Airline Industry Analysis

The assignment delves into various facets of the airline industry. It covers the historical development of the sector, the impact of deregulation on its operations, and the diverse marketing techniques employed by airlines. Furthermore, it analyzes the key challenges faced by the industry, including competition, fuel costs, and technological advancements.

Running head: BUSINESS MANAGEMENT
Business Management
Name of the Student
Name of the University
Author note

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Executive Summary
The report helps in analyzing the issues that is faced by the Virgin Atlantic Airlines as well as
the Virgin Group of Companies in the present scenario. The different issues has to be highlighted
with the help of SWOT, PESTLE and Porter’s Five Forces analysis as this will help in
understanding the different issues faced by the respective company.
The main aim and purpose of the report is to identify the different emergent strategies has to be
applied by the Virgin Group of Companies, as this will help in analyzing and identifying the
techniques that can be applied by the Group in the future to reduce such issues from the entire
airline industry.
The conclusion is based on analysis of SWOT, PESTLE and Porter’s five forces and generic
strategies that will help the entire company in gaining competitive advantage in the entire airline
industry along with the entire Virgin Group of Companies.

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Table of Contents
Introduction......................................................................................................................................3
1. Analysis of the key forces in the general environment................................................................3
2. Five Forces analysis of Virgin Airlines......................................................................................5
3. SWOT analysis of Virgin Airlines..............................................................................................7
4. Analysis of the decisions: Programmed or Non-Programmed..................................................10
5. Analysis of the emergent view of strategy followed by Virgin Group......................................11
6. Generic strategies followed by Virgin Group............................................................................12
7. Issues faced by Virgin Group of Companies.............................................................................13
References......................................................................................................................................16

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Introduction
The report helps in analyzing the different key forces that are having huge influence on
the Virgin Airlines that is one of the companies of the entire Virgin Group of Companies. The
Porter’s Five Forces analysis is required to be done for the Virgin Airlines in understanding the
new entrants, buyers, substitutes and competitors in the market.
The main aim and purpose of the report is to understand whether the decisions mentioned
in the respective case study are non-programmed or programmed. The generic strategies have to
be analyzed, as this will help in understanding the different issues that are appearing the
company.
The structure of the report includes proper SWOT, PESTLE, and Porter’s Five Forces
analysis, as this will help in analyzing the issues in an effective manner.
1. Analysis of the key forces in the general environment
The macro environment is described with the help of PESTEL analysis that helps in
analyzing the long-term influences. This is one of the best analytical tools in analyzing the
external environment of Virgin Airlines for understanding decline or growth in the market
("VirginAmerica.com's New Look", 2018). It helps in understanding and identifying the different
political, legal, economic, environmental, social and technological influences for the entire
business environment.
Political is one the factors that help in understanding the political influence on the entire
Virgin airlines. In the year 2016, the Virgin Atlantic has operated in political environment that
was challenging in nature (Suki, 2014). This was characterized by different kind of terrorist

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attacks in different destination key markets such as Brussels, Nice and Paris. The biggest shock
politically was Brexit that occurred in the month of June in the year 2016wherein Britain voted
to leave EU and there were huge uncertainty in the entire economy of United Kingdom (Daft &
Albers, 2015). There are different potential implications that included regulatory compliances
wherein there were no future policy as well. Furthermore, the entire expansion of the Heathrow
post Brexit will help in allowing carriers such as Virgin Atlantic as this will offer different direct
flights in such a manner that included 40 new cities as well (Zou, Elke, Hansen & Kafle, 2014).
Economic is another environmental wherein the entire uncertainty following Brexit has
economic impact on different British Airlines that included Virgin Atlantic. According to the
different annual reports, as there was a drop in the Pound Sterling value, the revenues that is
generated by Virgin Atlantic in the USA was negatively impacted as the largest expenses of the
Virgin Airlines are in dollars and the revenues are in pounds. It has been seen that there was
huge impact on the financial results of the company that was negative in nature amounting to
£50million despite of different hedging profits (Ognyanova & Ball-Rokeach, 2015).
Social environment is another analysis wherein in the peak season of summer in 2016, it
was difficult for Virgin Airlines to operate in an effective manner. There were number of union
strikes of ATC that has hit France in the year 2016, as there was social unrest over series of
different labor reforms that was disputed in nature (Misopoulos, Mitic, Kapoulas & Karapiperis,
2014). This has caused different cancellation of flights of Virgin Atlantic Airlines to and over
France. In the year 2017, a five-day strike has affected the different flights from UK and Virgin
Atlantic along with other airlines had developed action plan in order to minimize the different
strikes in ATC on the different passengers (DaSilva & Trkman, 2014).

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Technological environment is another component wherein the entire airline industry is
undergoing disruption digitally. The digital technologies are changing the entire structure of cost
of the airline industry enabling new entrants that are WOW Air, in order to use the digital
technology to disrupt the carriers of the legacy such as Virgin Atlantic (Dai, Liu & Serfes, 2014).
The Virgin Airlines has invested in the IT systems such as crew tablet devices, as this will help
the managers to deliver personalized and seamless services to the passengers. The respective
airlines will help in minimizing the disruptions digitally while taking proper advantage of the
technology.
Legal environment is another component, wherein in the month of December 2016, the
pilots of Virgin Atlantic decided in order to take action industrially in row over recognition of
union after the union of the pilots. The union of the professional pilots helped in representing
over more than 75% of the virgins more than 900 pilots that demanded to be solely recognized
kind of union for the pilots as well as for British Airline Pilots Association to be derecognized
(Wiman, Walton, Shearer, Rondon & Lee, 2015).
Environmental is one component wherein Virgin Atlantic Airlines faced sustained
operational kind of disruption in such a manner that caused due to the different weather
disruptions. Due to the thunderstorms in the South East England, it has led to different
cancelations for the entire airline industry that included Virgin Airlines as well (Mills, 2017).
2. Five Forces analysis of Virgin Airlines
Rivalry among the different competitors is one the five forces wherein it can be seen that
Virgin Atlantic Airlines has different competitors who have entered in order to gain profit of the
respective airlines. The entire airline industry does not gain profits on a regular basis, it has

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stopped different competitors to enter into the market and the competition is high in nature as
well (Lee & Leskey, 2015). The entry as well as exit barriers for the entire aviation industry is
quite high in nature as this has been seen that there is huge amount of capital required for
entering into the sector. There are relatively few competitors in the market for Virgin Atlantic
Airlines and this has created and limited competition as well. The number of competitors in the
entire airline industry is less and Virgin Atlantic Airlines has taken huge space in the entire
airline industry (Han & Hwang, 2017).
Bargaining power of the Buyers is wherein the consumers or buyers hold huge power
due to greater system of distribution (Heizer, 2016). There are different channels wherein the
tickets are booked wherein the buying patterns or the power has influenced the Virgin Atlantic,
as there are huge numbers of choices available in terms of different fares. The online system of
booking has helped in providing different options to the customers for booking tickets. The
product is important to the different customers, as this will help in analyzing the entire volume
that is required to be analyzed in the airline company (Grant, 2016).
Bargaining power of Suppliers is one of the components wherein the suppliers of the
aircrafts are Boeing and Airbus. There are different suppliers including the ones who make spare
parts and taking into consideration that the entire airline industry has no such carriers as it will
dominate itself from terms of suppliers (Kaynak & Kucukemiroglu, 2015). The power of the
suppliers is becoming low in nature in terms of the cost of fuels that is a premium product where
buyers are taken as favorable product for the entire company. The suppliers has to be kept in
mind in such a manner that this will help in analyzing that suppliers is valuable in nature and this
will help in analyzing the low concentration of the suppliers (Rezaei, Fahim & Tavasszy, 2014).

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Threats from the entry of new entrants is another force wherein Virgin Airlines faces
tougher external environment and this has made hard for the different entrants to take a place in
the entire competitive market. Furthermore, yet once a particular company has entered into the
business, it can rise to the peak or decline in the position of the entrants. Proper high
requirements of capital is essential in nature as this helps in understanding the different threats
from the competitors who are trying to gain such profit from the Virgin Atlantic Airlines. There
are different customers who are loyal to different other brands and this can affect the Virgin
Airlines to suffer and this will be affecting the entire loss to the respective airline company.
Substitute of existing products is another component wherein there are no such threats
for Virgin Atlantic Airlines. The main priority of the Virgin Atlantic is the customers who chose
to travel by air (Snider & Williams, 2015). As there is ongoing recession, there are different
companies are utilizing these options such as telecommunication as well as virtual meetings as
this will avoid travel and continue to work. The other substitute companies or airline companies
are of low quality and standards and this will be strength for the Virgin Airlines as well. There is
limited number of substitutes in the entire market, as this will help in gaining huge competitive
advantage in the market (Williams, 2017).
3. SWOT analysis of Virgin Airlines
A proper SWOT analysis of the Virgin Airlines helped in analyzing the different
strengths and weaknesses that is faced by the Virgin Airlines. The SWOT analysis helps in
understanding the internal and external performance and situations.
Strengths

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Virgin Atlantic Airlines enjoys brand reputation that is strong in nature and this was
ranked sixth in the survey of the best airlines. Virgin Airlines has been rated as one of the
top airlines in the entire airline industry
The fleet has been modernized in nature
The Virgin Airlines has been awarded as the best cabin crew from Airlineratings.com
The new VHQ headquarters has been opened in the month of September
Virgin Airlines has launched AIR4, Virgin Atlantic’s transformation technologically in
the history of the company
Weaknesses
There has been heavy reliance on the personality of the celebrity of Richard Branson for
the brand promotion of the respective airlines
Heavy competition from the cash rich gulf airlines
Disproportionate growth has skewed the flights of USA when it is compared to the other
high growth regions such as China, Middle East and India
Opportunities
The government has approved third run away at Heathrow is the best opportunity for BA
There has been continued low prices of the fuel in the year 2017 that will translate the
low cost of the fuels
Virgin Atlantic Airlines can increase their different routes and destinations internationally
Threats

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Brexit from Europe created uncertainty in the environment of business and the financial
markets
Digital disruption continues to be major threat
There has been adverse conditions of the weather
The rise in the cost of the labor is affecting the margin for the Virgin Atlantic Airlines
There has been huge change in the regulations of the airways and the increase in the cost
of the fuels as well
Continuation feud between the PPU and Balpa has been recognized as sole union of
Virgin Airlines
From the above SWOT analysis, it can be analyzed that there are different strengths of
the Virgin Atlantic Airlines that include that it has strong foundation along with efficient
services. The Virgin Atlantic Airlines has satisfied and proper base of the customers and this has
become the preferred airlines for the affluent customers as well. The advertising technique that is
used by Virgin Atlantic is innovative in nature and Richard Branson does the entire branding.
Virgin Atlantic Airlines has carried more than 5 million passengers in a whole year and it has
become the largest British Airlines with more than thirty-five destinations.
Furthermore, there are different weaknesses of the Virgin Atlantic Airlines that included
that there is severe amount of competition for the respective airlines in the market. The market
share of Virgin Atlantic Airlines has been limited in nature and the growth is limited as well. The
global presence has been limited in nature that can cause issues for Virgin Atlantic Airlines and
this is specially taking place in the emerging countries.

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Furthermore, there are different opportunities for the Virgin Atlantic Airlines that
included Heathrow terminal is major hub across the entire world and it has created huge
presence. The respective airlines have leveraged their strong presence of brand as this helped in
penetrating globally in the market. The Virgin Atlantic Airlines is increasing the international
destinations and routes as well.
Lastly, there are threats to the respective airlines named Virgin Atlantic Airlines that
included that there is rise in the cost of the fuel along with changing regulations of the aviation
industry as well. The huge amount of rise in the cost of the labor affects the entire margins for
the Virgin Atlantic Airlines and there is huge competition in the entire European market as well.
It has been seen that there are different competitors of Virgin Atlantic Airlines that included
British Airways, Qatar Airways and Emirates.
4. Analysis of the decisions: Programmed or Non-Programmed
The decision that has been mentioned in the Virgin Group is programmed in nature, as
there have been different situations in the respective airlines. The officials of the respective
group have encountered such situations that include business of Virgin Rail wherein there has
been competition and lost bid for the 15 years to the rival FirstGroup.
The entire Virgin Group help in surviving all over again after such issues that has taken
place and the decisions that are taken by the entire group has implemented different strategies
presently that helped them in solving such crisis and issues in an effective manner. There has
been different uncertainty in the business matters that is causing issues in the entire business.
This has caused and implemented higher level of risk factors in the business of the Virgin group
regarding specific decisions.

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The programmed decisions are related to the different daily activities that can be handled
with the help of different business rules and procedures. Virgin Group is using such techniques
in an effective manner, as this will help them in solving the different matters wherein too much
discussion is not required as well. In the programmed decisions, the managers of the Virgin
Group had made real decisions as this will specify different procedures to follow when the
similar kind of situations occur in the organization.
Example of dependency of decisions
From the example of Virgin Rail, it can be analyzed that the dependency of the decisions
is related to the different flaws that has occurred in the different decisions that has been taken by
other companies in Virgin Group. With the help and dependency of different rules, regulations
and procedures, it will be easier for Virgin Group to make appropriate changes relating to the
decisions of their company.
5. Analysis of the emergent view of strategy followed by Virgin Group
In the last couple of years, the Virgin Group has focused on the geographical expansion
strategy of the existing product portfolio. This helps the entire Virgin Group has taken its
successful concept of the entire Virgin mobile phones in other countries. The emergent approach
that is followed by Virgin and the strategies were partly successful in nature as well. The
emergent view of the strategy that is followed by Virgin has to be analyzed in such a manner that
this will help the entire Virgin Company in maintaining protecting the brand and this will help
them in diversifying the entire business in an effective manner.
The emergent view of the strategy that is followed by respective company is
experimental in nature wherein the respective company is trying to adopt different changes that

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will help them in gaining competitive advantage in the entire market. The different generic
strategies of the Porter is followed by Virgin Group as this will help in generating different
strategies that will help them in expanding their other businesses. The strategies that are
emergent in nature and used by Virgin Group of Companies are not successful completely but it
is partially successful in nature that has to be taken care of the different issues faced by the other
brands of Virgin. The Virgin Group will implement strategies relating to the different issues
faced by the company presently as this will help the entire airline company in solving the issues
in an effective manner. The effectiveness is essential in nature, as this will help in solving such
issues within a specified deadline. Virgin Group requires understanding the different alliances
that will help them in minimizing the risks in a positive manner, as this will help in solving the
issues.
6. Generic strategies followed by Virgin Group
Virgin Group helps in understanding the requirements of the customers and this has been
rendered as the niche airlines who are seeking value for money. The Virgin Group has managed
in serving different kind of customers in an effective manner. The different generic strategies
that can be followed are as follows:
Cost leadership: is one of the generic strategies, as this will help in attracting the
customers towards their different businesses such as Virgin Mobile Company along with
Virgin Atlantic Airlines. The cost leadership strategy is helping the company in
increasing their profit by reducing the cost
Differentiation: Virgin Group of Companies provides the customers with customized
along with different flexible services with their different companies. The different

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passengers feel delighted in nature when they are offered services that are of their choice
and this helps in increasing the satisfaction levels of the customers. On the other hand,
there are different ranges mobile phones that are sold by Virgin Mobile Phones that
includes ability to deliver good products along with innovative strategies (Putz,
Vorwagner & Hoch, 2016).
Focus is another generic strategy that is adopted by Virgin Group wherein the focus of
the group is to enter the niche market along with understanding the market dynamics in
an effective manner. The focus strategy does not work alone and therefore, it has to be
teamed up with differentiation and cost leadership strategy.
Virgin Group of Companies is using Porter’s Five Forces Generic Strategies in such a
manner that it will be competitive in nature. One of the main strategies that are adopted by
Virgin Group is to promote the brand all over the market with differentiation strategy. The
differentiation strategy helped Virgin Group of Companies to be known as well equipped and
convenient in nature for the customers.
7. Issues faced by Virgin Group of Companies
There are different other issues that have been faced by Virgin Group of Companies are
as follows:
There has been huge competitiveness that has been one major problems in Virgin Group
of companies and the change in the GDP is reflected on the cost of the fuel in the airlines
sector along with rise in the prices of the mobile phones and there has been no
integration on the operations (Shaw, 2016)

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The fuel price has been one of the factors that is faced by the Virgin Atlantic Airlines
and this is imposing the charges of fuel on the different customers as well (Berghöfer &
Lucey, 2014)
There has been different kind of government legislations that is one of the challenges
faced by the Virgin Group of Companies, as there are different sub companies involved
with it. There are different changes in the rules and regulations imposed by the
government that can affect the respective company negatively
The increase in the competition in the entire European market is affecting the entire
Virgin Group of Companies and this is affecting the regulations as well
There has been severe competition as there has been limited market share growth for
Virgin Group of companies especially for the airlines (Baker & Saren, 2016)
The safety management is another issue that is faced by Virgin Group of Companies that
is affecting the customer base of the Virgin Airlines along with Virgin Mobile Phones.
There has been different safety issues in the Virgin Airlines that is affecting the customer
base and this is affecting reputation of the airlines and there are change in the
preferences of the customers in the mobile department (Hapsari, Clemes & Dean, 2016)
There is lack of operational efficiency in the management of the Virgin Group of
companies wherein the customer service is getting affected in a negative manner. This is
causing huge negative influence on the airline and mobile companies along with Virgin
Rail (Bilotkach, Gaggero & Piga, 2015)
Therefore, it can be analyzed that Virgin Group of Companies has faced these challenges
presently as these are affecting the reputation of the company. The Virgin Group of Companies

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need to understand the issues in an effective manner as this will help them in solving the issues
and gain competitive advantage as well.

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