Consultancy Project: Solving Business Problems in the Aviation Sector due to Brexit

Consultancy Project
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Table of Contents
INTRODUCTION...........................................................................................................................3
Problem Overview.......................................................................................................................3
METHODOLOGY AND BUDGET...............................................................................................9
FINDINGS/ RESULTS.................................................................................................................13
CONCLUSION AND RECOMMENDATIONS..........................................................................30
REFERENCES..............................................................................................................................33
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INTRODUCTION
Problem Overview
In very country aviation industry plays an important role in its economic growth and
development. This is because it connects the nation from other parts of country and entire globe.
Besides that, the sector also contributes in boosting growth of tourism sector as people travel
from one place to another (McGrattan and Waddle, 2020). This particular tourism industry Is not
controlled and run by owner completely as there is involvement of the government. Main
responsibility of the government is making relevant laws and making all companies able
following them. They form laws and regulations which are to be followed by companies
operating in airline sector. Apart from it, trade regulations are interrelated with aviation as well.
It can also be said that large number of employment is being generated by this industry and it
also encourages economy to grow and connect with other countries.
UK is located at center of Europe. It is strongly connected with other parts of world
through air. Moreover, there are total 50 airports in overall UK. In recent times there is high rise
in number of passengers who are travelling to UK. The airport of UK is connected with 100
countries. In 2016, total number of passengers traveled was 268 million. Also, it contributed $22
billion to GDP of UK. Beside that, 80% of tourist in UK travel by air every year. Thus, the
contribution of tourism is worth £54 billion in UK GDP. Alongside, the travel and tourism sector
accounted for 10% in GDP and 12% in employment.
In UK Brexit is recent issue that is discussed. It has been a major concern and issue for
both industries and their citizens (Silveira, Silva and Perobelli, 2019). Due to it, there is high
instability in political condition of country. The economic growth has also declined. Apart from
it, government is not able to control businesses. The reforms are still not formed and applied.
Hence, it is leading to complex situation. In aviation sector many firms have started their
operations. This is creating situation of over capacity where number of companies provide
similar products and services. In the future, it will not be beneficial for airline industry. Also,
shutting down of Thomas cook is major factor of overcapacity.
Therefore, a business problem has arisen due to Brexit. There is high rise in competition
as similar services are offered at same price. For organizations operating in aviation sector they
are not able to compete with others. The political instability has directly impacted on airline. The
companies are bind to reduce cost of product or service. Therefore, their profit and sales are
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declined. Thus, market value of business is decreased. This is the reason behind shut down of
Thomas cook. (Steinberg, 2019)
Consultancy prohect can be defined a project in whcih research staff share their views
and knowledge as well as intellectual inputs to the company.
Business overview: This study is mainly based on TUI group which is a multinational
travel and tourism company. It owns hotels, resorts, airlines. It has several skills and abilities
which makes it able to lead the travel agency in the UK with having approximate of 564 travel
shops (McLachlan, James and Hampson, 2018). It mainly serves and provides its services to
North America and Europe. It has several skills and the main key of the success of this company
is skilled workforce. It has approximate of 71,473 employees which helps it out in providing
qualitative services and taking competitive advantages.
Business problem: In the context of problem, it is stated that, Thomas Cook who has
recently goes out of business was one of the main and closest rival of TUI group. Due to recent
gone out of Thomas cook, it created several problems such as political unrest, delaying in
bookings by customers. But now it has become opportunity for TUI group as it does not have a
strong rival. But there are several other factors which create problems. Some major problems for
TUI is overcapacity in the airline sector and Brexit uncertainty. Overcapacity is considered as the
main key threat to the future prosperity of the airline industry. Due to overcapacity, companies
become bind to reduce fair (So-Hyung and et.al., 2018).
It is also stated that due to Brexit uncertainty, approximate 46% drop in quarterly profits
created several problems as it decreased booking. Its earning also fell to approximate from
€100.9m to €186.8m in 3 months. It is also stated that TUI is committed to the accommodation
in Spain to the great extent but there is an overcapacity because of a shift in demand to Eastern
Mediterranean destinations. Continue Brexit uncertainty for diminishing demand among British
holiday makers is one of the main threat for TUI. Because of the Knock on effect from the
summer 2018 heatwave, demand is weakening (Tabeshian, 2018). Other main reason is changing
tastes and demands of customers as they prefer places like Turkey over TUI destinations like
Spain. Political concern due to diminishing of Thomas cook also affecting TUI demand.
Research need to solve problem: It is already stated that TUI is facing several problems
and there are several reasons which can decrease its profit margins and can increase an overall
cost. So, it is important for TUI group to resolve it and take competitive advantages. For making
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an effective position in the market, company needs to develop an effective strategy. Some of the
effective strategies which are being developed by TUI. It is stated that company' journalism is
completely free from bias and because of equality it cannot be influenced by well-known and
Billionaire owner. Further It is an effective strategy which will make it differ than others.
Entering into a new market specially in emerging economies with growing middle classes such
as Brazil, Malaysia, China and India, it can attract wider range of customers (Martínez Vidal,
2018). By making alliance and partnership with other airlines, it can reduce negative impacts of
all factors and can make its string position in the market and can also increase profit. It is also
stated that for improving brand image, it will reduce dependencies on the traditional tour
operator model.
So, it can be said that, for solving all these problems and accomplishing pre-determined
goals, research plays an important role. Research will help this company in analysing all factors
which are in its favour in order to make an effective use of all those factors. By knowing its own
strengths, weaknesses it can make changes in strategies and attract wider range of customers
(Oxford Analytica, 2016). For example: It can make changes in its products and strategies with
the help of Porter's 5 generic model. It is trying to make its business more sustainable. It believes
that better holidays lead better world. For making these changes, it focuses on 4 main core areas
such as: its operations, customers, employees and value chain (Sustainability Strategy, 2019).
Research setting to answer research questions: The main aim of this research is to
identify ways to solve problems that occur due to Brexit uncertainty and other factors. There is
an importance of research as with the help of research, all data and relevant information can be
found out. By developing research, scholar can identify impacts of their skills as well as
weaknesses on the performance. They can also accomplish all objectives by solving problems
with the help of relevant data. The main information which TUI will require identifying is
current market trends and demands of customers. It is stated that changing customers trends are
having negative impacts on the performance and profits of this company (Alegre and Sard,
2017). With the help of research, it is identified that increased cost after the collapse of Thomas
cook can impact on its performance in a negative manner. But it can be an opportunity as well
because customers of Thomas Cook will attract towards TUI which can increase its sales. With
the help of research, impacts of Brexit identified. The main aim of research was to reduce
negative impacts by making changes in strategies and making a strong position in the market.
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Significance of the problem: Identification of problem plays an important role as with
its help company can measure its effectiveness and can take actions in a timely manner. If it does
not identify problems on time then it has to face several problems which can be difficult for the
company to solve (Veiga and et.al., 2018). Identification of problem can help the company in
preventing itself against critical problems and loss. With the help of research and analysis of
business environment, several factors have been identified which is impacting on the growth and
performance of the company. For taking competitive advantages, protecting against any loss are
some reasons which shows importance of identification of problems.
So, it can be said that TUI is facing several problems due to Brexit and overcapacity but
with the help of developing strategies and research, it is trying to make its business sustainable.
BACKGROUND
Brexit is procedure of withdrawal of UK from EU. This will highly impact on global as
well as UK economical growth. Due to Brexit there is instable political condition in UK. there
are no measure or action taken by government to ensure how business will trade, reforms are
formed, etc. The impact of Brexit has been negative for the industry of tourism and because of
this UK made a decision to call for a second referendum and remain as a member of economic
union. The travel and tourism industry is one of the most profitable sectors which generates
highest amount of revenue and create opportunities for employment (Born, Müller and Sedláček,
2019). This sector have approximately three million people working under it and it gives the
economy a boost of around 130 billion Euros to the country. This sector of tourism is considered
in the list of top ten countries in the world. Before Brexit there was a link between EU and UK
which helped the country to maintain the flow of this sector. In accordance with... the main
sources and areas of destination is with EU which is the also one of the main area for the people
who come to visit the country. Before this referendum they were dependent on each other for the
movement of goods, services and putting investment into some areas. After this the whole
situation has been changed it has affected the movement of people and put restrictions on it
which has resulted in the flow of sector of travel and tourism. Before the situation it was not
predictable by companies such as TUI and Thomas Cook but it has surely affected their business.
This decision has hit the industry so adversely that their growth is not just influenced in UK but
all over Europe. As per the view of (Hassan and Gunson, 2017) many of the analysts and
researchers are working to reduce the impact of this issue on economy. They have published
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their opinions and stated that the consequences of Brexit is not at all good for the industry of
travel and tourism. Many of the researchers worked on it but no one was able to understand and
give the overall solution of the situation. Some of them believed that it will influence the
intention of travellers. Some of them worked on the issues of healthcare and insurance and
research of some of them was concerned with what the decision of Brexit will influence the
destination of tourism in Europe and influence on the tourism of UK. Investigation is still going
on to evaluate the accurate effect of Brexit.
According to (Kalyugina, 2017) approximately 55.9 million people visit EU but this will
be affected after Brexit. This situation may change the whole route of travelling of people as
people have other alternative routes available to visit EU. This negotiated deal will also leave an
impact on tourism of other countries such as Spain, Italy, France. This situation may also change
the way and requirement to visit EU specially for the citizens of UK. They will need a visa
waiver to Europe which will put them on a limit to visit the place and in a period of 180 days
they can only stay there for 90 days. This will decrease the no. of people of UK also it will affect
the exchange rate of the currency which will decrease the no of foreign people to visit the place.
The issues was delayed to the beginning of 2020 but it will surely have an impact on this sector.
One of the major problem after this decision is to find suitable and appropriate staff which can
meet the requirement of this sector. Rules have been set and restrictions have been put for the
immigrants and the most no. of people working under this sector are immigrants which is a
difficulty and a loss for this sector as they will be loosing a lot of candidates who had the
potential and can be their permanent employees. Apart from this they will also have to face more
cost of hiring if they want to hire people who are not from the country. It will affect the
performance of business as well as the business of this sector. The industry of tourism is facing a
lot of issues in maintaining the finances and the flow of cash. They have less amount of liquidity
because of the losses in funding of EU. Currently Britain gets funds of around 57 million Euros
which they keep it for development. After Brexit they will no longer be able to receive this sum
of amount.
According to (Hamper, 2016) After the exit of Thomas Cook from market more
companies are entering into the sector of airline industry which will increase the factor of
overcapacity in the sector. This will impact on the whole sector as more companies entering into
the sector will increase the level of competition which will create difficulties for the existing
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industries in the market. TUI will need to drop their prices of services so that they can survive in
the market and achieve growth which is difficult at the time of Brexit. Airport of UK is one of
the busiest in the world. Problem which needs attention is that according to the ratio of people
every two clients or passengers of the company which belongs from UK is looked after by EU.
The network of aviation of the country is the third largest in Europe. Currently UK is the part of
single market for aviation which states that they have an agreement which clearly mentioned that
they have the authority to take on the routes which is in the radius of 28 member countries. It
also involves agreement of open skies with third countries which gives authority to companies
such as TUI to have access in different markets. Rules on this matter will be decided by both UK
and EU because this issue is a crucial part of both the economies. In accordance with (Hoffmann,
2018) companies such as Easy jet has set up an airline which is based on the guidelines of EU so
that they can maintain the flow of their operations and work in an unaffected manner after the
issue of Brexit. Ryan air had the biggest counter for selling tickets at London airport which they
removed saying that until the deal it will remain closed. To ensure that travel does not get
affected companies such as Virgin Atlantic and British Airways have taken different positions so
that their businesses remain unaffected even after Brexit. There are many risks in this industry
such as cost of input, fluctuation in demand and condition of the economy which is uncertain. All
of these factors determine the success of the industry (Javorcik, Kett and O'Kane, 2019). TUI
needs to keep these factors in mind in order to survive in this industry and face the issue of
overcapacity. Demand for travel through airlines is increasing as everyone wants to travel
through this medium which is creating another issue and that is to realize low amount of profit
earned from each passenger. As per the view of (Charles, 2016), it is one of the major concerns
of this industry and if companies such as TUI are not able to predict and evaluate the right
amount of measures then they will face difficulties in meeting the requirement of capital such as
purchases and paying up the rent of the aircraft paying the shareholders of the company in time.
To collect more investment they offer more return on this sector. Companies such as TUI have
evaluated that revenue earned from each set is reduced by 4.2 per cent. One of the competitors
that is Easy jet is positive about the decision of Brexit as they have made progress in this sector.
Brexit had affected the level of tourism of the economy and companies which are dealing in the
sector of airline industry has the capacity to take out more people but they are not able to attract
more people and because of that they are suffering from huge losses. Many companies are going
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