ArikAir Case

Table of Contents

Executive Summary3

Introduction3

Issues in Establishing an Airline3

The shift towards online sales, direct distribution and Low cost carriers (LCCs)3

Growth and risks in air travel demand3

Profile of Arik Air3

Business Plan for Future of Arik Air3

Airline Alliance3

References3

ArikAir Case

Executive Summary

At the level of air travel, demand is growing worldwide as a result of economic development, globalisation, international trade, cheaper passenger fares and improved airline services. The entrance of Arik Air on the Lagos-London-Lagos route has tremendously reduced the pressure on passengers who before now usually experienced difficulties returning to their base after the yuletide. The busy schedules of airlines during the festive season would have left many passengers stranded for a week or two as was usually the case in previous years. However, air passengers were full of praise for the airline, describing the timing of commencement of operations between Lagos and London as perfect.

Introduction

The airline industry has been in a chaotic state for a number of years. According to the Air Transport Association, the airline industry trade association, the loss from 1990 through 1994 was about $13 billion, while from 1995 through 2000, the airlines earned about $23 billion and then lost about $35 billion from 2001 through 2005. Early in 2008 the association expected about a $12 billion loss in 2005. (Mason, 2001) However, a few airlines are able to compete successfully.

Airline industry is a very valuable industry and is used throughout the world as an easier way of transportation. This type of industry is categorized in 4 different sections: major, regional, national, and cargo carriers. All of these categories have ways of displaying and executing services to interested consumers. Regional airlines focus mostly on transporting major travelers between major cities and small communities near by. This class has been seen to have the fastest growing and most profitable segment of the airline industry. Sheding light on the company, we can see that there are the cargo carriers. They are part of the industry that focuses on the passengers and their cargo.

In the early 2000, the growth in the airline industry was around 5%. But, as a result of the events of 9-11, the industry felt that there would be too many seats chasing too fewer passengers (Business Week, 2000). Then, there was a promising build up within the next three years (until now) and it has shown that planning and strategies which were applied after this tragic event has lead to a new great start for airline industry.

Dramatic changes in industry structure have occurred against the backdrop of strongly growing airline activity. Growth in air passenger traffic has outstripped growth in the overall economy. The airline industry is highly responsive to economic cycles. Just as most network, airlines are now expected to turn an operating profit, most lost substantial sums in the last several years; (Mason, 2001)

Issues in Establishing an Airline

The shift towards online sales, direct distribution and Low cost carriers (LCCs)

The emergence of the Internet in the mid-1990s forced airlines to reshape their distribution strategy in ...