Scientific Game

In search of growth strategies

Thursday, 26 October 2017 15:22
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Dr Brian To takes a look at the contrasting fortunes of the world’s low budget airlines, with Asian enterprises such as Spring Airlines leading the way when it comes to positive expansion strategies.

By Professor Dr Brian To

The recent news that Irish low-cost airline Ryanair had cancelled many of its flights was disheartening to say the least. More than 2,000 cancelations were announced in September, with another 18,000 flight to be canceled through March 2018.

Compensation to passengers was a measly £40 voucher. I’m sure the vouchers were not received well either as a way of offering an apology or as a sincere gesture to manage relationships and prompt customer loyalty. As anyone with half a brain would ask, where on earth did these senior executives study human relations and operations management? Despite recent peace offerings to pilots, it’s hardly compensation for all the disappointed passengers and airline staff. 

One suspects that considerable turnover will occur shortly given the present morale of both cockpit and cabin staff. The public assertion that the company was run like a North Korean communist regime is hardly a confidence vote to recommend Ryanair as a candidate for best run company this year.

Contrastingly, on the other side of the world China’s first budget carrier, Spring Airlines, is now growing nicely in line with China’s expanding consumer market, with consecutive growth numbers for the past five years in both revenues and earnings. The company is now expanding into hospitality across Asia with an eye on South Korea and Thailand. The company’s focus has been to concentrate not on group travel but the individual traveller, and it is now China’s largest private sector travel agency also. Like Ryanair, Spring’s flights are usually less than four hours in duration. Another similarity to Ryanair is the use of secondary regional airports. Yet its strategy is vastly different.

In places like Japan, despite competition, the company’s plan is to pursue a strategy that ensures its crews and passengers remain loyal, recognizing that tremendous opportunities for growth still remain in the short haul market. 

Perhaps the most outstanding case of an airline falling from grace and ditching this year is the case of Monarch Airlines in the UK. In early October, Monarch abruptly ceased operations, causing over 300,000 passengers to lose their reservations and forcing the Civil Aviation Authority to rescue 110,000 vacationers who were overseas with no return flight alternatives arranged by Monarch. The CAA had to charter 34 aircraft to abandoned travellers. I’m reminded that this massive reparation exercise looks a lot like Dunkirk Part 2!

Despite more than 2,750 Monarch employees losing their jobs, the welcome news is that other carriers may at least be able to pick up some of those staff to fill vacancies.

Earlier this year, Alitalia and Air Berlin also went into administration. Perhaps it’s time to study the budget airlines based in Asia for lessons in product differentiation, leadership and business from companies like VietJet whose bikini-clad flight attendants have helped drive the company stock higher than the national carrier. Other companies such as easyJet and Spring Airlines also offer lessons in growth strategy with easyJet now planning a push into mainland China.

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