SWOT ANALYSIS OF TURITEA AVIATION

QUESTION
TURI TEA AVI ATI ON
AN AVI ATI ON MANAGEMENT CASE STUDY
BY J OHN MURRI E,  SCHOOL OF AVI ATI ON,  MASS EY UNI VERSI TY
This case study is purely fictional but does make use of
information from actual Airlines that operate, or have
operated, in the New Zealand market.  Consequently,
the events it describes are similar to, but diverge
significantly from actual historical events in this
country.  The case study is intended solely as a learning
activity and is in no way intended to be an accurate
historical overview of the New Zealand aviation
industry.
COMPANY OVERVIEW
Turitea Aviation was founded in 1975 by
former Air New Zealand pilot Desmond
Scott under the name Sky-High Flight
Training.  Training students up to
Commercial Pilots Licence standards the
company grew slowly and by 1980 had 10
staff and 4 aircraft.  The company’s early
years coincided with a national economic
boom and its operations soon expanded.  By
1985 the company had been rebranded as
Turitea Aviation and was flying a range of
charter and freight services in addition to
its flight training activities.  In 1986 the
company began its first scheduled
passenger services using 10-seat Piper
Chieftain’s that flew between Palmerston
North and several smaller urban centres not
serviced by the company’s larger
competitors.
EARLY GROWTH
The company’s operations grew rapidly
during the late 1980s and early 1990s as it
filled gaps left by the collapse of other
carriers.  Demand for air travel increased
significantly throughout the country, on the
back of a large increase in Trans-Tasman
tourism.  By the beginning of the 1990s the
company had expanded its charter and
scheduled passenger services adding
several extra aircraft to its fleet.
Engineering services were also added to the
company’s operations necessitating the
building of its first purpose built hangar;
this was named after the company’s founder
who had passed away in 1988.
FIRST MODERN AIRCRAFT
In 1993 the company took delivery of its
first Turboprop aircraft adding 18-seat
Embraer EMB-110s, and later 34-seat Saab
340’s to its fleet.  These formed part of an
expanded route network that covered most
of major towns and cities throughout the
country.  Flight training and charter
operations also grew during the same
period; the company using its flight school
to provide most of its pilots.  Major
milestones occurred in 1996 and 1997
when Turitea took delivery of its first Jet
aircraft, and started its first Trans-Tasman
flights.
The first of what would eventually become
10 Boeing 737’s joined a company that was
by 2000 the 2
largest commercial airline,
and the largest aircraft operator in the
country.  New permanent bases were
established outside of Palmerston North,
first in Auckland but later Wellington and
Christchurch.   By 2000 Palmerston North
was home to a large engineering division, a
successful flight training school and the
majority of Turitea’s charter operations
while the main centres housed its scheduled
passenger, and other smaller charter
services.
nd
OPERATIONAL DIFFICULTIES
The company’s growth was not without
problems however.  Its rapid rise from
small charter operator to large airline had
been met with stiff opposition by the
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incumbent Air New Zealand and other
Trans-Tasman airlines.  Government
regulators had taken a serious look at its
growth, and the company often struggled to
recruit enough pilots to meet its operational
needs.
The recruitment of pilots straight out of its
own flight school was paralleled by the
recruitment of managers from within its
own ranks.  While some of the company’s
management completed qualifications in
Aviation Management at the local University,
most relied on experience and intuition.
Attempts to recruit external experts were
only moderately successful and by 2003 the
company was suffering from a lack of expert
knowledge in several critical fields.
Most of the company’s passenger services
were simply continuations of services taken
over from failed competitors, or ad-hoc
additions made on the spur of the moment.
In short Turitea’s decision making,
operations, planning and support systems
were inferior to those of other airlines.  A
large number of scheduled services were
unprofitable and retained purely to give
senior pilots (many of whom were also
senior managers) the chance to log flight
hours.  Charter services which operated on
tiny profit margins followed the same path,
and were regarded as an informal part of
the flight training programme rather than a
business venture.  While improvements
were made by key individuals the overall
organisation of the company was poor.
Turitea’s unofficial motto seemed to be
“Growth Solves Everything”, and the firm’s
logo adorned aircraft that flew on the most
complex network in the country.  This
network like the firm’s management was
confused, haphazard and unsure of itself.
The company even lacked a definitive
strategic plan and its separate divisions –
flight training, charter services, engineering
and scheduled passenger – functioned
almost as separate firms.  The large,
extremely diverse aircraft fleet included
everything from single engine Cessna’s up
to highly complex Boeing 737’s.  A large
number of core services were unnecessarily
duplicated, particularly across its four
major bases; its operations over staffed and
more importantly its cost structure was
much higher than its competitors.
ENGINEERING SUCCESS
The one bright spark in the firms operations
was its Engineering Division.  This had
grown in tandem with the charter, flight
training and scheduled passenger services
into an efficient and highly profitable
service.  By 2004 Turitea Aviation
Engineering operated out of a large purpose
built facility at Palmerston North Airport,
provided services to Air New Zealand and a
number of other operators, and employed
around 100 staff.  Differences between
Engineers and Pilots may have played some
part, but in contrast the Engineering
Divisions management was highly
organised and more importantly well
qualified; the Division more able than other
parts of the company to attract qualified
management personnel.
TIME OF CRISIS 2004-2011
In 2004 rising fuel costs and falling prices
both domestically and internationally hit
the Aviation industry hard.  Turitea’s large
unprofitable domestic network and high
cost structure suffered far worse than its
competitors whose numbers were on the
rise.  Moves to fully liberalise air travel
across the Tasman had started to increase
during the late 1990s.  By 2004 strong
suggestions that the Australian and New
Zealand Governments would re-classify
Trans-Tasman flights as domestic for
registered flag carriers sparked off a wave
of investment and new entrant airlines.
Many of these quickly folded, but others
particularly Low-Cost operators began to
exert increasing dominance.
In this increasingly competitive, but also
highly promising environment, Turitea
Aviation finally reached crisis point.
Whereas the global trend was for airlines to
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rationalise, consolidate and cut costs in
such circumstances Turitea did the opposite;
a reluctance to dispose of old assets and a
strong ‘Jobs for the Boys’ culture actually
saw the company expand.
The final straw was the decision to adopt
the ‘Hub’ network concept widely used
throughout Europe.  Turitea’s management
argued that shifting its operations to a
single airport would save it money, improve
efficiency and allow it to monopolise air
travel out of that location.  However, the
location chosen – Wellington – was too
small, already congested and lacked the
infrastructure necessary to cater for
Turitea’s huge aircraft fleet.
Further problems were caused by friction
between the company’s senior managers,
who were nearly all former or current pilots,
and the engineers.  The move to the Hub
was rumoured to be part of an attempt to
contract out non-flying parts of the
company.  Cabin crew and ground staff also
suffered from low morale and high turnover
rates.  Consequently, just as the company
began to invest millions in creating its new
‘Hub’ its staff relations sunk to an all-time
low.  Customer service ratings fell as a
result and the airlines new competitors
began to eat into its market share.  A failed
attempt, in 2005 to re-launch the TransTasman

service as a low cost full service
airline added to the company’s woes.
In August 2005 Turitea also suffered its first
fatal accident when an aging Embraer
EMB110 crashed in bad weather near
Napier killing 5 people.  The resulting
investigation found that while maintained
to a high standard, the training of the
aircrafts pilots was poor and that the
Airlines operational procedures were
deficient in several areas.
The crash and resulting bad press meant
that by 2006 with tens of millions invested
in the hub move and in supporting the
Trans-Tasman low cost operation the
company was close to running out of money.
When non-aircrew wages were
subsequently cut Engineers and Cabin Crew
already unhappy went on strike.  The strike
dragged on and off for two months before
an agreement was finally reached.  However,
the damage caused was catastrophic and by
years end Turitea was only a few weeks
away from bankruptcy.
SURVIVAL MODE 2007 – 2011
In 2007 the Labour Government worried
about the potential collapse of the countries
2
largest airline went to Turitea’s rescue.
A series of interim loans kept the company
afloat long enough for it to downsize its
fleet, and close down some of its
unprofitable operations.  The hub move was
terminated, the resulting losses written off,
and in a multi-million dollar coup the Flight
School entered a partnership with the local
University renaming itself the Massey
Turitea School of Aviation.  By 2011 Turitea
was still, in terms of destinations served
and routes flown, the 2
nd
largest airline in
the country.  But it was no longer the
dominant market leader it once was.
Furthermore many of its key problems
remained unsolved and management
seemingly unable to figure out what to do
next.
3

nd
It was into this environment that a new CEO
was appointed in a last ditch attempt to
save the company.  A former Turitea Pilot
Jean Batten had flown charter and
passenger operations for the airline in the
mid-1990s.  She subsequently left the
airline and spent a decade working in
Europe moving from the cockpit to the
management table.  She now returned to
New Zealand highly experienced and
extremely well qualified, lured by the
challenge of fixing the airline with whom
her aviation career had begun.
*****
THE STRATEGIC
ENVIRONMENT
The following section outlines, in brief, the
environmental conditions faced by Turitea
at the beginning of 2012.  This particular
section is based on ‘Porters 5-forces’ model
of the competitive environment.  This
particular concept is covered in paper
190.211, but in simple terms argues that
any company’s competitive position (and
market success) depends upon the balance
of five forces. Those forces are:
1. Strength of New Entrants.
2. Buyer Power.
3. Supplier Power.
4. Product & Technology Development.
5. Competitive Rivalry.
The effect and strength of the first four
forces combine to determine the size of the
fifth, the amount of competition in a market
place.  Buyer and Supplier Power in this
context refers to the ability of either to
dictate the prices companies charge (to
buyers) or pay for (to suppliers) goods and
services and the components needed to
produce them.
NEW ENTRANTS
The threat of new airlines entering the
market had arisen several times throughout
Turitea’s history.  In fact in its early days the
company was one of the most aggressive
new entrants in the country.  Its ability to
take over the operations of failed operators,
willingness to expand and a legal
environment that allowed it to do so were
all key factors in its initial success.  Only in
one instance did it have to face off and beat
a serious new competitor.
But by 2012 however, with Australia and
New Zealand operating essentially as a
single Aviation Market the threat of new
entrants was far more significant.  In the
current environment it is now far easier for
new airlines to start up operations and
compete directly with the incumbent
airlines.  However, Turitea possessed two
clear advantages in that it was listed, along
with Air New Zealand, as one of two New
Zealand flag carriers in the countries
bilateral agreement with Australia; and the
small size of the New Zealand domestic
aviation market.
BUYER POWER
Consumer or buyer choice and the ability to
switch products are key determinants of a
firm’s ability to retain market share.  In its
heyday Turitea’s only domestic competition
for domestic passenger services came from
Air New Zealand.  However, from 2004
onward this changed and now a number of
new Low Cost Carriers are now operating
within the New Zealand domestic scene.
This gives consumers more power to switch
companies and to dictate the prices they are
willing to pay for air travel.
Flight training services and the demand for
them have also expanded in New Zealand
with a plethora of new flight schools
opening around the country.  However,
Turitea retains one advantage in that its
graduates can move directly into flying jobs.
Likewise Aircraft Engineering services
remain highly specialised, and most
operators in New Zealand are customers of
Turitea unable, and/or unwilling to go
elsewhere.
SUPPLIER POWER
The rapid growth in Trans-Tasman travel
increased the number of New Zealand cities
wanting to have an international airport.
Consequently, many have invested millions
in building and supplying airports and
infrastructure to support such services.
Increased competition also means that
firms such as catering companies are
finding it harder to make a profit.  Airline
outsourcing has seen most chop and change
the suppliers of their non-essential services
regularly.  Only the supply of Engineering
services remains an area in which Suppliers
retain the ability to dictate to Airlines.
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PRODUCT & TECHNOLOGY
Air New Zealand has won several awards
for its innovative customer service, and
been named airline of the year several times
over.  Other companies, such as Jet Star and
Singapore Airlines have continued to
modify their products and adopt new
methods of doing business.  Aircraft
manufacturers also seem to be more willing
to customise aircraft and the range of
alternatives available to airlines is
increasing.  Although this also has the effect
of reducing their power as suppliers given
the increased choice airlines have between
aircraft models.  In this environment the
relative stagnation of Turitea’s innovative
processes has been in marked contrast to its
competitors.
COMPETITIVE RIVALRY
In 2012, the New Zealand aviation market
remains small and its growth has slowed
since the 2008-9 recession.  More airlines
now compete in the domestic market place
than at any time in Turitea’s history.  More
importantly the lucrative Trans-Tasman
market is now one of the most competitive
in the world.  But like the rest of South-East
Asia and the Pacific trends in the region
remain upward. Passenger numbers
continue to increase, as does demand for air
freight.  These in turn increase demand for
trained cabin crew, engineers and pilots and
for engineering services. An important
downside for airlines however is the
increasing expectation, by consumers, that
air travel should be a cheap form of travel.
This is putting huge demands on airlines to
manage their cost structures and to conduct
efficient airline planning.
*****

5

STUDENT ACTIVITY
Assume the role of Turitea Airline’s new
CEO and help the company devise a new
strategy to improve its current position.
TASK 1 – MISSION STATEMENT
To complete this task you must read the
case study and then:
1. Devise a simple mission statement that
outlines who and what the company
should stand for.
2. Write a set of clear, concise, and
measurable objectives that will ensure
the airline achieves this mission (no
more than 6).
KEY TIP
There is a guide to writing a mission
statement on STREAM which I strongly
suggest you read before completing this
activity.  Also when writing your objectives
use the SMART guide.  Keep them:
• Simple.
• Measurable.
• Achievable.
• Relevant/Reliable.
• Timely.
Anything longer than 3-4 sentences for
either the mission statement or each
objective is too long.
TASK 2– SWOT ANALYSIS
To complete this task you must conduct a
detailed SWOT Analysis of Turitea Airlines
using the process outlined in your lecture
notes and course materials.  Your SWOT
analysis must:
1. Identify and list the key strengths,
weaknesses, opportunities and threats
faced by Turitea Airlines.
2. State in concise terms why each of the
factors you have identified is a strength,
weakness, opportunity or threat (No
more than 2-3 sentences per factor).
KEY TIP
It is important here to only identify the key,
or most important, strategic factors.  Don’t
list everything.  Also remember that it is
entirely possible for something to be both a
strength and a weakness, or an opportunity
and a threat.
Remember also that completing the SWOT
analysis may result in you having to adjust
the Mission Statement and Objectives
developed in Task 1 – this is perfectly OK.
TASK 3 – STRATEGIC ALTERNATIVES
To complete this task you must briefly, in
no more than 500 words, describe at least
two strategic alternatives that you think
Turitea Airlines could adopt to address the
findings of your SWOT analysis and which
achieve the mission and goals you
completed in Task 1.
KEY TIP
You do not need to provide detailed
descriptions for how your strategic
alternatives should be implemented; that
comes later in the strategic process.  Rather
focus on general ideas that outline the type
of strategy the airline should follow why it
should, and its key components.
*****

SOLUTION

TASK 1 – MISSION STATEMENT

Mission Statement

Turitea Aviation is the consecrated towards its travellers. Our prime objective is to provide high quality services to our eminent customers and to provide best working place to our employees.

Objectives

• Creating an effective managerial team
• Enhance customer relations
• Working for benefit of employees

TASK 2 – SWOT ANALYSIS

STRENGTHS

Turitea Aviation is the second largest airline in New Zealand covering most of major towns and cities throughout the country. It owns the most advanced engineering division. Engineering services are the only services in which suppliers still dictate the airlines. Moreover, most of the operators in New Zealand form the customer base of Turitea’s engineering services division. These operators are not able to or in other words are not willing to go anywhere else. This is a big strength of Turitea.Turitea’s flying school graduates can move directly into flying jobs. Though there is a substantial increase in the demand for flight training services in New Zealand but graduates from Turitea’s flying school get the advantage of getting direct job into the aviation industry. Company enjoys financial backing of the Government. In 2007, the Labor Government has already rescued Turitea by providing the interim loan to the company.

WEAKNESSES

Most of the managers in Turitea Aviation are its pilots only who came from its pilot school only. Thus these managers lack the key managerial skills. As a result there is lack of proper planning, decision making, operational efficiencies and controlling in the company. In an airline, employees play an important role as they are the one who serve the passengers. In case of Turitea Aviation, morale of its employees is at very low level. They need to be encouraged and motivated in order to make sure that they give their best to serve the passengers. Turitea is highly diversified aviation company. It is competing with giant as well as local small airlines, engineering support providing companies and pilot training schools. There is no clarification regarding its strategic direction and brand in the market.The key reason behind the low profitability is the high cost structure of the company. This high cost structure along with low capacity utilization is leading to financial problems for the company.

OPPORTUNITIES

Aviation industry globally is experiencing deregulations there by bringing more opportunities and business for the companies internationally. These policy changes are opening new doors for the airline companies. Moreover spending habits of people worldwide is also changing. Earlier, air travel was considered luxurious activities but with the change in time it is becoming a routine mode of transportation.

THREATS

As the growth potential in the aviation industry is increasing so is the competition. New entrants are trying their best to tap the market by introducing new and innovative way of providing services.

TASK 3 – STRATEGIC ALTERNATIVES

Two main strategic alternatives that Turitea Airlines need to adopt are people management and cost management

People Management

An effective management plays a role of a bridge between an organisation and individuals be it its employees or customers. Though, Turitea Aviation has a skilful Engineering division but it lacks the expert knowledge in the most critical field and that in “management”. It is the effective management which can build an effective planning, decision making, operational and controlling environment to ensure that the quality of service product that is being delivered gives value of money to its customer and also boost employees’ morale and confidence. Non-human resources come into existence only through human resources. Thus, in case of Turitea Aviation, people management is very crucial strategic alternative.

Brand Building

In the time of competition, it is very important to understand the taste and preferences of customers. Failure on this front may lead to loss of market share to the competitor. Thus Turitea aviation need to implement new, innovative and effective measures to enhance its market share and lost reputation.

References

Applications in the Airline Industry, [online] available at: http://www.ashgate.com/pdf/SamplePages/Modeling_Applications_in_the_Airline_Industry_Ch1.pdf [Accessed 09 April 2012].

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