In this report strategy management in the Tourism and Hospitality industry specifically, the airline industry was discussed. The key strategic management issue discussed was sustainability. The sustainability issue is a major concern in every business especially the airline industry. The industry is considered to be unsustainable in the long term due to the wide use of natural resources. To become sustainable, airlines need to address sustainability in their business strategies and business model. In this report's sustainability aspects of Australian airlines,
'Virgin Australia' was assessed and discussed viable solutions to achieve sustainability. The viewpoints considered to assess the sustainability were Strategy, organizational operations, and culture with more specific consideration to the environmental management strategy. General discussion about the business model, business strategy, and sustainability aspects are presented and the same is compared with the ongoing practices with Virgin Australia airlines. The report presents the company's environmental performance, how it is addressing sustainability in the business model, and strategies. This report also listed out solutions to sustainability problems.
Table of Contents
The strategic management process helps the organization to take care of changes in business environments by applying strategies, deploy them, and analyze the effectiveness of the implemented management (Johnson & Gerry 2016). The sustainability issue has to be considered by all business organizations for their survival in the market. Airlines play an important role in the global transportation system helping to move people long distances in the shortest time. During 2019,4.5 billion passengers were carried by the world airline(Air transport action group,2019). Also, it enhances economic growth by providing job opportunities and facilitates trade by establishing connectivity. It was reported that 87.7 million jobs were supported worldwide in aviation and related tourism during 2019 (Air transport action group,2019).In the long run, the airline industry is considered as unsustainable due to its high dependency on natural resources. During 2019, Carbon dioxide production from flights amounts to 915 mt which is 2 per cent of the total carbon dioxide emission from human activities.12 per cent of emission from all transport sources is contributed by the aviation industry (Ai r transport action group,2019). There will be continuous growth of the airline industry in the future (Air transport action group 2019) and due to its high dependence on natural resources the stakeholders need to focus on sustainability issues in the airlines. This report is prepared by taking the example of Virgin Australia airline which has taken many sustainability initiatives and practices and tries to analyse the company's strategies and also listed out solutions for better sustainability.
Virgin Australia is based in Queensland, Australia, and is the trade name of Virgin Australia airline private limited a part of Virgin Group. It became a major airline in the Australian domestic market after the collapse of Ansett Australia. The emission by Jet fuel use is their major environmental impact accounting for 98 per cent of their greenhouse gas emission (Virgin Australia,n.d.). Through extensive fuel efficiency programs, focusing on sustainable fuels, and good coordination with partners the company is seeking to minimize greenhouse gas emissions.
According to the United Nations global compact (2014), corporate sustainability is nothing but delivering the long term value in financial, environmental, social, and ethical terms. Sustainability issues addressed by Virgin Australia were looked through its strategy, operations, and culture along with environmental management strategy.
Business model: Business model is the fundamental aspect of the organization. This will allow the organization to understand and design strategic options. Pereira and Caetano (2015), developed a conceptual framework for the airline business. The main features identified by the authors are the creation of market value, hybrid strategies, and revenue generation. In addition to this business model considers multiple processes including external and internal strategies. The business model allows investors to apply systematic approaches to analyse the company using the required number of constitutional components and sub-dimensions (Daft& Albers, 2013). Generally, value proposition-what and whom the value is created, Value architecture-how the value is created by the business, Revenue model-how business will generate the profits, culture& values-external and internal values realized by the company are the major components of the business model. Virgin Australia focuses on providing air travels at a cheaper rate so the business model followed by Virgin Australia is Low-cost model (Virgin Australia, n.d)
Business Strategy: According to Grant & Jordan (2015), the strategy may be of two types of corporate strategy and business strategy. Corporate strategy is done by the top hierarchy of organizations and staff involved in designing corporate strategies. Divisional management is a responsible designing business strategy. Business strategy determines the positions of the business in the industry. The three generic business strategies used by the business are cost leadership, product differentiation, and Focus.
Virgin Australia focused on cost reduction and high return strategy(CAPA, 2015). Due to its costs reduction strategy. Virgin Australia's revenue increased during 1HFY2015(Airline Reportsn.d.).It is focusing on costs, yields and establishing a coherent group strategy
Strategic Management process to address sustainability
UN Global compact corporate defines 5 feature of sustainability which includes adhering to the principle of business, working towards social welfare, commitment toward leadership, reporting progress of the of company’s practices &effort and the local focus of the business.
Virgin Australia sustainable programmes focus on carbon footprint, aircraft carbon and fuel metrics, waste, water, noise and also its sustainability performance depends on their repo with suppliers, investment on people and supporting communities around the world to do business well (Sustainability Report, 2019).
Virgin Australia launched a change in the air programme in 2007. According to Virgin Australia's sustainable report (2019), the organisation has realised the importance of investing in people and building an inclusive environment in deciding the long term growth of the organisation. Virgin Australia's top environment priority is around aircraft fuel and reducing carbon. Some of the key initiatives of the organisation include investing in a new fuel-efficient fleet, improvement in operational procedures and innovation of new carbon fuels. Along with it reducing waste, product and energy consumptions are existing practices towards sustainability(Sustainability Report, 2019). Company's sustainable supply chain focuses on the welfare of people and animal.
Sustainable aviation fuels are one of the biggest things in reducing aviation carbon reductions. Virgin Australia reported an 8% reduction in onboard weight which resulted in less fuel use. This is achieved through the issue of amenity kits on a request basis, Avoiding the use of plastic bags for headsets and protecting them using charity envelops, use of FSC certified wooden materials and paper-based products.
Environmental stewardship strategy in airlines
The environment indicators that apply to the airline industry are climate change, air quality, generation of waste, use of freshwater resources in their operations, energy resources and noise pollution(see Appendix 1). Environmental stewardship in aviation industry involves complete understanding and effective management of environmental risks associated with the industry. There are many ways to address sustainability. According to Eccles et al. (2012) mentioned the role of strong leadership in promoting the commitment of the organisation to address sustainability by way of employee engagement. Petrini and Pozzebon (2010), discussed the importance of communication and training in promoting the importance of sustainability in the business. Other ways to address sustainability as mentioned by the authors include stakeholder management, commitment from management and employees and finally Governance.
In addition to above the environmental stewardship helps in achieving sustainability through balancing between short term target and long term goals, a collaboration of stakeholders and diffusing best practises of sustainability by leaders throughout the business.leaders should able to implement sustainable strategies throughout the geography where the business operates (UN Global Compact,2014).
The following gives the glimpse of how Virgin Australia's to address sustainability
Low-cost business model
Low fare for customers
Discount flights to key destinations
Sustainable aviation fuel
Ths report analyses the sustainability aspects of the Airline industry which is one of the important sectors in the tourism and hospitality industry. Marketing strategy for sustainable airlines was discussed. There are many ways to achieve sustainability in the aviation industry. Virgin Australia addressed sustainability by giving importance to increasing sustainable performance across its business operations. It seeks to minimize greenhouse gas emission through comprehensive fuel efficiency programs, sustainable aviation fuel, destination stewardship, carbon offsetting, and improved stakeholder management. It remains passionate about supporting the future generation of Australia. Though the airlines are following sustainable practices but still huge potential to improve sustainable growth which may help to gain higher competitive status in the market and achieving the status quo.
Some of the additional recommendations that help the sustainable growth of Virgin Australia are
Air transport action group. (2019).Facts and figures. Retrieved 5 October 2020 from https://www.atag.org/facts- figures.html
Daft,J.,&Albers,S.(2013). A conceptual framework for measuring airline business model convergence. Journalof Air transport management,28,47- 54.doi:10.1016/j.jairatraman.2012.12.010
Eccles, R.G., Perkins, K.M., &Serafeim, G. (2012). How to Become a Sustainable Company. MITSloan Management Review, 53(4).Retrieved 5 October 2020 from https://www.atag.org/facts- figures.html
Johnson & Gerry., 2016. Exploring Strategy: Text and Cases. Pearson Education Limited.
Pereira, B.A.,&Caetano, M.(2015).A conceptual business model framework applied to air transport.Journal of Air Transport Management,44-45,70-76.doi:10.1016/j.jairtraman .2015.02.006
Penttinen, I & Pohjola, T. (2008). Choice of a Strategy Tool for Eco-Efficiency.Proceedings from penttinen 2008 choice OA.Retrieved 5 October 2020 from https://www.semanticscholar.org/paper/Choice-of-a-Strategy-Tool-for-Eco-Efficiency- Penttinen-Pohjola/008de3e7bd59527e32e636aefbd06ef852ccbf62?p2df
Sustainability Report.(2019).Retrieved from https://corporate.virginatlantic.com/content/dam/corporate/FINAL_Virgin_Sustaina bility_Report_2019%20LR.PDF
UN Global Compact & Duke University. (2010). United Nations Global Compact Guide to Corporate Sustainability Retrieved from https://www.unglobalcompact.org/
Virgin Australia.(n.d.).Emissions Management.Retrieved 5 October 2020 from https://www.virginaustralia.com/us/en/about-us/sustainability/emissions-management/
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