Skywest

Topics: Regional airline, Airline, Delta Air Lines Pages: 19 (5007 words) Published: April 6, 2009
INDEX

1. DOMINANT CHARACTERISTICS OF THE INDUSTRY3
1.1 WHAT ARE THE DOMINANT CHARACTERISTICS OF THE US REGIONAL AIRLINE INDUSTRY?3 1.2 WHAT IS THE RELATIONSHIP OF THE INDUSTRY TO THE NATIONAL AND GLOBAL AIRLINES?5

2. PORTER’S FIVE FORCES ANALYSIS7
2.1 RIVALRY AMONG COMPETING SELLERS (HAS THE GREATEST IMPACT ON COMPETITION)7 2.2 THREAT OF NEW ENTRIES8
2.3 THREAT OF SUBSTITUTES8
2.4 BARGAINING POWER OF SUPPLIERS9
2.5 BARGAINING POWER OF BUYERS9

3.KEY SUCCESS FACTORS11
3.1 YIELD11
3.2 LOAD FACTORS12
3.3 UNIT COSTS13

4. DRIVERS OF CHANGE FOR THE REGIONAL AIRLINE INDUSTRY15

5. SKY WEST STRATEGY17
5.1 FUNDAMENTAL ASPECTS OF SKY WEST’S STRATEGY: GROWTH STRATEGY17 5.2 GENERIC STRATEGY18

6. SWOT ANALYSIS19
6.1 STRENGTHS19
6.2 WEAKNESSES20
6.3 OPPORTUNITIES20
6.4 THREATS21

7. RECOMMENDATIONS22

8. BIBLIOGRAPHY23

1. DOMINANT CHARACTERISTICS OF THE INDUSTRY

1.1 WHAT ARE THE DOMINANT CHARACTERISTICS OF THE US REGIONAL AIRLINE INDUSTRY?

Regional airlines are airlines that operate regional aircrafts to provide passenger air service to communities without sufficient demand to attract mainline service.

Regional airlines used to travel shorter distances with poorer aircrafts. Today, regional aircraft are getting larger, faster, and are flying longer ranges. Regional airlines are considered to be their own segment, apart from legacy carriers because they do not offer 'long-haul' flights to international or intercontinental destinations. In many cases, regional airlines also sell all or most of their flights to larger legacy carriers such as US Airways, United, and Delta, which offer long-haul and short-haul flights. There are primarily two ways for a regional airline to do business: 1. As a feeder airline, contracting with a major airline, operating under their brand name, filling two roles: 1. Deliver passengers to the major airline’s hubs from surrounding communities, this is known as regional feed or regional traffic 2. Increase frequency of service in mainline markets during times of day of the week when demand does not call for use of large aircraft. The major airlines would pay the regional airlines a contracted fee per departure. This means that the revenues of the regional airlines are not directly related to ticket sales. An example of a regional airline company that serves mostly as a feeder airline is SkyWest Inc. SkyWest does not have to directly pay operating costs and is paid for the flights that it operates. Still, it is dependent upon its partner airlines to pay its operating costs and the per-hour payments that it is guaranteed through its contracts.

2. Operating under their own brand, providing service to small and isolated communities, for whom the airline is the only reasonable link to a larger town. In this role, the term commuter airline is generally used. Regional carriers carry fewer passengers than the large, legacy carriers, but over the last decade they have proven to be much more profitable businesses. [pic] [pic]

US Regional airlines enjoyed robust growth and financial returns over the past several years when mainline partners reduced capacity and outsourced flying. Below you can see the changes in the regional airline industry in terms of number of passengers and the length of their flights. [pic]

[pic]

1.2 WHAT IS THE RELATIONSHIP OF THE INDUSTRY TO THE NATIONAL AND GLOBAL AIRLINES?

As said before, most of the revenues of the regional airline companies come from their contracts as a feeder airline for the major companies. They rely on each other in order to do business.

The regional airlines that have partnerships with the major national companies also have an advantage since they gain access to large established internet bases.

In the cooperation between the regional airlines and the big carriers, it is mostly the regional airline companies that control the power in...
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