Part 1
Consumer preferences are one of the characteristics that affect market mechanisms. These are habits, traditions and taste characteristics of the buyers. Preferences are the most unpredictable and variable factor. The correct choice of airline for flights to any country is the first step on the way to a successful holiday. Passenger chooses airline based on the ticket price and departure time. In order to avoid unnecessary problems and make the right choice, it is necessary to know inside information about the state of security and the economy of the selected carrier. Finally, consumer preferences also come from having access to most objective information about a particular carrier for each passenger (Hollensen, 2014).
Aviation in Canada is well developed. The largest airports in Canada are Vancouver, Montreal, Toronto and Halifax. Canadian Airlines are well-known airline. In northern Canada, the aircraft is the primary means of delivery of goods, while the rest of Canada uses a widely developed network of highways. According to statistics, every second Canadian has a personal car. Canada has the most extended ocean coast. St. Lawrence Seaway is the common name for the channel system that allows ocean-going vessels from the Atlantic Ocean to penetrate into the interior of the continent down to Lake Superior. Water transport can be used in Canada only during the period from May to September. In the winter, ice and snow pose a big problem for railway and road transport. However, in Canada, snow cars, aviation and subway are widely used that successfully compensate for the problems associated with bad weather. As for complements for air transport, they include spare parts for aircrafts, aircraft maintenance, fuel, catering, etc. (The Canadian Encyclopedia, n.d.).
Concerning non-monetary costs, which affect the demand for flying, the following should be considered, namely customers’ incomes. In case they increase, the passengers will allow themselves to buy ticket of higher class, for example. Also, depending on the season, the customer can choose substitute of airline. However, the reputation of the airline as safe carrier is one of the most important non-monetary factors, which can affect the demand. Speaking about uncertainties, the level of political stability in the country, the level of terrorism as well as economic situation in Canada can be those uncertainties, which may surround future demand (Hollensen, 2014).
Cost management, especially in the conditions of the market, is the pivotal direction of the entire enterprise management system, as this is where all the information collected on the actual costs, and thus lays the foundation for the actual profit. Almost a third part of the cost structure accounts for maintenance at the airport. The composition of air navigation charges include fees for the provision of meteorological information to aeronautical users, which, in accordance with ICAO and WMO regulatory documents, should be made on a reimbursable basis. Variable costs include payroll deductions for aviation-related staff, commissions of sales agents and flight catering. Fixed costs consist of payroll with deductions, repair and maintenance of aircraft fleet, aircraft leasing, insurance and other (depreciation, advertising, training, maintenance of buildings, services, reservation systems, etc.). Thus, the cost of special transport civil aviation fleet, significant fuel, labor and other resources associated with its operation, which require increasing effectiveness of its use at airports, are most likely to dramatically change in the future (Rodwell, Coulby, Carney and Mott, 2010).
Canadian airline has oligopoly market structure. As of 2014, there were numerous air carriers operating in Canada, nevertheless, the majority of them were small local airlines, even small local cargo carriers. Buffalo Air, for example, was one of them, which featured in the well-known TV show Ice Pilots. However, there were some quite large airlines in Canada, namely Air Canada, Westjet, Sunwing Airlines, Air Transet, Cargojet, Canadian North and Canjet (Before It’s News, 2014). There are high barriers to entry the industry as it requires significant funds. There is high interdependence of companies-oligopolists with each other, which makes their behavior strategic. Company’s strategic behavior means that by changing its prices, quantity and (or) the quality of the goods, it must take into account the possible response of competitors (Hollense, 2014). In general, consolidation allows carriers to get rid of excessive competition, optimize the route network, organizational structure of the company, the structure of terrestrial services and to strengthen its position in the market. To do this, airlines continue to enter into code-sharing agreements, acquire the bankrupt airlines and enter into alliances (Rodwell, Coulby, Carney and Mott, 2010).
Cost optimization is a complex process, requiring the staff of the enterprise comply with planned expenditures of labor, material and energy resources, efficient use of the equipment, finding ways to save resources. Reducing production costs is achieved as a result of the use of resource-saving technology for saving materials and energy, the release of workers; the elaboration of an optimal technical development strategy that ensures the rational level of expenses for creation of the technical capacity of the airline; improving the organizational level of production, entailing a reduction of working time loss, restatement of the old tariffs; rationalization of the organizational management structure and, therefore, reducing management costs, improvement of its efficiency; and the use of machinery and equipment, especially expensive in cost-effective areas and modes (Rodwell, Coulby, Carney and Mott, 2010).
References
Before It’s News (2014). Canada’s largest airlines by fleet size. Retrieved 14 February 2014 from http://beforeitsnews.com/opinion-liberal/2014/02/canadas-largest-airlines-by-fleet-size-2477332.html [Accessed: 9 February 2016]
Hollensen, S. (2014). Marketing Management: A Relationship Approach, 3rd ed. New York: Pearson.
Rodwell, J. F., Coulby, A., Carney, Th. and Mott, J. (2010). Essentials of Aviation Management: A Guide for Aviation Service Businesses. 7th ed. Miami: Kendall Hunt Publishing.
The Canadian Encyclopedia (n.d.). Transportation. Retrieved from http://www.thecanadianencyclopedia.ca/en/article/transportation/ [Accessed: 9 February 2016]
