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Washington State University Diana Golovin, Robert Moehnke, and Lindsey Szueber MGMT 491 Group Strategic Plan “Alaska Airlines Three Year Expansion” June 12, 2017Table of contentsExecutive summary 3-4About the company 4-9Why change is needed9Analysis section 5 forces Buyers10Suppliers 10-11Competition 11-12Alternatives 12Barrier to entry 12-13SWOTStrengths 13-15Weaknesses 15-16Opportunities 16Threats17What this means 18-19Business strategy 19-22Marketing 22-23Finances 23-24Conclusion 24Appendices 25-30Work cited 31-33Executive summaryAlaska Airlines (“Alaska”) is a company that prides itself in the ability to create an airline that people will simply love. They have done this in two basic ways throughout their existence. First, they offer their customers an excellent mileage plan so that travel is cheaper for their customers who use their service to travel frequently. Second, Alaska is known as an airline company that prides themselves in having excellent customer service. Alaska depends on maintaining the image of excellent customer service to regain former customers and to gain new ones. The team then moved into asking why change for the business would be needed, which is easily answered by the statement “a need to evolve”. At first, Alaska may find it difficult to recognize the need for change since year after year it beats out its competitors in the war for new customers. Once the need has been recognized, primarily based off the company’s relatively small size, our next step was to make an analysis of both the company and the market of airlines in general.The team started with the external analysis and quickly found that the airline business is not a business that anyone would want to be in currently. Using Porters Five forces model the team found that buyers, suppliers and competitors all have significant power. Alternatives are becoming much more common and the barrier to enter the market is incredibly low due to the fact that most services in the airline industry can be leased out now. Moving on, the team did an analysis of the internal market surrounding Alaska and found that customer service and having their mileage card are some of their best assets. They are a small company though and do not support flights around the East coast and do not have many international flights. The team decided to put a hub on the east coast, specifically the JFK airfield. From here the team decided to add flights every year putting one flight per day. On the third year however we will be adding two flights per day to the most popular cities. We will be targeting business customers because they are less sensitive to changes in price and the company will be able to utilize their credit card right away. A hub on the East coast will ensure that Alaska will be profitable for the next several years. About the companyAlaska’s current mission statement is "creating an airline people love"(“Alaska Air Group, Inc. (2016)” p. 4), which they deem as a continuous process. This is further explained by the following statement: “Each day, we are guided by our core values of Safety, Professionalism, Caring, Resourcefulness, Integrity and Alaska Spirit at work and in our communities. Alaska Airlines also fosters a diverse and inclusive culture and is an Equal Opportunity Employer” (“Working at Alaska Airlines”). It carries out each of these in the following ways, which have been accessed from the source “Alaska Airlines Jobs - All Jobs”: Safety- #1 value; if something is unsafe, stop it until it is safe again Professionalism- proven through individual skill, expertise and commitment to work Caring- showing genuine kindness to guests and one another. Resourcefulness- bias towards action and readiness to adopt to change; value hard work and innovation. Integrity- commitment to ethical and honest behavior (doing the “right thing”) Alaska Spirit- fun-loving, energetic, and adventurous personality that sets Alaska apart Alaska has had a row of slogans since being founded in 1932, its current slogan being “keep climbing” which reflects its vision statement of constantly evolving. They have five main principles that guide their future, all of which have been accessed from the source “Alaska Air Group, Inc. (2016)”: Be Safe and On time- achieved through developing well defined processes and ensuring that every employee is aware of their contribution; No. 1 on-time carrier in North America seven years in a row (p. 5) Focus on People- "Higher employee engagement drives higher productivity, superior execution and better customer service, which is why we listen to our employees for feedback in shaping our strategy"; implemented customer-service workshops and leadership training that is provided to virtually all employees (p. 5) Build a deep emotional connection for our brand- Desire to be "preferred airline to fly for people living on the West Coast." Recently launched Free Chat which allows guests to text free in-flight, and continues to offer free and premium entertainment directly to guests devices (p. 5) Defend and grow our customer base- Plans to use recent merging with Virgin America to their quest to grow their base and introduce their new guests to their award-winning service, Mileage Plan program, and affinity credit cards (p. 5) Win with low costs and low fares- Benefit from competitive advantage of low-fare model and competitive cost structure. Continuous focus on productivity, cost management and leveraging capacity growth. Managed fuel costs by flying larger, more fuel-efficient aircraft (p. 6) Alaska Airlines offers strategic partnerships with Horizon Air and Virgin America, allowing for the extra coverage of flights. ?Horizon Air is an independently managed company that is under the ownership of Alaska Airlines. The sister carrier has flight routes to 45 cities on the West Coast. Horizon passengers have access to the frequent flier program of Alaska Airlines (“Horizon Air History”). Virgin America and Alaska Airlines came together to help increase the number of flights. Their goal was not to be normal, but to go above and beyond the standards for the industry. There are 1,200 daily flights with the two companies, combined. The passengers now have access to the frequent flier program for each other’s flights (“Alaska Airlines Virgin America”).Alaska Airlines also has alliances with other companies to ensure a great travel experience. They do this through a partnership to ensure world travel comfort. You can travel to more than 900 destinations in the world. Alaska also allows for passengers to receive miles when they purchase items through their partnership. For example, flights, rental cars, hotels, shopping, etc. (airline-partners). ?Management team - Alaska prides themselves on having great service, which is carried through the people they hire. They currently have an “organic” structure which is based on employee empowerment. The current CEO, Bradley Tilden overlooks the operations of Alaska Airlines, Inc., Horizon Air Industries, Inc. and Virgin America Inc. (Alaska Air Group, Inc. (2016)). Five other executive officers overlook different sections of the three companies, including the finance portion, the commercial portion and the ethics and compliance portions. This creates a more unified management group where decisions are based on the interest of the three companies in order to maximize the outcome of Alaska Air Group as a whole. ?Alaska wants to provide benefits to their employees that help ensure healthy lives, and empowers it employees by having workshops available. This goes along with the message provided by the management of creating a more even-leveled workplace, where everyone has the opportunity to excel. How service works- “Our goal is to always provide safe, reliable transportation for a reasonable price, along with the caring, friendly and professional service that we are known for” (“Customer Service Commitment”).Selection- selecting a ticket for a trip can be done online at , over the phone with a customer service agent, or at the airport with an Alaska Airlines customer service representative. During this process the passenger is selecting a destination, date, and time to travel.Registration- During the registration process, information about the traveler will be asked. (Name, date of birth, contact information). In addition, a passenger can select the desired seat for the trip.Payment – To finalize the purchase, a payment must be made. This can be done with a credit card. If the passenger is a part of the mileage plan program, they can choose to redeem their miles as a form of payment. They can also choose to use miles and money.Check-in – Check-in is an important step on the day of travel. This is used to let the company know that you are ready to fly. By checking in, the passenger gets a ticket which will allow them to get through security and is checked at the gate to get on the aircraft. Check-in can happen in the following ways (“Check- in options”): In person, at the airport at the ticket counter, or in person at the airport through the kiosk system (“Check-in options”). A passenger can also check-in on the mobile phone app, and on the internet through the website.o ??Kiosk check in allows:?Check in up to 40 mins before departurePurchase available upgrades?Change seating assignments?Print boarding pass?Pay for checked bagsPrint checked bag tagso ??Mobile phone check in allows:?Check in 1-24 hours before departure?Use of mobile boarding pass· ??Use for checking bags· ??Security Check· ??Gate Checko ??Online check in allows:?Check in 1- 24 hours before departure?Print boarding pass?Pay for checked bags?Change seating assignments?Purchase available upgradesChecked Baggage:Cost: 1st and 2nd bags cost $25 (if less than 50 LBS and less than 62” linear). 3 or more bags cost $75 each 50 LBS and less than 62” linear (“Checked Baggage Rules”).Inflight experience- The aircraft that is used is the Boeing 737 and the Bombardier Q400. The goal is to focus on comfort and efficiency. The aircraft offers leather seats with an adjustable headrest. In the main cabin, complimentary snacks and drinks are provided. There are options to purchase larger meals and snack packages. Alaska offers inflight entertainment via streaming and on tablets for longer journeys (“Main Cabin Seating on Alaska Airlines”). ??Baggage claim- Alaska Air has a baggage claim guarantee. They guarantee that the passengers will have their baggage on the carousel in 20 minutes for domestic destinations. If this does not get met, then Alaska will provide a $25 discount for the next trip or 2,500 miles for the mileage program (“Checked Baggage Rules”).Why change is neededAlaska Currently is ranked Number 8 in the United States for airlines in terms of passenger count (Appendix D). This means that there is plenty of room to grow in the industry. Compared to the giants Southwest, American, and Delta, Alaska airlines has a very small number of passengers annually. The other encouraging thing to note is that the number of passengers overall is increasing every year, as reflected in a 5% increase in number of passengers from 2014 to 2015 (Appendix B). One thing that currently makes Alaska Airlines look very appealing is that while the overall industry is increasing by 5% Alaska’s passengers are increasing by over 9%. This means that the strengths that Alaska has are helping them grow faster than the competition. Regardless of this fact, Alaska still has an incredibly small market share compared to the companies mentioned above.Analysis sectionThe team has decided to do both an internal and external market analysis in order to adequately understand what is going on in any industry. For any given company, more than one analysis is required to come up with a strategic plan. For the external analysis, the team chose to use Porters 5 forces. This will help us understand what potential the market has as a whole and whether or not the market is favorable for us to make strategic change. For the internal analysis, the team is looking at doing a SWOT analysis because this easily shows what the company is doing well and how they can improve in the most efficient manner. 5 Forces (External)BuyersBuyers have a large advantage when it comes to choosing an airline. The majority of buyers are incredibly price sensitive. If one company has cheaper prices, people are going to fly more often through that carrier. For the most part, business travelers are less sensitive about price and instead value better service. Leisure flyers are going to be on the lookout for the best deal. While there is no data to support this, price may become less of a concern soon because of all the negative press that airlines are getting. People could start to want to pay more for better service and safety but for now consumers are very price oriented and if one airline does not offer them what they want it is very easy for them to choose another. Additionally, there are many different alternatives of travel that consumers can choose from if they find air travel unattractive. All in all, the power is in the hands of the buyer when it comes to the airline industry.SuppliersSuppliers include airplane makers, fuel companies, airports, food companies, maintenance companies, and employees. Suppliers in the airline industry are incredibly powerful because of how specialized they are. There are only so many plane manufacturers and if Alaska want to remain buying 37s for their main plane they have to buy from Boeing. In their 2016 financial statement, Alaska outright says that “Alaska is dependent on Boeing as its sole supplier for aircraft and many aircraft parts” (Alaska Air Group, Inc. (2016), p. 21). There are only so many pilots and other specially trained people that are required to run an airport. The people that supply these services have a lot of power when it comes to setting a price. Switching from one supplier to another is also expensive. Suppliers determine quality of planes thus Alaska is reliant on high quality (safety, etc.) and standardization. There are little substitutes to the airplanes that the suppliers provide. Suppliers (vendors) of fuel, aircrafts, food & beverages (“Alaska Air Group, Inc. (2016)”) make up a large portion of operating expenses and, for the most part, can not be replaced by others. Because of the need to maintain a top-quality airline and hold on to suppliers who offer specialized equipment, suppliers are very powerful in the airline petitionAlaska Airlines competitors fall into two main categories- those airlines that fly short distances and charge less, and those that fly long distances and charge more. In the first category, which is more relevant to Alaska Airlines, the main competitor is Southwest Airlines. It is deemed the world’s largest low-cost carrier and as of 2014, carried the most domestic passengers of any U.S. airline (“Domestic bliss”). In the second category, Delta is the largest competitor, specifically due to similar flight patterns. Delta has a stronger presence worldwide (operating over 5,400 flights daily, with subsidiaries and regional affiliates) and has been in partnership with Alaska as of recently, tension mainly attributable to Delta’s increasing flights from Seattle to California and Seattle to Alaska (“Delta Air Lines”). About 61% of Alaska's capacity to and from Seattle competes with Delta (“Alaska Air Group, Inc. (2016)”, p. 11). It has created a hub in Seattle in 2014, which serves as an important gateway to Asia, and continues to add more regional and domestic services in Seattle (“Delta Air Lines”). AlternativesAs technology increases so do the number of alternatives that can effectively replicate air travel. Europe and Japan for instance have a fairly large network of incredibly fast trains that move across multiple countries. Even in the United States, people are choosing different means to travel places. Cars are still prevalent and people take cars absolutely everywhere. Services like Uber and Lyft have also played a part in being deemed as an alternative. Busses and trains are also ways that people can move about. The consumers are very price sensitive and some will choose to go on a bus or train rather than a plane if the cost is cheaper, especially for shorter trips. ?This is only the side for passengers. On the freight side, there are other ways that product is moved around besides air travel. Boats, trucks and even smaller vans all compete for similar business for shipping from air. Amazon is even considering having drones start delivering packages, thus there are all sorts of alternative competition that air travel has to worry about. Air shipping almost always has the advantage on speed but is always the most expensive option for people to choose as well. With all the alternatives that people can choose from it is easy to see that the market for airlines is not an attractive one to try and enter.Barrier to entryFrom the class discussions and some basic research the barrier to entry is relatively low for the airline business consequently causing high threats. Liberalization of market access due to globalization (causes low entry barriers) and high exit barriers due to capital intensive nature (Teresa Cederholm). Pretty much everything that you need to run an airline, employees, planes other equipment and even ticketing services can all be leased now. ?This means that while leasing will still be an expensive endeavor, you do not have to own anything. The pilots can even be found through hiring agencies and paid when the tickets start coming in. Because of this there is no large start up costs like there could be for other businesses. Scale is not a large cost determinant (Shimizu, K., 2012), thus small companies can enter and play a huge role. This puts a lot of power into the hands of people who would like to get into the airline business themselves. A relatively small airline company can pose a big threat to larger companies if they only have a few flights and can make the service incredibly cheap. The small business from Portland achieved this so well that Southwest actually bought them so that the sales would stay with them and not a smaller company. Because of this, new business popping up is always going to be a concern and means that the power is in the hands of new business not the established companies.SWOT Analysis (Internal)StrengthsAlaska Airlines has two very large strengths and competitive advantages over their competitors. One is having an excellent Mileage plan and the others is customer service. Mileage plan program: - Alaska Airlines offers a frequent flyer program that is known as the mileage plan. This allows for a better flying experience. Miles can be earned through the mileage plan program by making purchases. The membership is free and it rewards travel. The Visa signature credit card allows miles to be earned for each dollar that is spent, as well as one mile for every mile that you fly on Alaska. You can also earn three miles of every dollar spent on Alaska Airlines purchases, such as on board purchases and the actual ticket. In addition, flying and buying flights through partnerships can increase the number of miles. Miles can be purchased at a discounted cost. The mileage plan also allows for perks. For example, upgrades for the seating assignments and free baggage check. There are different levels of rewards depending on the amount of miles flown. As the levels increase the value of the perks received increases (How can I earn Mileage Plan Miles?). See table 1.1.Customer Service: - Alaska Airlines wants to provide service that is committed to enhancing the passengers flight experience (“Customer Service Commitment”):o ??Low fare with great flexibility: Alaska wants to help the customers find the lowest price for their trip. This is done with being flexible in travel dates and booking flights early. Cancellations are allowed within the first 24 hours for no cost. ?If the customer finds a lower cost for a flight within the first 24 hours of booking a flight they can change the flight or get refunded the difference (“Customer Service Commitment”).o ??Clean and comfortable: Alaska Airlines accommodates for special needs. They are focused on working hard to make the flight as comfortable as possible. They offer accommodations for unaccompanied minors. They do this in a way that ensures that the underage child is safe. They offer wheelchair assistance and other services that accommodate for passengers with a disability (“Accessible Service”).o ??Listens to what is said: - Alaska responds to every letter that is sent in for feedback within 60 days. They know it is important to be able to increase the success of the business (“Customer Service Commitment”).o ??Rewards received: - Alaska has received awards for their service and ability to perform. They received the JD Power award 10 years in a row for highest customer satisfaction. They also received an award for the best airline loyalty rewards program for three consecutive years. They were number one for performance and quality (“Awards”).o ??Innovation and technology: - Alaska wants to provide their customers with the fastest service possible, all the while uncompromisingly persisting with quality. They try hard to find new ways to help make this possible (Innovation & technology): f1989 Integrated the Heads-Up Guidance system to help fly in fog.?1995 First airline to sell online tickets?1996 Fist airline to use GPS to help land?1999 First US airline to offer online check in?2001 Created wireless check-in2004 Offered kiosks to check in?2010 Offered mobile app?2011 Pilots use iPad for flight manuals2013 First airline to accept Google WalletWeaknessesThe biggest weakness for Alaska currently is how small of a company they are relative to their main competition. ?Alaska Air is based in Seattle and currently has hubs in several large cities along the West coast. This means that the company is missing a potentially huge source of customers that only fly on the East coast. In 2015, Southwest was rated the number two airline for domestic flights with almost 145 million people flying with them that year. Delta came in at number three with almost 140 million passengers in the same time period (Smallen, D, 2016). The number one airline by number of passengers was American Airlines with over 146 million passengers (Smallen, D, 2016). It is very important to remember however that American Airlines merged with US airways and became the biggest airline right afterward. During this same period of time Alaska only had 22 million passengers. This is largely due to the fact that Alaska is currently only know on the West coast. The company makes flights to the East coast but there is no hub on that side of the country so East coast countries cannot fly between themselves (only over toward the west side). Another very large weakness that Alaska currently has is the size of the planes that they currently have. For the company to consider moving into offering more internationals flight options, the company would have to start buying bigger aircraft. This would be a large cost on its own but also would rise the maintenance costs because new mechanics would be needed to specialize in the bigger planes. OpportunitiesBy looking at the weaknesses that Alaska has, the team has found two solid opportunities to continue the growth trend that they have been seeing recently. The first option is to start making international flights. There are over 100 million flights every year (Smallen, D, 2016), that are either leaving the country or coming into it through U.S. Carriers signifying a huge market for Alaska to get into. With a very low market share in this sector right now it would be reasonable that Alaska would gain markets share and be able to increase revenue this way as well. The other opportunity is to move a hub across the country and start offering flights along the East coast. Currently the only flights that Alaska makes to the East coast are across the entire country, thus adding a hub over in that area would allow the East cost consumers to use Alaska in an area where they have not before. Adding in the strengths of a good mileage plan and a great customer service, Alaska could potentially make a lot of revenue following this plan.ThreatsThere are several threats that plague the airline industry on a regular basis, most of which cannot be controlled by the companies themselves. All factors are listed in source “Alaska Air Group, Inc. (2016)” on page 13: Fuel costs- threat that will continue to get more and more real. Oil for the time being is still relatively easy to get and refine but soon oil prices will rise and jet fuel will rise with them. This is a threat that Alaska needs to be ready for as oil will be harder to get. Increase in competition- as described earlier the barrier to entry is so low that there are easy ways for Alaska Airlines to have new competition and they won’t be able to stop it. New low-price initiatives created by current competition- to take business away from the company. While the margins made in the airline business are only slight, there is still room to be cut and if a competitor does this to Alaska they could be in trouble. Increase in other variable costs- couples with a decrease in passenger’s due to alternative travel methods being a constant threat. Downturn in economy - since flying is a luxury, people do not fly when they cannot afford it which means if the economy turns down severely again like in 2008, air travel is going to be reduce significantly. Weather and seasonal fluctuations - airplanes can fly in incredibly horrible conditions yet are still fairly susceptible to weather being an issue for them not to fly. Luckily for Alaska, if they cannot fly, then most of their competitors probably cannot either. These are some of the bigger more common threats for Alaska to watch out for in their future. What this meansLooking at the 5 Forces model, the airline business is not at all an attractive business to be in currently. The buyers can dictate prices way too well, the sellers can do the same and because the equipment that they use is so specialized airlines can’t really just go to another company. The competition in the airline industry is very fierce. They are all fighting over the same customers and if one company is much cheaper than the other then the consumers will go to another company. Additionally, there are many alternatives to travel that can be taken rather than by air, meaning that the airline industry has little power when it comes to the alternative markets potential. Finally, the barrier to entry in the airline market is relatively low because all of the people and equipment can be leased rather than bought. This means that new competitors are always going to be a potential problem. As already stated, when these 5 Forces are analyzed, the airline industry looks like it is a poor industry to be in.The team did both an external and internal analysis and the SWOT analysis paints a less grim picture. Alaska has a lot of strengths as an airline chief and amount their strengths is their commitment to having excellent customer service. The company’s weaknesses though show that there is still opportunity to create more business, specifically through moving a hub to the other side of the country or starting flights internationally. The team is not interested in making international flights at this time. For companies based in America the amounts of passengers that fly internationally versus flying domestically is very low. Also this solution would mean that Alaska would need to buy additional larger planes for the fleet. These are large expenses that the team does not believe are a good idea for Alaska to undertake now so the strategy of moving to more international flights is not the direction that we are going at this time. Through the analysis of both the market and our own internal strengths and weaknesses the team decided to plan a hub on the east coast.StrategyBusiness strategy - Alaska Airlines will create hubs on the East Coast of the United States.· ??A hub can be defined as a geographical location in which operations are based. For example, at a hub there will be a hanger for the aircraft to be stored. There will be management to help with the control of employees and customer relations. There will be crew that is based out of the hub locations. This means they will fly out of this city to get to other destinations. There will be maintenance workers to work on the aircraft and restock needed items. ?The airports that are already hubs for Alaska are SEA, PDX, SFO, LAX, and ANC (“Alaska Airlines destinations”). Benefits from the Strategy Company: Creates more market demand. Offering more flights and destinations will help to increase the amount of market share Alaska Airlines has. When the company opens a hub, the business process is being more centralized, as a result this will increase efficiency and be able to provide a greater amount of service to a wider area.???????Passengers: The passengers have a need that is unknown. It is important to be able to show customers that they are going to enjoy the service of Alaska Airlines on the East Coast. Alaska Airlines has customers who travel to the East Coast. This will be helpful because Alaska is their desirable company to fly with, and now there will be more opportunities for both existing and new customers to fly to the East Coast with Alaska Airlines.Year one: Open a hub for Alaska Airlines in John Kennedy International Airport (JFK).o ??Alaska Airlines will need to hire more staff to be able to open a new base. Crew members from other bases will be allowed to transfer to JFK. Each Flight on a Boeing 737 takes a minimum of the following employees to run. ?§ ?Pilots: 2 certified pilots§ ?Flight Attendants: 4 Certified Flight Attendants ?§ ?Maintenance: 1 employee§ ?Customer Service: 5 employees ?o ??Alaska Airlines will have to contract with ground services. This includes catering for the food on the plane, baggage services, and cabin maintenance, such as cleaning.o ??Alaska Airlines will need to lease 10 aircrafts in order to fly to desired destinations on the East Coast.o ??Alaska Airlines and Virgin America will share terminal and gate space. ?Virgin America is located at Terminal 4 in JFK. They have 6 gates that they operate out of. In an effort to share gate space they must create a schedule for flights that will allow enough time to load and unload the aircraft and fit into the flight schedules.Alaska Airlines will create new flight routes:Year 1Cities:· ???????Hartsfield–Jackson Atlanta International Airport(ATL)· ???????O'Hare International Airport (ORD)· ???????Detroit Metropolitan Airport (DTW)· ???????Cincinnati/Northern Kentucky International Airport (CVG)· ???????Logan International Airport ?(BOS)Year two: ?The second year of expanding to the East Coast will consist of flying to more cities on the East Coast and Central United States. For example, it would be useful to create more flights to the above mentioned cities for each quarter of the year. During Year two it is important to hire more staff to be able to complete the needed flights. In addition it is important that we lease 25 more aircraft to be able to complete the flights.o ??Additional crew members will be needed for each of the flights added in year 2?Pilots: 2 certified pilots?Flight Attendants: 4 Certified Flight Attendants ??Maintenance: 1 employee?Customer Service: 5 employees ?Year 2Q1Q2Q3Q4Cities:· ???????JFK to Dallas-Fort Worth International Airport (DFW)· ???????JFK to Los Angeles International Airport ?(LAX)· ???????JFK to Denver International Airport (DEN)· ???????JFK to Charlotte Douglas International Airport (CLT)· ???????JFK to Philadelphia International Airport (PHL)· ???????JFK to Miami International Airport (MIA)· ???????JFK to Minneapolis- St. Paul International Airport (MSP)· ???????JFK to Detroit Metro Airport (DTW)· ???????Dulles International Airport (IAD)· ???????Ronald Reagan Washington National Airport (DCA)· ???????Tampa International Airport (TPA)· ???????Raleigh Durham International Airport (RDU)· ???????General Mitchell International Airport (MKE)· ???????Charleston Air Force Base International Airport (CHS)· ???????Nashville International Airport (BNA)· ???????Jacksonville International Airport (JAX)· ???????Pittsburgh International Airport (PIT)· ???????St. Louis Lambert International Airport (STL)· ???????Kansas City International (MCI)· ???????Louis Armstrong New Orleans International Airport (MSY)· ??Year three: In year three it is important to continue to find more flights that passenger’s desire. In addition it is important that we lease 15 more aircraft to be able to complete the flights. In year three the major five airports (ATL, ORD, DTW, CVG, and BOS) will be have a morning and a red eye flight.o ??Additional crew members will be needed for each of the flights added in year 2Pilots: 2 certified pilotsFlight Attendants: 4 Certified Flight Attendants ??Maintenance: 1 employeeCustomer Service: 5 employees ?Q1Q2Q3Q4Major Five Airports(Throughout year)· ???????JFK to Dallas-Fort Worth International Airport (DFW)· ???????JFK to Los Angeles International Airport ?(LAX)· ???????JFK to Denver International Airport (DEN)· ???????JFK to Charlotte Douglas International Airport (CLT)· ???????JFK to Philadelphia International Airport (PHL)· ???????JFK to Miami International Airport (MIA)· ???????JFK to Minneapolis- St. Paul International Airport (MSP)· ???????JFK to Detroit Metro Airport (DTW)· ???????Dulles International Airport (IAD)· ???????Ronald Regan Washington National Airport (DCA)· ???????Tampa International Airport (TPA)· ???????Raleigh Durham International Airport (RDU)· ???????General Mitchell International Airport (MKE)· ???????Charleston Air Force Base International Airport (CHS)· ???????Nashville International Airport (BNA)· ???????Jacksonville International Airport (JAX)· ???????Pitts burgh International Airport (PIT)· ???????St. Louis Lambert International Airport (STL)· ???????Kansas City International (MCI)· ???????Louis Armstrong New Orleans International Airport (MSY)· ???????Hartsfield–Jackson Atlanta International Airport(ATL)· ???????O'Hare International Airport (ORD)· ???????Detroit Metropolitan Airport (DTW)· ???????Cincinnati/Northern Kentucky International Airport (CVG)· ???????Logan International Airport ?(BOS)2 Times per day. Morning and red eye.MarketingAlaska is not unveiling a new product or service. The strategy that the team chose is geographic expansion because of the opportunity that could be created through the weakness of being small. To carry out the planned strategy effectively, Alaska needs to rely on a brief STP analysis using the external and internal data that was gathered in the analysis section. The thing to remember about our business is that to attract new customers we are going to have to take customers away from other airlines. There will be a very small market if Alaska simply tries to create new customers that do not already fly. Without going into super specifics there are a couple different demographics that the team looked at trying to market to. For the airline industry, the team did not believe that it made sense to look at demographics of race, age or gender, since all people use airlines. The people that we are targeting are those who are old enough to afford plane travel and also have a job that may require them to use air travel often (mainly the business passengers). The team decided to look at the two types of passengers that we talked about in class during the Southwest case. There are business flyers who care more about efficiency and then there are the leisure flyers that are much more sensitive to price. From our five forces analysis, we know that the buyers have a lot of buying power. To reduce this factor as much as possible the team is going to focus on business customers primarily. The business passengers are less price sensitive and instead want more efficiency and better service. Leisure customers will still come to Alaska for the experience that the company provides but for the three years that this plan outlines, the team believes that the business customers will be easier to target and get to come to Alaska from our competitors. To do this effectively we are going to continue our excellent mileage and credit card plan which should attract both casual and business flyers alike.FinancesNote: All data is sourced from “Alaska Air Group, Inc. (2016)” Use of ProceedsIn accordance with its value of hard work, Alaska has awarded its employees with $159 million in incentives in 2016, a record number for the company. Approximately 30.2% of its expenses go towards wages, which is its largest operating expense. In accordance with its value of caring, donated over $13 million to nonprofits in local communities, specifically to youth and education, medical research and transportation, as well as community outreach. Between December 31 of 2015 and 2016, $884 million was spent on property, plant and equipment and $831 million on fuel, which accounts for roughly 18.2% of total operating expenses for 2016, its second biggest operating expense. There was a near tie in expenses for “other” and depreciation and amortization, since the two totaled $365 million and $363 million consecutively, placing in third and fourth largest expenses. The financial report does not clarify what falls under the “other” category. ?$270 million was spent on aircraft maintenance (5.9%), $114 million on aircraft rental (3.1%) and $126 million on food & beverage (2.7%). ??Revenue Streams Majority of operating revenue comes from the “mainline passenger”, which represents those who use Alaska’s and Virgin America’s services to travel throughout the U.S., and parts of Canada, Mexico, Costa Rica and Cuba. They account for roughly 80% of operating revenue, in the form of $4,098 million for 2016. Consecutively, “regional passengers”, represent those who travel shorter distances within the U.S. borders. They make up only 20% of operating revenue, in the form of $908 million for 2016. An additional revenue stream comes from freight (about 1.8%) and “other” (about 13.8%). See appendix G for more detail into the finances of Alaska Air and why this plan will work for the company. ConclusionTo conclude briefly, the team sees moving Alaska Air from an only West coast company to an East coast company as a very positive expenditure of time and money. The airline market currently is not a market that people want to readily get into, however Alaska has many advantages in customer service that will allow the company to thrive. Moving over to the East coast while using a hub from Virgin Air will allow the company to migrate efficiently, without spending a lot of money upfront. For the next three years Alaska should be able to increase their sales every year especially given that they are growing faster than the rest of the current market. AppendicesAppendix AAppendix BAppendix CAppendix DAppendix EAppendix FMileage PlanRequirementBonus MilesAirport BenefitsFlight BenefitsService BenefitsMVP20,000 Miles50% bonus on base miles· ???????Priority check-in and boarding· ???????2 free checked bags for you and a companion· ???????Discounted Alaska Longue membership.· ???????Preferred seating· ???????First Class upgrades· ???????Premium Class upgrades· ???????Dedicated phone line for reservation and customer service.· ???????Elite LeaveMVP Gold40,000 Miles100% bonus on base miles· ???????Priority check-in and boarding· ???????2 free checked bags for you and a companion· ???????Express security line at select airports· ???????Complimentary same-day standby when a confirmed flight change isn’t available· ???????Complimentary same-day flight changes· ???????Discounted Alaska Lounge membership· ???????Unlimited First Class upgrades for yourself and a companion· ???????Unlimited Premium Class upgrades for yourself and a companion· ???????Preferred seating· ???????A complimentary premium beverage in the Main Cabin· ???????Four First Class guest upgrades per year· ???????Enjoy dedicated phone lines for reservations and customer service· ???????Waivers for Mileage Plan service charges and ticket change fees· ???????Elite LeaveMVP Gold 75K75,000?125% bonus on base miles· ???????Priority check-in and boarding· ???????2 ?free checked bags for you and a companion· ???????Express security line at select airports· ???????Complimentary same-day standby when a confirmed flight change isn’t available· ???????Complimentary same-day flight changes· ???????Discounted Alaska Lounge membership· ???????4 complimentary Alaska Lounge day passes, available in My account· ???????Unlimited First Class upgrades for yourself and a companion· ???????Unlimited Premium Class upgrades for yourself and a companion· ???????Preferred seating· ???????Complimentary inflight entertainment player· ???????Complimentary premium beverage in the Main Cabin· ???????4 First Class guest upgrades· ???????Dedicated phone lines for reservations and customer care· ???????Waivers for service charges and ticket change fees· ???????Opportunity to nominate someone for MVP status· ???????Elite LeaveAppendix G (Finances)Note: All data is sourced from “Alaska Air Group, Inc. (Q1 2017)” Step 1) Calculating Operating Revenue (Refer to page 6) JFK airport data taken from ticket price based on based on Q4 2016 data and then assuming increase of 1% each year Step 2) Calculating Operating Expenses and Operating Income (Refer to pages 6 and 31). Given the following information for Q1 for 2016 and 2017 (Regarding Operating Expenses) Step 3) Calculating Non-Operating Expenses, Capital Expenditures & Net Income (Refer to pg. 6) Works citedAccessible services. (n.d.). Retrieved June 08, 2017, from Air Group 2015 Sustainability Report. (n.d.). Retrieved June 08, 2017, from Air Group, Inc. (2016). Form 10-K 2016. Retrieved from SEC EDGAR website Alaska Air Group, Inc. (Q1 2017). Form 10-K March 31, 2017. Retrieved from SEC EDGAR website Alaska Airlines destinations. (2017, May 30). Retrieved June 8, 2017, from Airlines Jobs - All Jobs. (n.d.). Retrieved June 08, 2017, from Airlines Virgin America. (n.d.). Retrieved June 08, 2017, from | Alaska Airlines. (n.d.). Retrieved June 12, 2017, from Checked baggage rules. (n.d.). Retrieved June 08, 2017, from options. (n.d.). Retrieved June 08, 2017, from Service Commitment. (n.d.). Retrieved June 08, 2017, from Air Lines. (2017, June 11). Retrieved June 8, 2017, from bliss. (2015, June 24). Retrieved June 8, 2017, from , N. (2017, May 24). How Alaska Airlines Became the Best Airline in the U.S. Retrieved June 08, 2017, from with our worldwide airline partners. (n.d.). Retrieved June 08, 2017, from Air | Alaska Airlines. (n.d.). Retrieved June 08, 2017, from Air History. (n.d.). Retrieved June 08, 2017, from can I earn Mileage Plan miles? (n.d.). Retrieved June 08, 2017, from Cabin seating on Alaska Airlines. (n.d.). Retrieved June 08, 2017, from & technology | Alaska Airlines. (n.d.). Retrieved June 12, 2017, from Our 20 minute baggage guarantee. (n.d.). Retrieved June 08, 2017, from Aircraft. (n.d.). Retrieved June 08, 2017, from , K. (2012). The cores of strategic management. New York: Routledge. Smallen, D. (2016, March 24). 2015 U.S.-Based Airline Traffic Data . Retrieved June 08, 2017, from Airlines Co. (NYSE: LUV)- Corporate Fact Sheet . (2016, October 26). Retrieved June 8, 2017, from mission. (n.d.). Retrieved June 08, 2017, from Cederholm |Dec 29, 20141:36 pm EDT. (2014, December 29). Low-entry barriers intensify competition in airline industry. Retrieved June 8, 2017, from America | Alaska Airlines. (n.d.). Retrieved June 08, 2017, from join Mileage Plan? (n.d.). Retrieved June 08, 2017, from at Alaska Airlines. (n.d.). Retrieved June 8, 2017, from ................
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