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Wednesday, January 11, 2012

Essay on Comparative Analysis of Southwest Air and EVA Air

I. Southwest Air

            In 1997, CNNMoney.com ranked Southwest Airlines Co. the number one in safety (Peter Keating, 1997, p.1).  With its continued emphasis on on-time flight arrivals and proper handing of bags and luggage and efficient service, Southwest Airlines continues to be one of the leaders in the Regional Airline Industry.  It is a domestic airline that provides comfortable air transportation service targeting both business and leisure travelers.  It boasts of having a profitable, highly efficient and high-quality airline with a schedule that fits the needs of its customers. 

            Southwest Airlines started in 1971 with just three Boeing 737 aircraft serving three Texas cities - Dallas, Houston, and San Antonio. Now, it is already the eighth largest carrier in the US famous for its frequent departures, low-cost and no-frills flights and operating 520 Boeing 737 aircrafts in 64 airports in 32 states across the United States.  It currently offers more than 3,400 flights per day all over the United States. 

            According to the Department of Transportation, Southwest Air remains to have the best cumulative Customer Satisfaction record among all carriers.  This is evident by the fact that Southwest Air continues to come up with ways to improve its service to its customers.  Recently, it changed its Customer boarding method which enhanced boarding process, improved customer experience giving the travelers opportunity to be more productive of their time while waiting for their flights without standing in line.  Moreover, Southwest has recently completed its Extreme Gate Makeover which includes innovations such as plusher seats, power stations for laptops, additional flat-screen TVs and other electronic equipment to improve its customer experience while traveling with Southwest Air.  Southwest also provides rewards to the frequent flyers consisting of automatic check in for their flights and inclusion in the A boarding group.  It does not therefore comes as a surprise that its customers increased by 5.8% from 2006 to 2007.  Below are the statistics passenger report from 2006 and 2007 indicating the number of paying passengers boarding Southwest Air as Appendix A: 
Appendix A
Consolidated Highlights (Dollars in Millions)
2007
2006
% change
Revenue Passengers Carried
88,713,472
83,814,823
5.8 %
Revenue Passenger Miles (RPM)s
72,318,812
67,691,289
6.8 %
Available seat miles
99,635,967
92,663,023
7.5 %
Passenger load factor
72.6 %
73.1 %
(0.5) pts.
Passenger revenue yield per RPM
13.08 ¢
12.93 ¢
1.2 %
Operating Revenue yield per ASM
9.90 ¢
9.81 ¢
0.9 %
Operating expenses per ASM
9.10 ¢
8.80 ¢
3.4 %
Size of Fleet at Yearend
520
481
8.1 %
Southwest Airline Co. Annual Report 2007


            Just like any other airline industry however, it experienced growth decline for the year 2000.  Among the reasons are the soaring prices of crude oil and increasing competition in the airline industry.  It must be stressed that the airline industry is a highly competitive industry where players have to compete in the following competitive factors: Fares; Customer Service; Costs; frequency and convenience of scheduling; Frequent flyer benefits; and Efficiency and productivity, including effective selection and use of aircraft.  Moreover competition is much stiffer considering that some major airlines have established extensive marketing or codesharing alliances including: including Northwest Airlines/Continental Airlines/Delta Air Lines; American Airlines/Alaska Airlines; and United Airlines/US Airways.  It bears stressing that these alliances among its competitors are more extensive that Southwest’s present arrangement with ATA airlines
            Below is the comparative data for Total Revenue, Gross Profit, Operating Income/Loss and Net Income for Southwest Air for the past 3 years as Appendix B.  It shows that there is substantial improvement on the part of Southwest Air for its operations from 2006 to 2007 as indicated in its income.  This could perhaps be attributed to the different ways it had come up to improve efficiency and performance
Appendix B
Fiscal Year
2007
2006
2005
Total Revenue
9,861,000  
9,086,000
7,584,000
Gross Profit
2,780,000 
2,775,000
2,493,000  
Operating Income or Loss
791,000 
934,000 
820,000  
Net Income
645,000  
499,000  
548,000 


            Below is the comparative table of historical stock prices of both Southwest Air and EVA Air.  It shows that since the year 2001 until 2009, there is substantial decline in the value of stocks of Southwest Air from 31.33 in January of 2001 to 7.03 in January of 2009.

Appendix C

January 2009
January 2008
January 2007
January 2006
January 2005
January 2004
January 2003
January 2002
January 2001
Southwest
Air
7.03
11.72
15.10
16.46
14.48
14.95
13.05
18.94
31.33
Eva Air

6.26
15.65
14.30
13.45
15.05
16.83
14.58
Values not available
Values not available


II. EVA Airways Corporation
            EVA Airways Corporation, on the other hand, is principally engaged in the business of providing international air transport passenger and cargo services throughout Asia, Europe, America, New Zealand and Australia.  Its air transportation services include regular flights and regular and irregular charter flights. It also provides air cargo, mail and package transportation services.  It currently flies passengers and cargo to 45 cities around the world.  It operates a mix of 52 jets which includes the recent purchase of 15 Boeing 777s.  The composition of its aircraft fleet is as follows: B747-400 (4), B747-400 Combi (8), B747-400 Freighter (6), MD-11 Freighter (9), MD-90 (5), B777-300ER (8), A330-200 (11), A320-200 (1). 
            EVA Air was first founded in March 1989 and made its maiden flight on July 1, 1991.  Since then, Eva Air has grown into one of the most competitive airlines in the industry with various alliances with major carriers word-wide that helped EVA Air acquire a far-reaching service network that benefits both passenger and cargo customers.  It is a 100% privately owned and a sister company to Evergreen Marine Corporation. 
            Promotion of safe and punctual flights, providing friendly professional services and maintaining innovative and efficient operations remain its stated missions.  Moreover, flight safety remains its top priority as evident with the use of its technologically advanced flight analysis equipment such as Aircraft Condition Monitoring System (ACMS) and Aircraft Communications Addressing & Reporting Systems (ACARS) to track aircraft operations, engine conditions and flight performance. 
            Below as Appendix D is the comparative table showing the Operating Revenue, Gross Profit, Operating Income, and Net Income for EVA Air from 2004 to 2007.  It shows that for the past years, EVA Air has been operating on a loss brought about by its high operating expenses and the slow economic growth.

Appendix D
Fiscal Year
2007
2006
2005
2004
Operating Revenue
93,103,131
93,903,564
88,518,249
82,655,351
Gross Profit
4,584,231
3,568,916
7,659,750
11,540,859
Operating Income
(2,274,420)
(3,337,784)
851,000
4,715,357
Net Income
(1,871,918)
(1,686,585)
1,326,060
3,242,935
Source: Company Profile, http://www.evaair.com/html/b2c/english/eva/Investor_service/Company_Profile/


            Below as Appendix F are the Passenger Data of EVA Air for 2007.  While the aviation industry suffered a major setback in the past year in view of the soaring oil prices and slow global economic growth, EVA Air managed to stay afloat in the business through aggressive marketing strategies.  This has resulted in the increase in the total number of passengers to 5.6% due to demand on European and American routes and an improvement of more than 1% for its loan factor from 77.39% to 75.11%.

Appendix F
Passenger Data for 2007
Number of Passengers Flown
6,181,006
Revenue Passenger Kilometer
24,226,325,937
Available Seat Kilometer
29,785,040,020
Load Factor
81.34%
Revenue(NTD)
 48,956,179,157
Source: Company Profile http://www.evaair.com/html/b2c/english/eva/Investor_service/Company_Profile/

           
            EVA Air estimates that for 2008 its passenger count shall reach 6.41 Million compared to the 6.18 Million for 2007 or a projected growth of 3.7%.  It hopes to achieve their target by introducing new aircrafts in the market which it projects will cause increase in the number of passengers and the strategic deployment of aircraft in key routes to meet market demand.  This strategy has been implemented in 2008 by extending its flight network to major cities in Europe, America and Asia.  Flights in these areas were also made more frequent and convenient to attract more customers. 

Conclusion
            Analysis of the foregoing data shows that both Southwest Air and EVA Air expect to rebound from a disappointing 2008 performance.  A comparison between the two companies show that they operate in different routes and provides different air transport services.  Southwest Air operates domestically while EVA Air operates both domestic and international.  Southwest Air only caters to passengers while EVA Air also provides cargo services.  They have one thing in common though.  They both suffered major setbacks in the past years as brought about by global economic slowdown and rising oil prices which severely affected their performance. Despite the economic difficulty, both companies have managed to weather the storm and remain in business.  However, I believe that EVA Air is expected to rebound faster because of its strategic alliance with key corporations.  As the economy is projected to improve in the coming years, it is to be expected that both companies will be able to recover in the coming years. 

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