SWOT analysis of Puddle Jumpers Airlines
Introduction: A SWOT analysis is an analysis of the internal and external environment of a firm. Environmental factors internal to the firm are known as strengths and weakness and those
external to the firm are known as opportunities and threats. SWOT analysis is helpful in
matching a firm’s resources and capabilities to the competitive environment in which it operates Therefore, it is important in formulation of strategy and is a vital element of the strategic
planning of a firm. I have decided to conduct the SWOT analysis of Puddle Jumpers Airlines, Inc.
which is a new consumer airline in its formative stages.
Puddle Jumpers Airlines have experienced and creative leaders. They had previously managed
Private Jet Airlines and enlarged its operations from a single Boeing 727 to a fleet of 16 MD80
series aircraft and increased revenues to $130 million in a two year period from 1992 through
1993. Puddle Jumpers target markets will require even more frequent flights than the demand for
Private Jet’s flights which will increase its revenues further. It has a well developed and
researched model and its research indicates that air travel to and from Anytown is ample to
provide a new carrier with revenues of $110 million dollars in its first full year of operations,
utilizing six aircraft and selected short-haul routes. These sales figures are based upon load
factors of only 55% in year one. Second year revenues are expected to exceed $216 million
dollars with additional aircraft and expanded routes. Its products are the newest and best maintained aircrafts providing low cost fares which are well designed to serve the needs of customers for short-haul domestic travel market. It has accurately targeted the market segment that has a demand for low cost carriers .Its management is already in place and they are highly experienced and committed. It has a cost advantage due to lower operating costs. According to company estimates, it has an over-all cost per ASM (available seat mile) of 7.0 cents or less in 1996 dollars which places Puddle Jumpers in a grouping of the lowest four in the airline industry within the short-haul market. The only three airlines with lower operating costs also operate older and less reliable equipment..
Puddles Airlines has no direct marketing experience. Marketing problems may be in the form of dealing with channel problems and obstructions to entry; or solving problems with major advertising and promotion budgets. It has to attain the targeted market share even with the expected competition. Appropriate budget for the project is not yet secure. The first year of operations will require capital until revenue can begin. Therefore adequate capital is needed to handle the expenses of this phase of the business .The company has not yet secured sufficient financing such as “ bridge” and “seed” capital to keep the business in operation for the first
year. .The Company also has not yet obtained the required governmental approvals such as the D.O.T. and F.A.A. certifications on or before March 1, 1997 which are required regulatory obligations of a new air carrier.
It is focused to take advantage of the opportunity of a specific opening in the short-haul domestic travel market. There is demand for low cost aircraft carriers out of Anytown, U.S.A. and this demand in the availability of low cost service in and out of the Anytown hub joined with the demand for passenger travel on selected routes from Anytown provides an opportunity for a new entrant airline which can be predicted to capture a major portion of current air travel business at that hub.. The existing product range will be widened in the future to include other routes with a high demand for low cost carriers. The competition in this sector is poor and there are no airlines in the short haul routes for low cost carriers out of Anytime .Profit margins are good. Sales are projected to provide a net profit of just over $1 million in the first operational year and $21.4 million dollars in the second year. According to company projections, “Profits in the first year
will be 1% of sales and will improve to 10% of sales with the economies gained in year two. The over-all operational long term profit target will be 16% of sales as net profit in years three, four, and five”.
The company has not anticipated the reaction of other low cost carriers. It is vulnerable to reactive attack by other airlines. It might be that seeing the opportunity, other low cost airlines might also decide to operate in this route. This will result in price war. This will definitely affect the profit margin of the company. Another threat is, the company might have a tendency to emphasize on growth at the expense of profits. In order to keep maintenance standards both strict and measurable it has to keep a control over growth. Moreover new regulations such as potential new taxation might affect the profit margin. Retention of key staff is critical. It is a
comparatively small player which will start operations with two McDonnell-Douglas MD-80 series aircraft in month one, four by end of month four, and six by end of month six .It might have to deal with larger airlines carriers which might be damaging to its profit margin. Conclusion: SWOT analysis of the Puddles Jumpers Airlines is a practical way of assimilating
the internal and external information about the business unit, and provides an simple method to build the management team which can accomplish the objectives of profit growth. The management can identify and develop coordinated, goal-directed procedures, which strengthen the general agreed objectives.