interest and proprietary technology similar to ruling in South Africa where the
government & judiciary allowed generic AIDS drugs irrespective of patents of global companies.
● Unrest within the Country & Chances of Civil Unrest – We don’t think that Crew Plane business
operations are facing any dangers from any kind of civil unrest or internal militant operations in
the country.
● International Trade & Other Treaties – The country has a good record of adhering to
international treaties it has done with various global partners. The government of each party has
adhered to the treaties done by previous governments, so there is a consistency in both rule of
law and regulations.
● Segregation of Political Responsibilities between Different Government Agencies – There are
numerous government agencies which reduces the risk of overwhelming pressure by one
agency. But on the flip side it does increase both time and cost of doing business and getting
certifications and clearances.
● Political Governance System – Based on the information provided in the United Airlines 173
case study, it seems that the country has a stable political system. Crew Planes can make
strategies based on the stable political environment.
● Democracy & Other Democratic Institutions – According to Jan Hagen the democratic
institutions are needed to be strengthened further so that businesses such as Crew Plane can
thrive in an open, transparent and stable political environment. Strengthening of democratic
institutions will foster greater transparency and reduce the level of corruption in the country.
2. Economic Factors
● Financial Market Structure and Availability of Capital at Reasonable Rates – The quantitative
easing policy of the Federal Reserve has led to liquidity flooding all across the global financial
markets. Crew Planes can borrow cheaply under such circumstances. But this strategy entails
risks when interest rates will go up.
● Foreign Exchange Rate – Number of companies have incurred losses in past few years because
of forex risk in – Venezuela, Brazil, and Argentina. Crew Planes should be careful about the
history of forex risk before entering a new market. Many US companies have incurred losses in
Mexico during the regular forex crisis in that country.
● Inflation Rate – The inflation rate can impact the demand of Crew Plane products. Higher
inflation may require Crew Plane to continuously increase prices in line with inflation which
could lead to lower levels of brand loyalty and constant endeavors to manage costs. Cost Based
Pricing could be a bad strategy under such conditions.
● Demand Shifts from Goods Economy to Service Economy – The share of services in the
economy is constantly increasing compared to the share of manufacturing, goods, and
agriculture sectors.
● Employment Rate – If the employment rate is high then it will impact Crew Plane strategies in
two ways – it will provide enough customers for Crew Plane products, and secondly it will make
it expensive for Crew Plane to hire talented & skillful employees.
● Level of Household Income and Savings Rate – Increasing consumption and stagnant household
income in the United States had led to credit binge consumption. It has decimated the culture of
savings as people don’t have enough to save. Crew Plane needs to be careful about building
marketing strategy that is dependent on “Purchase on Credit” consumer behavior.
● WorkForce Productivity – Work force productivity in the US has grown by 25-30 % in the last
two decades even though the salaries are not reflecting those gains. It can enable Crew Plane to
hire skilled workforce at competitive salaries.

3. Social Factors
● Attitude towards Leisure – Crew Plane should conduct an ethnographic research to understand
both attitude towards leisure activities and choice of leisure activities. Experience economy is
one of the fastest growing segments both among millennials and among baby-boomers.
● Education Level in Society – Education level of the society impacts both the quality of jobs and
level of income. High level of education often results in better jobs, higher income and higher
spending on complex and aspirational products.
● Types of Immigration & Attitude towards Immigrants – Given the latest developments such as
Brexit and Immigrant detention on the Southern border of the United States. Attitude towards
immigration has come under sharp focus. Crew Planes should have capabilities to navigate
under this hyper sensitive environment.
● Nature of Social Contract between Government & Society – Before entering into a market Crew
Plane needs to understand the nature of social contract between government and society. For
example it has been extremely difficult for US companies to enter the UK health market as the
UK health system is a nationalized system and everything goes through contracts at national
level.
● Societal Norms and Hierarchy – What sort of hierarchy and norms are acceptable in society also
influence the types and level of consumption in a society. In highly hierarchical societies the
power of decision making often reside at the top
● Level of Social Concerns & Awareness in Society – Higher level of social concerns in the society
often result in higher consumer activism and pressure from non-governmental organizations, &
pressure groups.
● Gender Composition in Labor Market - Crew Plane can use gender composition of labor market
to understand the level of liberal nature of the society, women rights, and women’s say in
matters of societal issues and consumption decisions. The gender composition of the labor
market is a good indicator of disposable income of households, priorities of the households, and
related needs.
● Attitude towards Authority – Various cultures in different parts of the world have different
attitudes towards authority. In Asia authority is respected while in the west it is something to
rebel against. Crew Plane should carefully analyze the attitude towards authority before
launching a marketing campaign for its products and services.

4. Technological Factors
● Integration of Technology into Society & Business Processes – Uber failed in China because it
tried to enter before smartphones were widespread in China. Crew Plane should build a strategy
that can integrate societal values, infrastructure, and Crew Plane business model.
● Acceptance of Mobile Payments and Fintech Services – One of the areas where the US are
lagging behind China is Mobile Payments. Crew Plane should assess what is the preferred choice
of mobile payments in the local economy and choose the business model based on it.
● Cost of Production and Trends – Crew Plane should assess - What are the cost of production
trends in the economy and level of automatization. We at EMBA Pro believe that in the near
future the sector most disrupted by technological innovation is manufacturing and production.
● Property Rights & Protection of Technology Oriented Assets – Crew Plane should analyze the
legal status of various property rights and intellectual property rights protections that are
common in the US.
● E-Commerce & Related Infrastructure Development – As E-Commerce is critical for the Crew
Plane business model. It should evaluate the e-commerce infrastructure, technology
infrastructure etc before entering a new market.
● Transparency & Digital Drive – Crew Plane can use digitalization of various processes to
overcome corruption in the local economy.
● Intellectual Property Rights and Patents Protection – Before entering the new market Crew
Plane should focus on the environment for intellectual property rights.
● Level of Acceptance of Technology in the Society – Crew Plane has to figure out the level of
technology acceptance in the society before launching new products. Often companies enter
the arena without requisite infrastructure to support the technology oriented model.

5. Environmental Factors
● Per Capita and National Carbon Emission – What is the per capita carbon emission of the
country and what is the overall level of carbon emissions of the country. This will help in better
predicting the environment policy of the country.
● Recycle Policies – What are the recycle policies in the prospective market and how Crew Plane
can adhere to those policies.
● Corporate Social Responsibilities Culture – Are Crew Planes present CSR efforts applicable in
the new market or does it need to have new initiatives to cater to the prospective market.
● Level of Consumer Activism Regarding Environmental Concerns – Crew Plane needs to know
the level of consumer activism regarding environmental concerns is. It will help Crew Plane in
both developing environmentally friendly products and thwarting PR stumble blocks.
● Paris Climate Agreement and Commitment of National Government under the Agreement –
What are the commitments of the country under the Paris Agreement and what is the general
level of consensus regarding Paris Climate Agreement in the country. For example Trump not
standing by US commitments created an environment of uncertainty.
 ● Environmental Standards and Regulations both at National & Local Levels – Often the
environment policy at national and local level can be different. This can help Crew Plane in
numerous decisions such as plant location, product development, and pricing strategy.
● Waste Management – What is the policy of waste management in the prospective market and
how Crew Plane can adhere to the waste management requirements in that market.

6. Legal Factors
● Employment Laws – What are the employment laws in the country and are they consistent with
the business model of Crew Plane. For example, the Uber employment system is not consistent
with French laws and it is facing challenges in the country.
● Health & Safety Laws – What are the health and safety laws in the country and what Crew Plane
needs to do to comply with them. Different countries have different attitudes towards health
and safety so it is better for Crew Planes to conduct a thorough research before entering the
market.
● Adherence to Common Law – Is the country following common law which is uniform for all
parties – whether domestic or international. If there is arbitrariness in the judicial process then
Crew Plane can’t be sure of the judgments.
● Consumer Protection Laws – Crew Plane needs to know what are the consumer laws, what is
the rate of enforcement, what is the attitude of authorities towards consumer protection laws,
and what is the role of activist groups in enforcement of consumer protection laws.
● Time Taken for Court Proceedings – Even if the country has best of the laws, it doesn’t mean
much if they can’t be enforced in a timely manner. Crew Plane should do primary research
regarding how much time it often takes to conclude a court case in the country given the sort of
legal challenges Crew Plane can face.
● Business Laws – Before entering into a new market – Crew Plane has to assess what are the
business laws and how they are different from the home market.
● Securities Law – What are the securities laws in the country and what are the conditions to list
the company on national or regional stock exchange.

Porter’s Five (5) Forces Analysis for United Airlines :

1. Threats of New Entrants
New entrants in Major Airlines bring innovation, new ways of doing things and put pressure on United
Airlines through lower pricing strategy, reducing costs, and providing new value propositions to the
customers. United Airlines has to manage all these challenges and build effective barriers to safeguard
its competitive edge.

How United Airlines can tackle the Threats of New Entrants

● By innovating new products and services. New products not only bring new customers to the
fold but also give old customers a reason to buy United Airlines ‘s products.
● By building economies of scale so that it can lower the fixed cost per unit.
● Building capacities and spending money on research and development. New entrants are less
likely to enter a dynamic industry where the established players such as United Airlines keep
defining the standards regularly. It significantly reduces the window of extraordinary profits for
the new firms thus discouraging new players in the industry.

2. Bargaining Power of Suppliers

Almost all the companies in the Major Airlines industry buy their raw material from numerous suppliers.
Suppliers in a dominant position can decrease the margins United Airlines can earn in the market.
Powerful suppliers in the Services sector use their negotiating power to extract higher prices from the
firms in the Major Airlines field. The overall impact of higher supplier bargaining power is that it lowers
the overall profitability of Major Airlines.

How United Airlines can tackle Bargaining Power of the Suppliers

● By building an efficient supply chain with multiple suppliers.
● By experimenting with product designs using different materials so that if the prices go up of
one raw material then the company can shift to another.
● Developing dedicated suppliers whose business depends upon the firm. One of the lessons
United Airlines can learn from Wal-Mart and Nike is how these companies developed third party
manufacturers whose business solely depends on them thus creating a scenario where these
third party manufacturers have significantly less bargaining power compared to Wal-Mart and
Nike.

3. Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum
price as possible. This put pressure on United Airlines profitability in the long run. The smaller and more
powerful the customer base is of United Airlines the higher the bargaining power of the customers and
higher their ability to seek increasing discounts and offers.

How United Airlines can tackle the Bargaining Power of Buyers

● By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.
● By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if United Airlines keeps on coming up with new products then it can
limit the bargaining power of buyers.
● New products will also reduce the defection of existing customers of United Airlines to its
competitors.

4. Threats of Substitute Products or Services :

When a new product or service meets a similar customer needs in different ways, industry profitability
suffers. For example services like Dropbox and Google Drive are substitutes for storage hardware drives.
The threat of a substitute product or service is high if it offers a value proposition that is uniquely
different from present offerings of the industry.

How United Airlines can tackle the Threat of Substitute Products / Services :
● By being service oriented rather than just product oriented.
● By understanding the core need of the customer rather than what the customer is buying.
● By increasing the switching cost for the customers.

5. Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices and
decrease the overall profitability of the industry. United Airlines operates in a very competitive Major
Airlines industry. This competition does take a toll on the overall long term profitability of the
organization.
How United Airlines can tackle Intense Rivalry among the Existing Competitors in Major Airlines
industry :
● By building a sustainable differentiation
● By building scale so that it can compete better
● Collaborating with competitors to increase the market size rather than just competing for a
small market.

Implications of Porter Five Forces on United Airlines :

By analyzing all the five competitive forces of United Airlines, strategists can gain a complete picture of
what impacts the profitability of the organization in the Major Airlines industry. They can identify game
changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding
the Porter Five Forces in great detail United Airline's managers can shape those forces in their favor.

III Planning Aspect

● United Airlines today announced a commercial agreement with Denver-based aerospace

company Boom Supersonic to add aircraft to its global fleet as well as a cooperative
sustainability initiative – a move that facilitates a leap forward in returning supersonic speeds to
aviation.
● Under the terms of the agreement, United will purchase 15 of Boom's 'Overture' airliners, once
Overture meets United's demanding safety, operating and sustainability requirements, with an
option for an additional 35 aircraft. The companies will work together on meeting those
requirements before delivery. Once operational, Overture is expected to be the first large
commercial aircraft to be net-zero carbon from day one, optimized to run on 100% sustainable
aviation fuel (SAF). It is slated to roll out in 2025, fly in 2026 and expected to carry passengers
by 2029. United and Boom will also work together to accelerate production of greater supplies
of SAF.
● "United continues on its trajectory to build a more innovative, sustainable airline and today's
advancements in technology are making it more viable for that to include supersonic planes.
Boom's vision for the future of commercial aviation, combined with the industry's most robust
route network in the world, will give business and leisure travelers access to a stellar flight
experience," United CEO Scott Kirby said. "Our mission has always been about connecting
people and now working with Boom, we'll be able to do that on an even greater scale."
● Capable of flying at speeds of Mach 1.7 – twice the speed of today's fastest airliners –
Overture can connect more than 500 destinations in nearly half the time. Among the many
future potential routes for United are Newark to London in just three and a half hours, Newark
to Frankfurt in four hours and San Francisco to Tokyo in just six hours. Overture will also be
designed with features such as in-seat entertainment screens, ample personal space, and
contactless technology. Working with Boom is another component of United's strategy to invest
in innovative technologies that will build a more sustainable future of air travel.
● "The world's first purchase agreement for net-zero carbon supersonic aircraft marks a significant
step toward our mission to create a more accessible world," said Blake Scholl, Boom Supersonic
founder and CEO. "United and Boom share a common purpose—to unite the world safely and
sustainably. At speeds twice as fast, United passengers will experience all the advantages of life
lived in person, from deeper, more productive business relationships to longer, more relaxing
vacations to far-off destinations."

IV Management Aspect
 ● United Airlines (UAL) announced second quarter 2020 financial results, the most difficult
financial quarter in its 94-year history, with a net loss of $1.6 billion, and an adjusted net loss¹ of
$2.6 billion. Total operating revenues were down 87.1% year-over-year, on an 87.8 percent
decrease in capacity year-over-year. The company's total liquidity as of the close of business on
Monday, July 20, 2020 was approximately $15.2 billion. United now expects liquidity at the end
of the third quarter to be over $18 billion.
● Cash burn during the second quarter averaged $40 million a day, including $3 million of principal
payments and severance expenses. The company currently is forecasting average daily cash
burn to be approximately $25 million during the third quarter of 2020 including $6 million of
principal repayments and severance expenses.
● United believes it did the best job of matching actual capacity to demand among its largest
network peers. The company also expects to finish the quarter with the lowest average daily
cash burn among large network carriers.
● The company continued to take aggressive action to mitigate the impact of the COVID-19
pandemic by raising liquidity and reducing cash burn. The company is focused on remaining
flexible to position the airline to bounce back when demand recovers.
● United added 400 flights to July's schedule compared to June and operated 80% of the pre-
pandemic U.S. schedule. As international demand increases, United moves up service and adds
fourth weekly flight to Dubrovnik, Croatia plus more seats to Athens, Greece
● United remains the only U.S. carrier that makes it easy for customers to search, book and upload
COVID-19 tests and vaccination records through its mobile app and website

V Leading the corporate in testing time

Covid-19 effects on airlines industry & how United Airlines Handled it :

Launching United CleanPlus: Keeping Customers and Employees Safe

● Launched United CleanPlus, to reinforce the company's commitment to putting health and
safety at the forefront of the entire customer experience, with the goal of delivering an
industry-leading standard of cleanliness by partnering with Clorox and experts from the
Cleveland Clinic.
● Require all United flight attendants and passengers to wear face coverings.
● Among the first U.S. airlines to enforce policy that bans customers for refusing to follow mask
requirements.
● This week, the company announced it will now maximize air flow volume for all mainline aircraft
high-efficiency particulate air (HEPA) filtration systems during the entire boarding and deplaning
process, helping further reduce the spread of COVID-19.
● First major U.S. airline to ask all passengers to complete a health self-assessment during their
check-in process based on recommendations from the Cleveland Clinic.
● As of July 1, all U.S. airports are electrostatic spraying aircraft interiors.
● Expanded touchless check-in capabilities to kiosks at more than 215 airports.
● The company offers free COVID-19 testing to all employees, and checks their temperatures
before they begin work at all U.S. airports.
● In May, started providing individually wrapped hand wipes and snack bags with pretzels,
Stroopwafel, water, and a hand sanitizer wipe as customers board to reduce touchpoints.
VI Controlling the Business in Downturn

The company continued to take aggressive action to mitigate the impact of the COVID-19
pandemic by raising liquidity and reducing cash burn. The company is focused on remaining
flexible to position the airline to bounce back when demand recovers.

● Since the start of the crisis the company has raised a total of $16.1 billion through debt
offerings, stock issuances and the CARES Act Payroll Support Program grant and loan,
among other items.
● As of July 2, raised $6.8 billion in financings secured against MileagePlus Holdings in the
form of a $3.8 billion bond and a $3.0 billion term loan, with interest rates of 6.5% and
LIBOR plus 5.25%, respectively.
● Entered into an equity distribution agreement for the issuance and sale from time to
time of up to 28 million shares of UAL common stock in "at-the-market" offerings.
Utilized the at-the-market program to raise $22 million through the sale of
approximately 532,000 shares in the second quarter.
● The company entered into an agreement with a subsidiary of BOC Aviation Limited to
finance through a sale leaseback transaction six Boeing 787-9 and 16 Boeing 737 MAX 9
aircraft that are currently subject to purchase agreements between United and The
Boeing Company and are scheduled to deliver in 2020.
● Raised $250 million in a secured term loan facility.
● Increased cargo revenue by 36.3% by serving strategic international cargo-only missions
and optimizing aircraft capacity with low passenger demand.
● Reduced total operating costs by 69% versus the second quarter of 2019; excluding
special charges3, reduced operating costs by 54%.
● Full-year 2020 adjusted capital expenditures are now expected to be approximately $3.7
billion.
● In third quarter 2020 the company expects consolidated system capacity to be down
65% versus third quarter 2019. The company will continue to proactively evaluate and
cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand, and
expects demand to remain suppressed until the availability of a widely accepted
treatment and/or vaccine for COVID-19.
● Offered employees comprehensive voluntary separation packages including flight
benefits and continuous pay through Nov. 30, 2020 with more than 6,000 employees
opting to participate.
World Airways
World Airways, Inc. was an American airline headquartered in Peachtree City, Georgia in
Greater Atlanta. For the most part, the company operated non-scheduled services but did fly
scheduled passenger services as well, notably with McDonnell Douglas DC-10 wide body
jetliners. World Airways ceased all operations on March 27, 2014.

World Airways was founded in 1948 by Benjamin Pepper with the introduction of ex-Pan Am
Boeing 314 flying boats. Edward Daly, however, is thought of as World's founder. He bought the
airline in 1950 for $50,000 and proceeded to acquire DC-4s.
World got its first government contract in 1951 and had a substantial amount of government
business since then until it ceased operations.
Later, World acquired DC-6s and Lockheed Constellations. World entered the jet era in the late
1960s with Boeing 707s and 727s. In the early 1970s, World acquired Douglas DC-8s.
World became a key military contractor during the Vietnam War, flying troops and equipment
between the war zone and World's base at Oakland International Airport. On March 29, 1975,
World operated the last airlift flight out of Đà Nẵng, Vietnam. Two 727s were flown to Đà Nẵng,
one of which had Ed Daly aboard. Thousands rushed the airplane and it took off on a taxiway
under heavy fire. The aircraft with Daly aboard started its takeoff roll with the 727's back
airstairs still down with Daly fending off additional people trying to leave due to over-capacity
(The film of this was later broadcast on the CBS Evening News on March 30, 1975). When the
airplane landed at Saigon, there were 268 people in the cabin and possibly 60 or more in the
cargo holds. World did not return to Đà Nẵng until April 17, 2002, then with an MD-11 aircraft
to pick up a team of people resolving Missing-In-Action cases from the Vietnam War.
Also, in the early 1970s through the early 1980s, World operated three Boeing 747 aircraft and
was the launch customer for the "flip nose" front-loading variant of the 747. Later, World
acquired DC-10s that were retired in 2010. In 1986 during scheduled service, slots for lucrative
routes on the east coast were available, and with the competitive nature for these routes, they
were offered to interested airlines in the form of a lottery, or what was called the “Slottery”.
World was awarded 3 city pairs, Boston, Washington National, and New York LaGuardia. In
order to acquire these slots, the routes had to be operated for at least 3 months. Worlds’
intentions were to sell the routes, so operated fully crewed Boeing 727s (flight deck and cabin
crew) without passengers, flying between the scheduled city pairs by touch and go landings and
takeoffs to adhere to the requirements, and then as planned, sold the routes for profit. World
experienced heavy losses in the 1980s as a result of operating scheduled passenger services,
ending scheduled service September 15, 1986. In 1987, the company moved its headquarters
from Oakland to Washington Dulles International Airport, acquired Key Airlines from Bain
Capital's Presidential Airways, and established ties to Malaysia Airlines. World was burdened
financially as its cash was siphoned off by parent WorldCorp to support a telecommunications
venture in which the parent had invested. During the first Persian Gulf War, World did a
substantial amount of profitable business for the military, enabling the addition of the MD-11
to the fleet. During the mid-1990s, World operated the military passenger trunk route from
Osan Air Base, Korea and Kadena Air Base, Okinawa to Los Angeles, using MD-11 aircraft. World
has been headquartered near Atlanta Hartsfield International Airport.
The airline received a substantial amount of its business from the military, especially in its role
connecting American bases in the U.S. to the Middle East. It also thrived on passenger and
freight contracts with private organizations, such as the Jacksonville Jaguars of the National
Football League, as well as wet leases to other airlines. With such wet lease arrangements,
World Airways essentially functioned as a cargo airline arm or subsidiary of another airline in
which a separate division would not be an efficient use of an airline's resources.
In 2006, World Airways became a subsidiary of World Air Holdings, Inc. On April 5, 2007, World
Airways returned to its Oakland and Bay Area roots where they were headquartered from 1956
to 1987. It was later acquired by ATA Holdings, which was renamed Global Aero Logistics, in a
transaction valued at $315 million. With this, ATA's president, Subodh Karnik became the head
of all three certificated airlines autonomous operations, ATA Airlines, North American Airlines,
and World Airways. In 2007 GAL moved its operation to the World Airways building in
Peachtree City, Georgia. Robert Binns was named chief executive officer of GAL in April 2008
and Charlie McDonald was named president. Larry Montford became COO of World Airways. All
three have since left the airline.
On March 27, 2014, World Airways announced the immediate cessation of all operations. At
the time of its closure, World's fleet consisted of MD-11 trijet aircraft both in freighter and
passenger configurations and of 747-400 freighters.
On November 8, 2017, investment firm 777 Partners, announced it had acquired the
intellectual property of World Airways, Inc. and planned to relaunch the airline as a low-cost
international carrier with a fleet of Boeing 787 Dreamliners. The new airline will be based at
Miami International Airport with MIA and Los Angeles International Airport as initial operating
hubs.
SWOT Analysis
Strengths of World Airways
● Was a major international air carrier after its acquisition by billionaire Howard Hughes
in 1939.
● Was known as a luxury carrier and considered to be at the cutting edge of technological
innovation in air travel.
● High quality increased brand loyalty and improved World Airways’ performance in a
competitive market.

Weaknesses of World Airways

● The cash shortage or insufficient current assets negatively affect the liquidity position
and harms the overall performance. The airline had difficulty borrowing money and it
nearly went bankrupt in the early 1960s.
● Insufficient budget for the marketing and promotion activities weakened the ability to
expand the customer base.
● It was hit by the deregulation and fuel cost crises of the 1970s.
● Less expenditure on the research and development activities can weaken the
performance.
● The decision making in the World Airways takes too much time, causing expensive
delays.
● The misalignment between the organization’s leadership style and its core strategic
objectives made the business directionless.

Opportunities for World Airways

● The exponential growth in the population, and particularly in the existing or potential
customer segments is a great growth opportunity for the business.
● The development of new technologies to assist the service can be exploited to embed
the innovation in business operations. The advanced technological integration can
decrease costs and improve efficiency.
● Rise in the customers’ disposable income and increase in the affluent customer base
can be taken as a growth opportunity.
● Reduction in the interest rates makes the fundraising and financing at lower cost easier
for the business.
● The emergence of e-commerce and social media marketing as a trend can be a great
opportunity for World Airways if it can ensure a strong online presence on different
social networking sites.
 ● The subsidies provided by the government and other policies to make the business
environment more friendly is a positive external environmental factor for World
Airways.

Threats to World Airways

● The changing regulatory framework and introduction of new stricter regulations
imposed a major threat to the World Airways. It made compliance with legal standards
more complex and challenging for the business organization. Inability to comply with
changed regulations raises the risk of expensive lawsuits.
● Shortage of skilled labour in the market can make it difficult to attract talent with the
right skills set.
● The increasing number of direct and/or indirect competitors affects the organization’s
ability to sustain and expand the customer base.

PESTEL Analysis of World Airways

Political Factors
- Political Governance System – It seems that the country has a stable political system. It can
make strategies based on the stable political environment.

- Transition of Government and Changes in Policy – There is consistency in policy making from
one government to another. Secondly governments from all parties adhere to the treaties
made by the previous governments.

- Government Regulations and Deregulations – The government is adhering to all the rules and
regulations under World Trade Organization norms. There is consistency in both policy making
and implementations of those policies.

- Role of Non-Government Organization, Civil Society & Protest Groups – The country has a
vibrant civil society community and it should build bridges with them and seek out areas of co-
operations. Civil society groups are influential not only in policy making but also in building a
society wide narrative.

- Threat of Terrorist Attacks – In the world of post 9/11, corporations such as It have to live
with operating under the shadow of a terrorist attack. The prudent policy should be to take
insurance and other types of hedging instruments to mitigate the losses occurring because of
the terrorist attacks.

Economic Factors
- GDP Trend & Rate of Economic Growth – The higher GDP growth rate signals growing
demand in the economy. It can leverage this trend by expanding its product range and targeting
new customers. One way to start is by closely mapping the changes in – consumer buying
behavior and emerging value proposition.

- Level of Household Income and Savings Rate – Increasing consumption and stagnant
household income in United States had led to credit binge consumption. It has decimated the
culture of savings as people don’t have enough to save. It needs to be careful about building
marketing strategies that are dependent on “Purchase on Credit” consumer behavior.

- Financial Market Structure and Availability of Capital at Reasonable Rates – The quantitative
easing policy of the Federal Reserve has led to liquidity flooding all across the global financial
markets. It can borrow cheaply under such circumstances. But this strategy entails risks when
interest rates will go up.

- Demand Shifts from Goods Economy to Service Economy – The share of services in the
economy is constantly increasing compared to the share of manufacturing, goods, and
agriculture sectors.

- Price Fluctuations in both Local and International Markets – Compared to the level of
quantitative easing in the last decade the prices of their products and prices of overall products
have remained sticky in the US market. It should consider the fact that at deficit levels of the
United States in an emerging economy can lead to rampant inflation and serious risks of
currency depreciation.

- Inflation Rate – The inflation rate can impact the demand of their products. Higher inflation
may require it to continuously increase prices in line with inflation which could lead to lower
levels of brand loyalty and constant endeavors to manage costs. Cost Based Pricing could be a
bad strategy under such conditions.

- Work Force Productivity – Workforce productivity in the US has grown by 25-30 % in the last
two decades even though the salaries are not reflecting those gains. It can enable them to hire
skilled workforce at competitive salaries.

Social Factors
- Attitude towards Leisure – It should conduct ethnographic research to understand both
attitude towards leisure activities and choice of leisure activities. Experience economy is one of
the fastest growing segments both among millennials and among baby-boomers.

- Types of Immigration & Attitudes towards Immigrants – Given the latest developments such
as Brexit and Immigrant detention on the Southern border of the United States. Attitude
towards immigration has come under sharp focus. It should have capabilities to navigate under
this hyper sensitive environment.

- Attitude towards Savings – The culture of saving in the US and China is totally different where
the savings rate in China is around 30%, it is well below 15% in the United States. This culture of
consumption and savings impacts both type of consumption and magnitude of consumption.
- Attitude towards Authority – Various cultures in different parts of the world have different
attitudes towards authority. In Asia authority is respected while in the west it is something to
rebel against. It should carefully analyze the attitude towards authority before launching a
marketing campaign for its products and services.

- Demographic Trend – The demographic trend is one of the key factors in demand forecasting
of an economy. For example, as the population of the USA and EU is growing old the demand
for products mostly catering to this segment will grow. It should consider demographic trends
before new product developments and integrate features that cater to this segment. As the
population is ageing it will require less tech intensive products.

Technological Factors
- Intellectual Property Rights and Patents Protection – Before entering a new market It should
focus on the environment for intellectual property rights.

- Property Rights & Protection of Technology Oriented Assets – It should analyze the legal
status of various property rights and intellectual property rights protections that are common in
the US.

- Technology transfer and licensing issues– laws and culture of licensing of IPR and other digital
assets should be analyzed carefully so that it can avoid shakedowns and IPR thefts.

Environmental Factors
- Level of Consumer Activism Regarding Environmental Concerns –It needs to know the level
of consumer activism regarding environmental concerns is. It will help in both developing
environmentally friendly products.

- Influence of Climate Change – How climate change will impact its business model.

- Per Capita and National Carbon Emission – What is the per capita carbon emission of the
country and what is the overall level of carbon emissions of the country. This will help in better
predicting the environment policy of the country.

- Influence and Effectiveness of Environmental Agencies – The role of environment standards

enforcement agencies is critical in safeguarding norms. But often in emerging countries these
agencies delay the process as a tactic to extract bribes. It should be aware of the presence of
such practices in a country.

- Focus & Spending on Renewable Technologies – How much of the budget is spent on
renewable energy sources and how it can make this investment as part of its competitive
strategy.

Legal Factors
- Adherence to Common Law – Is the country following common law which is uniform for all
parties – whether domestic or international. If there is arbitrariness in the judicial process then
it can’t be sure of the judgments.

- Intellectual Property Rights Protection –Should assess the level of protection that intellectual
property rights get under the legal system of the country.

- Time Taken for Court Proceedings – Even if the country has best of the laws, it doesn’t mean
much if they can’t be enforced in a timely manner. It should do primary research regarding how
much time it often takes to conclude a court case in the country given the sort of legal
challenges it can face.

Porter’s Five Forces

To achieve above average profits, compared to other industry players in the long run, it needs
to develop a sustainable competitive advantage. Industry analysis using Porter Five Forces can
help to map the various forces and identify spaces where it can position itself.

By doing Industry analysis using Porter Five Forces, World Airways can develop four generic
competitive strategies.

Cost Leadership
In cost leadership, World Airways can set out to become the low-cost producer in its industry.
How it can become a cost leader varies based on the industry forces and structure. In pursuing
cost leadership strategy, it can assess – (pursuit of economies of scale, proprietary technology,
supply chain management options, diversification of suppliers, preferential access to raw
materials) and other factors.

Differentiation
It can also pursue differentiation strategy based on the industry forces where it can seek to be
unique in its industry by providing a value proposition that is cherished by buyers. It can select
one or more attributes that can uniquely position it in the eyes of the customers for specific
needs. The goal is to seek premium prices because of differentiation and uniqueness of the
offering. Industry analysis using Porter Five Forces can help it avoid spaces that are already over
populated by the competitors.

Focus - Cost Focus & Differentiation Focus

The generic strategy of Focus rests on the choice of competitive scope within an industry. It can
select a segment or group of segments and tailor its strategy to only serve it. Most
organizations follow one variant of focus strategy in the real world.

KINGFISHER
The airline group Kingfisher Airlines Limited was established in India. It was founded in 2003
and began operating commercially in 2005. It owned a 50% ownership in low-cost carrier
Kingfisher Red through its parent firm, United Breweries Group. Kingfisher Airlines had the
second highest proportion of India's domestic air travel industry till December 2011. It was
considered among top 5 passenger airlines in India but after that it suffered high losses, heavy
debts and finally shut down in 2012. However, the airline has been losing money since its
establishment, has a large debt load, and was forced to close its doors on October 20, 2012.
Due to the group's poor strategic decisions and mismanagement, the large and ambitious
Kingfisher Airline project experienced significant downtime. The airline became known for its
lavish design, food, and atmosphere, as well as its ambitious plans to establish itself in the
international market, but it overlooked the lower economic classes.
A. MANAGEMENT AND OUTLOOK – 2013
Dr. Vijay Mallya – (then) Chairman and Managing Director
The management was hopeful about the recapitalization and relaunch of the company's airline
activities. Every effort was being made to ensure a successful restart. While the industry's
growth had slowed, India's aviation industry had a strong long-term future. Many full-service
foreign carriers had shown an interest in entering the Indian aviation sector, but they were
waiting to see if the government would help them. Even financial investors were waiting for the
government to approve foreign carriers' entry into the market so that they could quit if they
like.
The company was confident that the management's persistent and committed efforts to bring
in fresh infusions of funds would be successful, provided that the lenders show interest and
commitment in reviving the company's operations rather than the hostile and negative
approach that was causing major concern among investors.
A. PESTEL
1. POLITICAL
Kingfisher Airlines was once a toast of the aviation service, and it was subjected to many
political concerns in India. The government aided Air India's monopoly and imposed
several restrictions on private carriers. Another concern was the lack of foreign equity
and non-resident Indian investment. Kingfisher has been in financial trouble since 2012,
when it was forced to close its doors after failing to pay back taxes and loans.
2. ECONOMIC
The crash landing of the Kingfisher aircraft from the sky to the ground was caused by the
Indian economy's upheaval. The sector was being severely harmed by rising gasoline
costs and strong prohibitions on foreign direct investment. The airline's income and
sales were also affected by changes in the interest rate and currency value. The airline
industry is also affected by the business cycle, as individuals regard air travel as a luxury
during the recession period.

Year 2012 2011

 Revenue 582,400.00 649,560.00

Fuel Expenses 294,590.00 227,400.00

Fuel Expenses as % of 50.58% 35.01%

Revenue

3. SOCIAL
People were willing to pay for travel around the world as their living conditions
improved and their disposable money increased. Kingfisher had a high consumer value
and was well-known in the community. It cost a premium ticket, which the customers
gladly paid in exchange for an incredible flying experience. The atmosphere on board
the plane was really pleasant, which made the passengers feel more at ease.
4. TECHNOLOGICAL
Kingfisher aircrafts were outfitted with the most up-to-date entertainment systems,
including a television in the back of each seat. It was the only domestic airline in India to
offer 16 live channels. Customers could use their mobile phones and PCs to complete
the online e-booking and check-in process. Through the development of advanced
communication, navigation, and air traffic management systems, technology was driving
the image of airlines. The construction of infrastructure also aided in the reduction of
maintenance expenses.
5. ENVIRONMENTAL
Kingfisher airline's recovery plan illustrated a variety of environment friendly options.
One step was to use tiny aircrafts, which use less fuel and emit less carbon. Another
phase was to replace two engines with one. The airline's operational costs and financial
burden would have been reduced as a result of the fuel-efficient aircrafts. Another
environmental problem for Kingfisher Airlines was lowering airplane noise. It
necessitated the adoption of new technology in order to manufacture new jets.
6. LEGAL
As a result of governmental policies, rules, and regulations, the Indian aviation sector is
subject to a variety of legal constraints. One of the reasons for Kingfisher's demise was
the need for a license to fly international routes following its joint venture with Air
Deccan. Following an understanding of the airlines' financial issues, the central
government's tax charges were being cut.
SWOT
Kingfisher Airlines' SWOT analysis examines the brand's strengths, weaknesses, opportunities,
and threats. Internal variables are strengths and weaknesses in the Kingfisher Airlines SWOT
Analysis, whereas external factors are opportunities and threats.
1. STRENGTHS
 · Strong brand value and reputation in the minds of the consumer
· United Breweries group as the parent company
· First Indian airline to have a new fleet of planes
· Quality service and innovation
· More than 80 destinations
· Less than 100 people (employees) per aircraft
· Strong backing from promoters
2. WEAKNESSES
· Could not break-even
· High ticket pricing (Kingfisher First and Class)
· Tough competition from Indian as well as international players
· Financial issues due to heavy debt and outstanding loans to oil marketing
companies
· Reputational hit due to laying off employees
3. OPPORTUNITIES
· Untapped International Markets
· Untapped cargo market
· Expanding tourism business
· Reputation of providing the best amenities in Indian skies
4. THREATS
· Falling demand
· Overcapacity in the skies – Low-Cost Carriers eating up market share
· Rising jet fuel costs
· Economic slowdown
· Infrastructure issues
· Pressure from aviation committees and government policies
PORTER’S COMPETITIVE ANALYSIS
1. POWER OF SUPPLIERS
· There are just two conceivable plane suppliers: Boeing and Airbus.
· The expense of switching suppliers is substantial because all mechanics and
pilots would need to be retrained.
· The price of aviation fuel is directly proportional to the price of crude oil.
 2. POWER OF BUYERS
· Customers are cost-conscious. Changing airlines is a simple process that is not
associated with hefty costs as all airline booking services are online
· Customers are aware of the costs of providing the service.
· There is no / very little customer loyalty
3. THREAT FROM COMPETITORS
· The LCC market is highly competitive
· Most cost advantages can be copied immediately
· Low levels of existing rivalry as the two major low-cost airlines have avoided
direct head to head competition by choosing different routes to serve
· Not much differentiation between services. Price is the main differentiating
factor
4. THREAT OF SUBSTITUTES
· No brand loyalty of customers
· No ‘close customer relationship’
· No switching costs for the customer
· Other modes of transport,
5. THREAT FROM NEW ENTRANTS
The entry barrier was very high, thus threat from new entrants was low due to the
following reasons:
· High capital investment
· Restricted slot availability makes it more difficult to find suitable airports.
· Immediate price war if encroaching on existing LCC route
· Need for low-cost base
· Flight Authorisation
B. PLANNING ASPECTS
Kingfisher Airlines rose to prominence as a premium airline that catered to the needs of high-
powered corporate leaders and politicians. It systematically built up its brand over a short period
of time. When it went to the low-cost market, however, it lost its luster.
It was not easy to navigate the low-cost market. Indigo, Spicejet, and other competitors
controlled the market. It was challenging, particularly in the domestic sector. Kingfisher Airlines
was up against fierce competition, and its hopes of making a quick buck were dashed. Over time,
its service deteriorated, and its customers switched their loyalty to better airlines.
The team's inability to make good decisions has led to its demise as one of India's greatest
airlines. The acquisition of Air Deccan, the service's rapid entry into the international arena, and
its shift in segments, which prompted rivalry, were all important factors in its demise. External
factors, such as the high cost of aviation fuel, were not adequately addressed. The cost of fuel
for Kingfisher Airlines continued to rise. All airlines, including its competitors, experienced this,
but they devised tactics to solve the difficulty, whereas Kingfisher Airlines did not.
Within a few years of starting Kingfisher Airlines, he made two critical decisions.
The first was the acquisition of Air Deccan, a low-cost carrier. Despite the fact that Kingfisher
Airlines inherited all of Air Deccan's aircraft and market, the latter also inherited its losses.
The rapid launch of overseas services was another choice that had an impact on Kingfisher
Airline's efficiency. It joined the international scene shortly after acquiring Air Deccan. After
consolidating the domestic service, which had by then taken a considerable share of the Indian
market, this entry into a vast market would have been excellent.
However, the foreign venture of Kingfisher Airlines was a complete disaster. Emirates and
Etihad, for example, dominated the international sky, and each had a devoted following. The
nascent Kingfisher Airlines found it too difficult to break their monopoly, and its foreign attempt
failed soon after it was launched.
C. ORGANIZATIONAL STRUCTURAL ASPECTS
An important factor contributing to Kingfisher Airlines decline and demise is a lack of continuity
at the top of the organization. Its owner was a newcomer to the aviation industry, and it was the
CEO who steered the company's route. However, no CEO stayed for more than a year. Things
may have turned out differently if Kingfisher Airlines had hired a "experienced CEO" like
Gopinath of Air Deccan and kept him for the full five-year term.
Apart from breweries and Kingfisher Airlines, Vijay Mallya's commercial interests were
numerous. His liquor business thrived because the breweries were supervised by skilled
individuals however Kingfisher Airlines did not have the same luck. The owner was also unable
to do justice due to his political (Vijay Mallya was a Rajya Sabha MP) and business duties.
Additionally, there was a point in 2011 when Kingfisher was unable to pay its employees'
salaries. Salaries were expected to arrive in 4 to 5 months. Following this, workers began
refusing to sign the required "Tech Log," which certifies that the aircraft is safe to fly. The
Directorate General of Civil Aviation (DGCA) became aware of this and Kingfisher Airline’s license
was revoked.
D. LEADING THE CORPORATE IN TESTING TIMES
Kingfisher's owner, Vijay Mallya, had extensive experience in the brewing industry. He'd made a
name for himself as a liquor baron. Despite his expertise in that field, he lacked experience
operating businesses such as airlines. As a result, he was unable to give the Kingfisher team
motivating and effective leadership.
Mallya had taken a number of calculated risks and developed new ventures that his father had
never attempted. A thorough examination of the case reveals that the majority of Mallya's
transactions were made for his own personal gain rather than the benefit of his employees,
shareholders, or investors. Mallya broke the confidence of those who were not only reliant on
his firm but also looked up to him as a role model, committing financial fraud and, more
crucially, ethical crimes.
Mr. Vijay Mallya never took any real intervention in day-to-day operations, despite the fact that
the CEO changed more than once a year and top management was failing. Later, Siddarth
Mallya (son of Vijay Mallya) received an airline as a birthday present from his father. He lacked
the maturity to manage such a large airline company, and as a result of his lack of skill and
experience in the airline industry, Kingfisher Airlines suffered a dramatic downfall owing to poor
management.
E. CONTROLLING THE BUSINESS IN THE DOWNTURN
Kingfisher Airlines repeatedly failed to evaluate its decisions and take corrective measures to
put it back on the track of growth and profitability. Repeated strategic failures without
interventions was a major reason behind its downfall.
After merging with Air Deccan, the airline suffered a three-year loss of more than over $10
billion. When Kingfisher realized they had made a huge mistake by buying Air Deccan, they
raised the price of Kingfisher Red. However, Kingfisher Red was not a good option at the time
because it was losing money, which caused confusion among management as to whether it
should be classified as a low-cost or regular carrier. The Income Tax Department of Mumbai
froze Kingfisher Airlines bank accounts in December 2011 due to a debt of Rs 70 crores. The
corporation took out extra loans to pay off the debt.
Lenders who lend money decreased interest rates and changed the loan to equity to help with
debt restructuring. However, this was not beneficial to the corporation, as the company soon
encountered a liquidity crunch. In February 2012, Kingfisher Red was eventually shut down.
Kingfisher Airlines then owed Rs 7057.08 crores (USD 1414 million) in total debt and had lost Rs
6000 crores (USD 1202 million).