AIRLINE STARTUP

CASE STUDY: Airline Start up Project Brief  LADEYI is a company looking to establish a low cost airline to cater for the  Australasian market and is seeking a feasibility study to determine the feasibility of a  supply chain being set up to support the business venture.  Background Context “The global airline industry continues to grow rapidly, but consistent and robust  profitability is elusive. Measured by revenue, the industry has doubled over the past  decade, from US$369 billion in 2004 to a projected $746 billion in 2014, according to  the International Air Transport Association (IATA). Much of that growth has been driven by low-cost carriers (LCCs), which now control  some 25 percent of the worldwide market and which have been expanding rapidly in  emerging markets; growth also came from continued gains by carriers in developed  markets, the IATA reported. Yet profit margins are razor thin, less than 3 percent  overall. In the commercial aviation sector, just about every player in the value chain — airports,  airplane manufacturers, jet engine makers, travel agents, and service companies, to  name a few — turns a tidy profit. Yet it’s one of the enduring ironies of the industry  that the companies that actually move passengers from one place to another, the most  crucial link in the chain, struggle to break even. Airlines need to make large and ongoing improvements to operate more efficiently.  With few exceptions, the most successful airlines are those with the strictest cost  controls. The biggest (albeit cash-intensive) lever to reduce costs lies in fuel efficiency,  as jet fuel typically accounts for 40 to 55 percent of operating expenses. Cost reduction can also be achieved through enhancements in organizational structure,  operating model, and work practices. In particular, legacy airlines have often built up  complex processes over decades that cost far more than the streamlined processes of  the LCCs.” (Price Waterhouse Coopers, 2015) “The aviation industry in Australia has a long history and currently it has a number of  airlines operating within the country and all over the world. The importance of airlines  in Australia has grown very rapidly because the country is an island and also has a  thriving economy. Defunct airlines and planned airlines are the two types of airlines  which are in operation in this country. The main sectors of the Australian civil aviation  industry are the international airlines sector, general aviation sector and its safety and  the domestic regional airlines sector. The aviation industry of Australia also comprises  of some small segments like hand gliding, gliding, autogyros and ultra-light aircraft. “The international airlines in Australia carry cargo and passengers to and from various  parts of the world. The total number of international airlines which provides services to  Australia is 49. As Australia is an island more than 90% of the visitors to this country  come by air. The total annual average of passengers who come to Australia from around  the world is about sixteen million. Though airlines are the main carrier of passengers  in Australia the freights are mostly carried by the ships to various destinations”.  (Australia Net, 2007)The potential growth of the business and commercial markets within China suggest a  growth in demand for air travel around the region. As part of any business development  there are a number of areas that need to be explored in order to establish the business  case for the venture. An essential part of the business being considered is the logistics  and supply chain that is required to ensure the continuity of business. This is even more  the case as the model that the company is looking to adopts is one of low cost and this  inevitably puts greater pressure on the margins that the company is looking to pay for  goods and services. The company have a range of areas to consider in relation to supply  chain and are looking for a consultancy to provide an independent feasibility study  within this area. The main aspects that have emerged from initial investigation are a  need to understand: • The current local supply chain to support the business and its capacity • Current logistics infrastructure to support the airline growth oppose to competition • Environmental analysis to support CSR operations • Problem solving and business tools application AirAustralasia understand the highly competitive nature of the modern airline industry  and so are keen to ensure that they have a clear examination of the issues that will  inform the supply chain requirements to run the business. Client Requirement The client is looking for a consultant to provide a report in critically discussing how  they would addresses the above aspects with a clear analysis of the supply chain  required to support the setting up of a low cost airline within the Australasian market,  meeting the aims and objectives identified.