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The existence of competitors in the airline industry poses a threat to the company; some of the existing competitors include Mesa Air Group, Republic Airways Holdings and Sky West airlines. Competitors pose a threat in that revenues and profits may decline if competition forces lead to a decline in market share, competitors may also reduce their ticket prices resulting into a decline in profitability. (Yahoo Finance, 2011)
Information retrieved from Yahoo Finance:
The above table indicates that Pinnacle Airlines has the lowest revenue values compared to the major competitors in the industry; this indicates that the company's competitors pose a threat to the growth of the company's revenue.
Fluctuations in oil prices:
Oil is a major input in the airline, changes in oil prices means that this increases the cost of production reducing profitability. In the last few months oil prices has increased and the company has been forced to bear these costs. When oil prices increase the cost per flight increases and given that the airline is in a competitive market increasing prices may result into a decline in its profits. Therefore, increases in oil prices reduce the airlines profits.
From the chart, it is evident that oil prices have been unstable and keep fluctuating over time; this means that the airline may be negatively affected by these unpredictable fluctuations.
There is a solution to the fluctuations in oil prices, the company may decide to hedge oil prices to reduce the impact of fluctuations in oil prices, this provides the company with the opportunity to have predictable fuel costs in future and therefore profitability will not be negatively affected in future. There are companies that undertake oil hedging
The revenue growth according to Yahoo Finance indicates that the company had the highest revenue growth rate compared to its competitors; the following table summarizes the results:
From the table above retrieved from Yahoo Finance, revenue growth for the year 2010 was 39.40% compared to its competitors with -34.30%, 2% and 7.70%. This is a strength indicating that the company is working to increase its revenue levels to realize higher profits.
2. Share prices and earnings:
The other Strength is that the company has been able to maintain positive earnings per share, from yahoo finance the following are the results:
From the above table it is evident that the Company was able to have a positive earning per share compared to the other airlines that include Mesa Airline and Republic airways. It is a strength in that the company will in future be in a better position to attract investors with its high earnings per share; this means that the company will easily raise capital for expansion if needed in future. (NASDAQ, 2011).
From the number of employees and revenue realized it is evident that the revenue per employees is lower compared to its competitors, the following table summarizes the results:
Mesa Air group has a revenue value of 1.06 billion and has only 4,113 employees, on the other hand Pinnacle has approximately double the amount of employees(7,478) and the revenue is lower (1.02 Billion) compared to Mesa air group. This is an indication of a weakness in that the company is not properly able to utilize its resources to generate revenue.