TUI Group: Airline Industry Analysis, Market Dynamics, and Strategies

This report provides a comprehensive analysis of the TUI Group within the airline industry. It begins with an overview of the industry's significance to the economy, highlighting the role of air travel and its impact on TUI's market share. The report then delves into the application of Porter's Five Forces model to assess the competitive landscape, examining threats from new entrants, substitutes, the bargaining power of suppliers and customers, and industry rivalry. The analysis includes TUI's market performance, discussing its growth in various regions, including the UK, and its competitive advantages. The report also addresses the challenges faced by the airline industry, such as dependence on the European market, economic slowdown, and competition from low-cost airlines. Furthermore, the report includes market size analysis, the company's strategies and financial performance, and an overview of TUI's competitors. The conclusion summarizes the key findings, emphasizing the importance of strategic positioning and adaptation to maintain a competitive edge in the dynamic airline industry. This assignment, contributed by a student, is available on Desklib, a platform offering AI-based study tools and resources for students, including past papers and solved assignments.

A CASE STUDY ON AIR TRAVEL INDUSTRY OF UK
INTRODUCTION
The airline industry is a very competitive market, in the past 2 decades the industry have
expanded and still expanding its routes domestic and globally in the beginning airline
industry was partly government owned but in the recent years many privatization with
airline industry have taken place. The UK’s airline industry has been one of the main
reason behind the success and stability of the country as due to its presence the country has
been able to trade with rest of the world which results in foreign reserves of the country
being raised comprehensively.
The present assignment is based upon TUI Group; its an international travel and tourism
company which headquarters is in Germany. The firm has its own travel agencies, cruise
ships, airlines and retail stores. Currently, TUI is operating 6 European airlines, nine tour
operators and one of the largest fleet. It was founded in 1923 and the overall sales revenue
of the firm is €17,184.6 million whereas its operating income is €618.3 million.
Dependence on Europe – TUI group is based TUI AG is greatly dependant on
Europe for its income generation, around 79% of its revenues. High focus of
operations in a single region increase the company's chances to more diverse risk
exposure such as local factors i.e.: lower demand, severe weather conditions,
labour strikes, change in regional laws and economic conditions, thus constraining
the ability for growth.
Economic slowdown in Europe - Since the company's revenues rely on the general
economic conditions of the region and the economic position of Europe is
projected to be weak after the recent chaos in financial markets and consumer
attitude, it could reduce the demand for the company's products and services.
Competition from low cost airlines - Whereas traditional airlines are encountering
rigorous challenges such as elimination of routes and reducing staff, the low cost
sector carry on expanding at a incredible rate, trends show that the low cost
carriers are becoming leading players on a considerable number of intra-European
short -haul point-to-point routes. Strong competition from low cost airlines could
negatively influence the company's operations.
– Currently, TUI has announced higher growth in summer; it indicates that
the firm is winning market share. The new holiday package of the company
represents low single digit growth which will raise TUI's market by 4.5% in
the end of March, 2018. The main objective of the company is to
maximises its claimed 22.5% by 25% almost. In UK, TUI had gained 3%
rise in its online booking and 3% enhancement in selling prices. Executing,
Turkey the company has achieve 8% rise over the globe. Along with this,
TUI Group has a 9% increase market growth and 5% improvement in
average selling prices. The UK is leading the way with an 11% sales
increase while the Nordics are up by 5% and Benelux by 4%.
TUI group (Crystal Ski, Thomson Ski and First Choice Ski) also beat
the market, growing by 2% when their main competitors Hotelplan
(Inghams, Esprit, Total) and Neilson Holidays fell 3.7% and 6%
respectively.
COMPETITORS OF AIR TARVEL INDUSTRY
Porter's generic strategy framework has a great influence in examining the market position of the
company on the basis of differentiation, cost leadership and focus. In its past years, TUI had
struggled in order to sustain high competitive edge but the firm is emphasised on product
diversification firm makes low profits. The airline industry is conducted an industry analysis that
based on five forces, i.e. threat of substitutes, threats of new entrants, bargaining power of
customers, bargaining power of suppliers and rivalry. It helps TUI to deal with market threats and
gain benefits from opportunities. Below describe the brief description of key elements of Porter's
five forces model: -
Threat of new entrants – Air travel industries require low skilled workers and vast amount of
resources. Recently, TUI has 150 aircraft and its new entrance in providing no-frill and low cost
airline services can put adverse impact on business operations. Thereby, weak profitability of TUI
can effect its competitiveness with new entries. The business organisation has already sustain high
competitive edge rather than its other rivals in terms of low cost, largest distributor of services and
providing flexible offers. Apart from this, new entrants take more risk as they wholly depend upon
their key suppliers.
Threat of substitutes – As the demands of tourism is increasing day by day, customers are awaiting
for new new experiences; they preferred diversified attractions across the world. Every year, many
people go for travel in other countries and for that they choose air travel. By having so options,
travellers can pick up from a variety of substitutes. Such options are less expensive for this,
customers are tempted to select one substitute. It helps air travelling companies to retain their
previous customers while attracting the new ones.
Bargaining power of suppliers – In UK's airline tourism industry, bargaining power of suppliers is
high because of certain issues, such as- dependence on third party services, raising fuel and raw
material prices. This is occurred due to World's economic crises. There are so many suppliers are
available, this can increases the cost of air services and customers will not prefer to use them. In this
relation, TUI has believed to acquire backward integration; it means the firm has its own suppliers
which enable to reduces cost of products and services.
Bargaining power of customers – Air travelling industries can be fluctuated as per the changes in
customers' needs and wants. Due to raising market competitions, buyers have vast amount of
products and services to choose. Hence, these companies are forced to abide by these variations in
customers' needs. Sometimes, buyers even destruct the role of tour operators and prefer to purchase
direct from suppliers. In order to survive effectively in market, TUI should ensure compliance with
laws of Civil Aviation Authority and government regulatory regulations which are able to protect
customers' right.
Industry rivalry – Air travel industry encompasses with several competitors by having a concept to
do far better than others. In UK, competition between competitors is high as the market distribution
is based upon regional operators and highly fragmented, privately owned and geographically
marketed. Although, there is a moderate level of services that aids TUI to sustain its market
competition as effective brand image and leadership in tourism market.
PORTER’S FIVE FORCES MODEL
MARKET SIZE OF AIR TRAVEL INDUSTRY
Challenges faced by automotive industry in UK
From the above mentioned it has been concluded that airline travel industry
is known as one of the leading sector that highly contributes in an economy.
Every year, there are several people who visits in other countries and for this
they selects air travel; this can driven up the market share of TUI in a certain
time period. Along with this, Porter's five forces model is conducted so as to
sustain high competitive edge.
CONCLUSION