Strategic Planning for Organizations Research Paper

Pages: 8 (2005 words)  ·  Bibliography Sources: 6  ·  File: .docx  ·  Level: College Senior  ·  Topic: Transportation

Management of U.S. Airways

Strategic Planning for Organizations

Based in Tempe, Arizona, U.S. Airways is considered the financially weakest of the major American carriers. With a focus city at Ronald Reagan Washington National Airport, U.S. Airways has struggled to capture a definitive corner in the airline industry. To accomplish those ends, the U.S. Airways considered a merger with a leading competitor, United Airways. Unfortunately, those negotiations fell through in April of 2010. In terms of the organizations future ability to compete in a market that experiences rapid patterns of change and restructuring, the inability to merge their future is unpredictable, which consequentially makes their stock appeal more speculative. But experts argue that this leaves the door open for a potential merger with American Airlines which is perhaps a more stable fit in terms of the company that would emerge post merger (Corridore, 2011).

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The post 9-11 economy undermined the core base of the airline industry and caused a severed reduction in the total amount of individuals traveling by air. This has made external competition a more crucial component of business planning for airline companies. Additionally the problems within the economy created a crisis whereby the industry became increasingly more competitor and room for players in the market have substantially decreased. The status quo activity in the airline industry is ripe with mergers making this a key moment for the organization to consider the option. On the other hand, the improving economy has proved to cause a resurgence in the industry as evident through the fact that airlines have reported improving business. A stronger economy only makes the possibility for a merger more attractive as the market begins to realize the emergence of dominant organizations.

US Airways, Inc. doing business as U.S. Airways is engaged in the operation of a network air carrier. The company is a wholly owned subsidiary of U.S. Airways Group, Inc. also referred to as U.S. Airways Group. U.S. Airways is a member of the Star Alliance, for airlines, which has 26 members who provide service to approximately 1,077 destinations in over 175 countries as reported at the closing of fiscal year 2009.

TOPIC: Research Paper on Strategic Planning for Organizations Assignment

US Airways charters international flights to destinations within Europe, South America and the Middle East. Additionally the organization operates major domestic hubs in Charlotte, Phoenix and Philadelphia and concentrates its East Coast operations on the provision of hourly shuttle service between Boston, New York and Washington, D.C.

Collectively, the airline industry have been struggling in recent years consequent of surging fuel prices and a weak economy. In terms of supply side economics, increased operational cost have cut into expected profit, but the industry has also observed a reduction in the total number of travelers which impacts the aggregate demand for their industry. As the airline experience troubles, U.S. Airways managed to exceed the quarterly expectations for earnings and reported $1.23 per share which surpassing the projections of $1.17 as of October 20, 2010.

US Airways is functionally registered as a holding company whose primary business function is the operation of a major network air carrier by proxy of its wholly owned subsidiaries. The organization consist of U.S. Airways, Piedmont Airlines, PSA Airlines, Material Services Company, and Airways Assurance. Material Services Company and Airways Assurance provide support operations for the remainder U.S. Airways airline subsidiaries. Their functions include activities such as the procurement of aviation fuel and insurance.

Companies within the airline industry are measured using two primary standards. These standards include calculating the domestic revenue per passenger miles and determining the total available seat miles. According to both of theses criteria, U.S. Airways ranks fifth among the airline industry. As of Fiscal Year 2009, U.S. Airways serviced a total of 68,459 million domestic revenue passenger miles. While providing 85,092 million available seat miles. The company reported a passenger load factor of 73.6%. The companies passenger carried stood at approximately 27 million. Concluding the 2009 fiscal year, U.S. Airways had a total 283 fully functional aircraft operating under its managerial control (Reed, 2011).

The biggest problem facing the airline is capturing a competitive advantage over the other airline companies that operate within the same market. Especially within the Hub destinations.

The economy has been increasingly unpredictable in the past decade celebrating spectacular performances at times and at others being devastated by unprecedented lows. The U.S. unemployment rate fell in July for the first time in 15 months as employers cut far fewer jobs than expected, giving the clearest indication yet that the economy is turning around from a deep recession. In terms of major stock exchanges, The Dow Jones industrial average is trading at its highest level since November 08, while the Standard & Poor's 500-stock index has climbed to its highest level since October 08. In addition, because the stock market usually outpaces economic recovery by about 6 months this bodes well for economic growth. Future expectations for investor are key to reinvigorating the stock markets. The political atmosphere is also positively impacting investor confidence. New programs endorsed by Obama and Geithner are creating the perception that the executive branch is taking control of the economic crisis which naturally causes positive shifts in consumer, business, and investor confidence.

While most signs indicate that the economic conditions are improving, other factors show signs of the growth slowing. Economist have speculated economic growth projections of 2.6% in 2010 falls .7% shy of expected growth and that performance is likely in the subsequent year (Crutsinger, 2010). This activity indicates that the economy is becoming more volatile. Investors attempt to avoid market violability because of the risk associated with speculating their performance. Comparatively, the airline industry is underperforming against other markets. In addition to market instability and the inability to stabilize its operational cost, the airline industry is less capable of leveraging liabilities to generate capital (Crutsinger, 2010).

The U.S. is incapable of providing access to labor with unemployment rates of approximately 9.6%. While the unemployment rate is gradually shrinking, the existing high employment rate causes the economy to remain recessive due to aggregate disposable income. The implications for the airline industry are two-fold (BLS, 2011).

1.1. Existing customer will be less willing to purchase amenities and extraneous services. Minimizing the ability of the industry to profit from terminal revenue options.

1.2. The total number of customers will not be optimal as a consequence of the consumers inability to afford prices at market value.

The fact that the airline industry is extremely volatile coupled with the upward trend in fare cost, airline companies must increase their net profits if they are going to position themselves to remain competitive. The industry is expected to be incapable of supplying the demand for air travel by 2013, which indicates that companies can realize greater profits through expansionary policies. Despite the fact that the Bureau of Labor Statistics indicates that the cost of airline fares is rising. The industry has yet to see repercussion of this activity. In terms of macroeconomics, this means the price levels for airline tickets are trying to correct themselves by shifting to an equilibrium. The data reported in the graph by the Bureau of Labor Statistics indicates that fares reached a record low in July of 2009 and have surged back to the record highs reached in July of the previous year (BLS Graph, 2008). Success for any company means that the organization must be able to underbid the competitors at any given price level. Hence the key to success for U.S. Airways will be found in its ability to generate enough revenue to either expand its fleet and make it more attractive to competing airlines for potential mergers, or to attempt strategic acquisitions of smaller firms operating in strong local markets showing positive signs of population growth. While its recent strategy of code sharing has help the company correct from the losses that resulted from the stock failure of 2008. While unattractive, the airline industry still has a small pocket of investment capital that can be accessed. Appearing more stable and competitive than other airline brands make help the company dry up the investment market for competitors while leveraging that equity to force further concentration in the airline industry.

Strategy 1: Leverage ability to retain earnings against competitors

US Airways does not pay dividends to its stockholders which means investors typically assume that their stock ownership is apart of a long-term investment strategy. This means that the organization is not under pressure to generate revenue for its shareholders. On the other hand, competing companies pay dividends and because of the record losses in 2008, these companies are under increased pressure by its shareholders. Even if dividends aren't paid, they are less likely win pricing wars because the cut to losses will scare investors. Investor confidence is more critical to these firms because stocks that pay dividends tend to attract short-term investors. This decreases their companies ability to retain disposable income that is used to expand the organization.

Strategy 2: Attempt Merger

The possibility for a merger… [END OF PREVIEW] . . . READ MORE

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APA Style

Strategic Planning for Organizations.  (2011, May 18).  Retrieved August 3, 2021, from

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"Strategic Planning for Organizations."  18 May 2011.  Web.  3 August 2021. <>.

Chicago Style

"Strategic Planning for Organizations."  May 18, 2011.  Accessed August 3, 2021.