The airline industry has some competitive advantages than other forms of travel, such as railway and trucks. The airplane can deliver a large quantity of goods in short time without the traffic problems. In the past few years, the number of passengers for travel has increased every year. Not only for the leisure purpose, but also the businesses travel increased as well. The main market of air travel will be in Europe, North America and Asia in the future. The air travel market still growing in Asia, and most of the travelers came from Greater China. The Greater China occupies the largest air travel market in Asia.
Hong Kong is a major international and regional aviation center in China. Many Greater China travelers transit in Hong Kong to different countries. Hong Kong International Airport is one of the busiest airports in the world, the world’s major airlines have flights to Hong Kong every day. There are only few airlines in Hong Kong, like Dragon, Hong Kong Express Airways, Hong Kong Airlines and Catchy Pacific Airways. The flight route of Dragon is usually between different countries in Asia. 47 destinations operated by Dragon, which is 22 destinations are from Hong Kong to mainland China.
It has total 41 aircrafts, they are all from Airbus, which is including AWAY and AWAY. Hong Kong Express is a low cost company, it provides the low cost tickets for customer to choose. It has total 9 fleets of AWAY to provide service. The destinations and target customer are similar to Dragon which is provided the service in Asia, including Korea, Japan, Taiwan, etc. Hong Kong Airline provide cargo and passenger service between Hong Kong, Great China and Southeast Asia, which is including Korea, Beijing and Japan. It has total 24 fleets in servicing, including 5 cargos.
Catchy Pacific provides international flight service, rather than other three airlines in Hong Kong. It is not only operates the passenger service, but also the cargo service as well. There are over 170 destinations in 40 countries that provided services by Catchy Pacific, which is operated by 174 fleets of the aircraft. Catchy Pacific is the third largest airline in the world, which is measured by the market capitalization. It won the reward of best airline in the world for four times, more than the other airlines. It has become the largest international cargo airline in the world either in 2010.
The threat of entry is depend on barriers to entry, such as legislation or government action, customer or supplier loyalty, etc. The entry barriers are factors that need to be endure by new entrants if they to compete successfully. The barriers to entry do provide interesting challenges to new and incumbent organizations, including start-up economics and the speculative nature of the industry. A substitute product is a product in one industry that can be substituted for a product in different industry. If there is an available substitute product, the competitive pressure can be increase.
In the aviation industry, the potential threats of substitution include video conferencing, e-mails and road transportation. Buyer or customer power is related to the number of customers the organization has and the existence of “switching cost”. The buyer or customer power is high where the switching cost is low. In the aviation industry, the corporate deal and travel agents in airline are the problem than need to be concerned by the buyer. The power of the supplier market is closely related to the significance of the component part to the final product. The supplier power s high where the switching cost is high.
In the aviation industry, the supplier has to be concern about the air traffic control, airport service and landing fee of the airlines. Competitive rivals are organizations with similar products and services aimed at the same customer group. The competitive rivalry is high when the market growth slowly. Porter’s Five Force analysis and interpretation on “Catchy Pacific” l. Competitive Rivalry The force is strong and increasing. Catchy Pacific tries to increase the rivalry by forming the strategic alliances. It has coders agreements with the Air China, Dragon, British Airways, Funfair, etc.
The coders agreement is an aviation business arrangement between more than one airline, which is share the same flight. Under the coders agreement, it can provide more choices of routes for the customer. It allow the customer to book travel from point A to C through point B under one carrier’s code, instead of a customer booking from point A to B under one code, and from point B to C under another code. This will increase the service frequency of the airline. Catchy Pacific vying for premium business passengers by offering enhanced services, comfort, etc.
It has been hashing in new cabin interiors and in-flight entertainment since June 2011. Food and beverages are complimentary for all long-haul passengers, with two hot meals generally served on each flight even in economy. It is trying to recapture customers from budget airlines by fan-fares on short haul Asia flights, including China, Taiwan and Korea. The fan-fares flights were cooperating with Dragon and the strategic alliances. II. Threat of entry The force is weak. Catchy Pacific is an international airline which is a full-service company.
It provides the international flight route rather than the short haul light provided by the budget airlines. At this moment, there are no newly established airlines in Hong Kong. If there is a new established airline try to entry the Hong Kong airline market, it should be require strong financial backing for entry. It is because the newly established airlines have to be prepared to lose money for a period of time to gain the customers, especially if there is already an established incumbent with deep pockets. The competition that Catchy Pacific facing is rather stable than the established airlines. Ill.
Power of suppliers The force is weak. The aircrafts of the aviation industry are oversupply, and there are fierce rivalry between Airbus and Boeing. For the fuel suppliers, Catchy Pacific has no power to bargain, the fuel price is related to the world price fluctuations. Oil prices will probably remain high for the foreseeable future. Only power carriers have is hedging, but this can be a double-edged sword. An the use of internet for selling tickets allow Catchy Pacific to cut down some intermediates and this could be an opportunity for airlines to explore places that they originally have no general sales agency. IV.
Power of buyers The force is moderate. There is no high-speed rail in Hong Kong. The travelers can only take the sea transportation, by aircraft or the train to other countries. The sea and road travels will take a longer time than the aircraft. Many of passengers will prefer the faster way. The passengers have more choice and access to information via the internet. The bargaining power of the travel agents decreasing, it is because the passengers can shop for flights by themselves on the internet. However, continue development with other airlines in mileage program may increase the “switching cost” of buyers to other airlines.
V. Threat of substitutes The force is moderate. E-mails, video conferencing and road transportation are potential substitutes for aviation industry. However, some of the business meeting has to face-to-face to sign the contact, that’s why the business passengers still the target market of Catchy Pacific. Although the high-speed rail can provide fast and short time travel as well, but the price of rail substitute is nearly high to the fan-fares short haul flights tickets. Some of the passengers prefer the faster way to travel, like air travel, rather than the sea travel or take he road transportations. . Conclusion and Recommendation Catchy Pacific decided a well business direction and development in global world since 1946. The market of aviation industry is growing fast Asia, especially in Greater China. Hong Kong is a major international and regional aviation center in China. Catchy Pacific is the biggest airline in Hong Kong. The highest quality in service is the successful key factors to satisfy the customers. There are two advantages are better than its competitors. It has the main hub in Hong Kong, this will enhanced the company’s position as the transportation hub.
The complex organizational structure is the disadvantage of the Catchy Pacific. This can prevents the ability to manage its international network of subsidiaries and other alliances. The competitions of aviation industry grow fast in the recent years, Catchy Pacific has slightly lost its competitive advantage in the global world market. During the asses, Catchy Pacific realized that there is a situation from the Asia market growth, Dragon became its biggest competitor, so that the Catchy Pacific need to acquire Dragooning get the Asia market back.
There s a great chance for Catchy Pacific to expand their brand by provide the new flight routes. It has to focus the US and European market, this will be the new distribution channel and opportunities between the airlines. One of the major threats of Catchy Pacific is the fast growth of the competitor in the world, like Asians Airlines, Quarters, etc. It has to extend a new market through acquisition and expansion, like increasing the partnerships of the code sharing program, and to increase the productivity in the cargo business by outsourcing not used capacity to partner networks. 5. Appendix A.