In 2007, IATA came up with a compiled strategy on how to reduce green house gas emissions produced by aviation. The strategy’s main goal was to achieve a zero emission rate from commercial aircraft manufacturing within a period of 50 years.However, the process of achieving such a goal required the adoption of a Four Pillar strategy. The pillars were technology improvement, operational efficiency, infrastructural efficiency, and positive economic efficiency. By June 2009, the airline industry decided to take a collective responsibility to have targets towards achieving IATA strategic objectives set. The targets include capping carbon emissions by 2020, improving fuel efficiency by 1.5% come 2020, and reducing carbon emissions by 50% come 2050. In the same year (2009), the aviation industry collectively endorsed the goals through an ICAO submission (Krishnan, 2011, pg. 3).
All the nations in the world are required to regulate local aviation industry through their governments. The governments are also required to take a number of measurements including:
Apart from security and safety, there are new challenges such as climate change that affects the airline industry. Generally, the outlined vision would ensure a growth in zero carbon emission – a factor to reduce climatic change. Currently, the industry produces about 2% of carbon emission that is projected to reach 3% come 2050. As mentioned before, the onset of IATA ensures that all the stakeholders win the industry come to terms to reduce challenges that would hinder the achievement of the highlighted goals. Key players include Airports, manufacturers, governments, Airlines, infrastructure providers,economy, and technology (Rouse, 2017).With the growing carbon footprint, the whole world is at risk. Achieving a carbon neutral growth for the airline industry requires the input of every stakeholder. With such, far much more records will be attained. For instance, achieving a fuel efficiency of 70% within a span of 40 years ensured the growth of a carbon neutral environment. Such was achieved through improving airframes, air traffic management,finding alternative fuel sources, and improving airport operations.In addition, creating a framework that would ensure increased coordination and cooperation of all stakeholders would lead to a carbon neutral growth (CWMIFG, 2012).
The growth of any kind of industry always depends on technological development. With technology, the industry is able to develop alternative measures for getting cleaner jet fuel, modernconcepts and advanced technologyfor the management of air traffic and Airframe engines. As a result, there is need for Aerospace Manufacturers and Fuel Suppliers to coordinate to find short and long-term action plans. For plans that are short, reduction of carbon and modernization of air fleet should be the priority. The plans can be achieved through the application of modern fuel technologies.The aviation industry is required to invest about USD 1.7 Trillion in the purchase of new fleet by 2020. Consequently, the same will lead to the replacement of about 5300 aircrafts come 2020; a number that would represent 25% of the total fleet in the industry. The process is known as drastic fleet modernizationand is purposed to reduce the rate of carbon emission by about 20% (Krishnan, 2011, pg. 9).
According to IATA’s scheme, the roadmap to technology is a task scheduled to help in the reduction of carbon emission by about 15% per aircraft. The roadmap identifies that by overhauling the technology of systems and engines will introduce aircrafts that produce less carbon yet burn a lot of carbon. Such would include some of the modern forms of technology that are currently being practiced including retrofitting of winglets. Such will also include further technological advancements in the form of laminator flow, application of other composite material, and new engine architecture. Such new advancements have been identified to reduce the emission of carbon by an extra 1.1% come 2020.However, achieving such great strides would cost the industry a total of USD 200 Billion (Nikki, 2017).
Regarding a full carbon life cycle,the employment of sustainable bio fuels leads to the reduction of carbon emission up to 80%. From new and second-generation biomasses, IATA intends to extract bio fuelswithout affecting the food crops. The bio fuels are technologically advantageous in the form that aircraftswill not need to have major adaptations to use them (Soriano-Meier, Garza-Reyes and Rocha-Lona, 2012). However, if the stakeholders do not have the technological will power, it will not be possible to achieve a state of carbon neutral growth within the industry. On the contrary, the airline industry has a reputation of achieving the impossible. Regarding the current scenario, the annual carbon emission growth lies at 4% while passenger growth is 5%. The presented 2% carbon emission reduction would not be possible in case the taken initiatives did not exist. There are airlines that have already undertaken test flight using bio fuels. Figure 1 in the appendix gives some of those airlines (Porter and Pearce, 2011, pg. 20).
there are several forces that influenceprofitability as well as goals that are set by IATA. Such forces include availability of substitutes and the role of governments among others. The highlighted challenges are also associated with hindering the airline industry from making attractive returns for growth. The current state of low profitability is because of price-dominated, fierce rivalry brought about by new as well as alreadyestablishedcompetitors. Growth is hindered because there are consumers that are price sensitive as well as powerful groups of suppliers that capturethe value created by the aviation industry. In addition, substitutes to air travel make it hard for the industry to realize fast growth. Both frequent entry and intense rivalry in the industry are driven by the underlyingeconomics such as product features, demand profile, and the nature of the adjustment capacity (VMOSA, 2017). Aspects of product features include perishable product, low marginal cost per passenger cost structure, core transportation service provided by the commodity ‘factory’, and fixed costs peravailable seat mile – that decreases with reduction in airplane size. Demand profile aspects include demand’s high volatility and increase of individual customer’s value concerning the frequency of connection. Finally yet importantly, the aspects of capacity adjustmentsnature include the capacity of infrastructure, time lags,andstepwise capacitychanges (Outsource, 2017).
In as much as the economic factors that driving the aviation industry are unique, the factors’ individual elements are not. The reason as to why other industries are performing better than the airline industry is because of difference in strategic choices, existence of government policies, and the behavior of suppliers (Kader, 2017).
Several research activities have identified the fact that the challenge is unique because of the behavioral pattern within the industry. The existing airlines are focused on yield and volume instead off margin. Competition is also based on network breadth and size instead of differentiation. In addition, the industry takes a myopic view regarding capacity expansion’s consequences. The reasons why such made choices are individually rational include the fact that the industry leaves capacity unused, creates first move advantage, and increase cash flow’s short-term profitability.Never the less, such choices create a market environment that suites no one. In this case, we shall consider two examples that are the growth of activity outsourcing and the drive towards yield management improvement (Soriano-Meier, Garza-Reyes and Rocha-Lona, 2012).
Yield Management – refers to the short-term prices management for maximizing revenue in line with the price discrimination and the available seatmile. In simple terms, it refers to the pricing of transportation service in terms of purchase time,bundle,and conditions of rebooking among others. The named factors are vital in ensuring that the profitability of the airline is improved. However, the extensive use of such factors – which is influenced by the availability of sophisticated technology, has led to reduced profits. The truth is that such practices have negatively affected the structure of the airline industry. Customers have often been left uncertain if there are fair prices in the industry because of the current rate, at which prices change which alternatively reduces transparency. Customers have thus, sorted alternative aggregator websites in pursuit of ‘better deals’ thereby letting price to be their keyproduct feature. In addition, by discriminating prices for similar services via bundling has made airlines to create rivalry between themselves (MSG, 2017).
Activity outsourcing–this is the main mechanism used in the reduction of costs in the short run. However, the mechanism leads to negative longer-term effects on the structure of the industry. It does so by ensuring that airlines are given less control over the value chainleading to reduced differentiation potential in the process. Outsourcing also harmonizes the structures of cost and service levels in the aviation industry consequently leading to reduced price competition. Last but not least, it reduces entry barriers into the industry (Pirtea, Nicolescu and Botoc, 2009).
Circumstances within the airline industry have changed within the last four decades. Such changes include the deregulation of major markets, the use of more efficient technology, and the achievement of millions of new consumers who are able to afford airline prices. On top of that, the industry has also registered a change in the role of local governments. Most governments are in a tight fiscal position thereby constraining them to avoid helping airlines that are failing. There are countries where the government imposes new taxes on the available airlines while others are willing to let the market get consolidated even if the flag carrier would be lost or number of rivals would reduce. The assumption in this case is that making the exit easier would lead to the creation of more efficient and successful business models that would gain the market share. The same action would also reduce aggressive capacity expansion’s incentives that rely on risk mitigation performed by government bailouts (Price, 2011).
Another realized change is demand growth’s outlook. Currently, the costs of fuel are rising because of temporary moderation that happened during the global economic crisis. What is likely to follow is the increase of emission charges. In case technological improvements do not compensate the higher underlying costs, prices will be forced to rise thereby resulting to negative demand consequences. Another factor that influences demand growth is infrastructural bottlenecks. The truth is that the extension of infrastructure is not easy to finance and politically achieve. Mature market’s slower demand growth leads to reduced incentives for capacity expansion’s aggressiveness forcing airlines to sort other dimensionof competition. Never the less, as the market continues to grow, a continuation of capacity expansion will still be realized making it uncertain for the market structures likely to emerge (Ethics, 2017).
As a final note, a change in the behavior and profile of airlines has also been realized. Fragmentation might reduce for airlines that alliance globally.In most countries, mergers among airlines are also beginning to occur even though cross-border mergers are limited by international agreements. There are small network airlines that are slowly becoming feeder networks for those that are already established. In addition, domestic and international long haul isslowly being served by different entities. In as much as it is not yet clear which models will surviveultimately, a trend towards business models that are more differentiated already creep in the industry. To add on that, there are some airlines that arebecoming more explicit in pursuit of more profitability instead of unbridled growth (Grissemann and Stokburger-Sauer, 2012).
As the stakeholders think on which necessary steps to take to achieve the set goals, there are a few enabling factor that need to be considered. First, the industry needs to document the benefits provided in the global economy. By doing so, local government and politicians will not take the industry for a ride based on the primary performance to their countries’ economic development. Apart from that, many economically successful metropolitans and cities depend on a productive airline connection through a competitive airport. In such a case, the regulatoryenvironment is liberal. The industry will thus, require proving that it is a tool powerful enough to generate economical development (Saxena, 2014).
To ensure that change takes place, the industry must be in a position where it is able to frame all the made efforts as a campaign towards the reduction of societal costs associated with a poor industrial structure. Everyone is concerned about the root causes and consequences of low profitability. As a result, the industry is required to document the current industrial structure’s societal costs (Kaplan, 2017).
Motivation is required to ensure that the goals are achieved. Therefore, documenting the benefiting act of every stakeholder geared towards the achievement of the outlined goals would be important. Focus should be put on service improvement, reducing congestion, increasing economic development, and reducing environmental impact among others. Introducing new industrial structures will ensure that some opportunities are created in the industry leading to the improvement of profitability. Governments will also see the new industrial structure as a leeway to economic growth(Ethical Standards, 2017).
Another recommendation is to ensure that the action agenda builds on the already created positive trends. Such trends, as mentioned before include demand shifts and policyevolution. In as much as such trends are strong enough to change the industrial structure, presence of an action agenda needs to strengthen and leverage them.The industry needs to communicate the same action agenda in one voice.The only way that the industry will mobilize action is when it has its position and agendas clearly stated (Management, 2017).
Lastly, the industry needs to coax local governments to take the aforementioned measurements like:
Reference
Competences (2017).Capabilities and Competences. [online] Ifm.eng.cam.ac.uk. Available at: https://www.ifm.eng.cam.ac.uk/research/dstools/capabilities-and-competences/ [Accessed 1 Aug. 2018].
CWMIFG (2012). What are resources and competencies? | Innovation for Growth. [online] Innovation for Growth. Available at: https://www.innovationforgrowth.co.uk/Blog/what-are-resources-and-competences/ [Accessed 1 Aug. 2018].
Ethical Standards. (2017). IMPLEMENTING EFFECTIVE ETHICS STANDARDS IN GOVERNMENT AND THE CIVIL SERVICE’. [online] Available at: https://www.oecd.org/mena/governance/35521740.pdf.[ Accessed 1 Aug. 2018].
Ethics. (2017). Importance of Ethics in Accounting & Financial Decision Making,” .[online] Available at: https://yourbusiness.azcentral.com/importance-ethics-accounting-financial-decision-making-4394.html[Accessed 1 Aug. 2018].
Franklin, M.(2012).Understanding Research: Coping with the Quantitative – Qualitative Divide. Routledge.
Grissemann, U.S. and Stokburger-Sauer, N.E., (2012). Customer co-creation of travel services: The role of company support and customer satisfaction with the co-creation performance. Tourism Management, 33(6), pp.1483-1492.
Kader, M. (2017).Strategic Management (StratMgt). Open2study.com. Available athttps://www.open2study.com/courses/strategic-management [Accessed 1 Aug. 2018].
Kaplan (2017).Critical success factors and core competencies. [online] Kfknowledgebank.kaplan.co.uk. Available at: https://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Critical%20success%20factors%20and%20core%20competences.aspx [Accessed 1 Aug. 2018].
Krishnan, M. (2011). IATA’s Four Pillar Strategy and possible Integration:Paper under Module – EEC. 2(3), pp. 3-17.
Management, S. (2017).SMS | Strategic Management Society. Strategic management.net.,Available athttps://www.strategicmanagement.net/ [Accessed 1 Aug. 2018].
MSG (2017).Resources, Competencies and Distinctive Capabilities. [online] Managementstudyguide.com. Available at: https://www.managementstudyguide.com/resources-competencies-distinctive-capabilities.htm [Accessed 1 Aug. 2018].
Nikki (2017). Benefits of outsourcing: Enjoy global outsourcing advantages from Flatworld Solutions. Flatworldsolutions.com. [online] Available at: https://www.flatworldsolutions.com/articles/benefits-of-outsourcing.php [Accessed 1 Aug. 2018]
Outsource (2017).The Benefits of Outsourcing – Outsource2india. Outsource2india.com. [online] Available at: https://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asp [Accessed 1 Aug. 2018]
Pirtea, M., Nicolescu, C., &Botoc, C. (2009).THE ROLE OF STRATEGIC PLANNING IN MODERN ORGANIZATIONS.AnnalesUniversitatisApulensis, Series Oeconomica, 11(2).
Porter, M., Pearce, B. (2011). Vision 2050 – Structuring for Profitability:Industry value creation. IATA 13(1), pp. 10-87.
Price, S.(2011).Qantas unions stand up to management. [online] Greenleftweekly. Available at: https://www.greenleft.org.au/content/qantas-unions-stand-management[Accessed 1 Aug. 2018].
Rouse, M. (2017). What is outsourcing? – Definition from WhatIs.com. SearchCIO. [online] Available at: https://searchcio.techtarget.com/definition/outsourcing [Accessed 1 Aug. 2018]
Saxena, K. (2014). Capabilities versus Competence: How are they Different?. [online] Available at: https://www.linkedin.com/pulse/20141123155439-7430899-capabilities-versus-competence-how-are-they-different [Accessed 1 Aug. 2018].
Soriano-Meier, H., Garza-Reyes, J. and Rocha-Lona, L. (2012).Exploring the Advantages and Disadvantages of Outsourcing the Development of New Products. [online] Available at: https://ieomsociety.org/ieom2012/pdfs/189.pdf. [Accessed 1 Aug. 2018]
VMOSA. (2017). Developing a Strategic Plan | Proclaiming Your Dream: Developing Vision and Mission Statements | Main Section | Community Tool Box. Ctb.ku.edu. [online] Available at: https://ctb.ku.edu/en/table-of-contents/structure/strategic-planning/vision-mission-statements/main [Accessed 1 Aug. 2018]
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download