Aeroflot Airlines Company

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Aeroflot Airlines Background and History 2000.doc

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LONDON SOUTH BANK UNIVERSITY 
 
 
 
 
 
 
 

Business Enterprise  
AHS Faculty 
2011-2012
 

Coursework 1. 
 
 
Student name                           Student  ID  
Adelina Dicheva Chumova       2912605 

 

AEROFLOT AIRLINES
Aeroflot Airlines Company
Analyses and Strategic Plan
 
 
 
 
 
 

 

Aeroflot Airlines Background and History.

OJSC Aeroflot-Russian Airlines  is the biggest  airline in  the Russian Federation .Aeroflot Russian Airlines was also named "The Best Airline Eastern Europe" at the 2011 World Airline Awards, in a ceremony held in the French Air and Space Museum at the Paris Air Show.("SKYTRAX" The World Airline Awards™, 2011).See Appendix 1 for more information.

The company was situated in 1923 and it  is one of the oldest companies in the world. Aeroflot Airlines are  operating domestic and international travelers all around the world.  Nowadays Aeroflot, has became  semi-privatised airline (51%  is owned by the Russian Government)  and  it is also considered as  one of the profitable in the world. This confirms 2006 financial results, from the August Issue of Airline Business that says  "Aeroflot-Russian Airlines is one of the world best airlines" .  In June 2011 Aeroflot  Airline became 10th member of  "THE SKYTEAM".( http://www.skyteam.com/en/About-us/Our-members/Aeroflot/). For more information about the historical facts and the financial situation of the company see Appendix 2 and 3. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Analyses of the company

SWOT analyses

SWOT analyses are really important  because  it can really show   the nowadays and future philosophy,  companies strategy and the plan of the company`s development as it shows the (S) strengthens, (W)weaknesses, (O)opportunities and (T)threats. It was  also confirmed by R.W. Grillin "The starting point in formulation strategy is usually SWOT analyses" (2008) The matrix of the Aeroflot Airline company was  developed  back in1997 and it  shows companies condition as well as it characterise  the point of  external environment. 

SWOT analyses Table for Aeroflot company.

(S)Strengthens: 

1)Geographic position 
2)Extensive infrastructure 
3)Safety indicators 
4)Pilots qualifications 
5)80 Years on the market 
6)Companies recognition. 

(W)Weaknesses:

 
1)Lack of a single info-structure

2)Old  organisational system 
3)Lack of new Technology and new Operational system  
4)Old Airpark 
5)Inefficient operation of some routes 
6)No alternative products and offers for customers 
7)Reputation 
8)Beaurocracy 
9)Low  level of loyalty 
10)Weak  communication system inside of the company. 
11)No service culture 
12)Quality and old Russian aircraft technology 
13) Quality of service and staff training 
 

(O)Opportunities:  
 
1)Russian regions, where local Airlines are mostly used 
2)Opportunity to extend the business, because of the  demand in air travel around the world; 
3)To offer unique experience concentrating mainly on the service culture. 
4)Staff training; Increase the quality of service 
5)Image improvement 
6)Focus on  customers 
7)Opportunity to make better quality of the product 
8)Alliances 
(T)Treats:  
 
1)Low customer  power  of  Russian population (using the airline)  
2)Inflation on the traditional, famous places and resorts, taxes 
3)Government`s restrictions, laws etc. in their own interests ( as 51%  is owned by the government) 
4)Competition with other western Airlines  
5)Lack of trust 
6)Competitors Active actions

It has been used the open company information and details from the official web site (www.aeroflot.com) and Ex General Director  of the company V. Okulova`s comments (http://www.superjetinternational.com/blog/?p=451 )for the SWOT analyses of  Aeroflot company.  
 

Analysing the company using "SWOT" , shows that the company in general has more weaknesses and treats, then opportunities or strengthens. But it does not mean that company immediately collapse or that it can not have better future.  
Analysing thoroughly and in details the Aeroflot company has one of the main " trump card " , which is the advantageous geographical position. E. Huntington and F. E. Williams  where also highlighting the geographic factor as one the most important things running a business (1992). Russia is the connection between Europe and Far East, Middle East, South-East Asia, that is why Moscow is like a "transfer" and "transportation " center, where the capital city meets passengers from all over the Europe.  
 
To be more critical and fair weakness factors such as service quality or old, non-upgraded technology and info-structure is pulling the company many steps down, as sometimes such factors can play the main role, choosing the service. Especially IT level is important because many mistakes can be done , as the information is going through different stages. Similar ideas where discussed by R. Behl in Information Technology for Management book (2009).  
 
Aeroflot company still has an opportunities to extend their business locally. Offering more domestic routes, where the company is going to be able to control and organise their work and service better, dealing just with domestic travelers. As an example American companies does more then 50% of their transportation domestically.(according to bureau of transport statistics 
http://www.bts.nsw.gov.au/
 
The main and the most important threat for Aeroflot company is the competition with other more well known, global and big companies, that operates also on the territory of Russian Federation, that can offer better quality product, variety of customer service and products or cheaper flights.

 
 
 
 
 
 
 
 
 
 
 
 
 
 

PEST analyses

  Facts Mark and status (0-10) Importance(0-10) Total(max 20)
Politics 1)Russian Government sustainability 
2)The character of the political control, struggle
3.5 
 

4.0

8.5 
 

8.5

12.0 
 

12.5

Environment 1)The state of the natural, environmental resources 5 7.0 12.0
Socio-culture 1. Social Security 
2. The criminalization of society
2.0

1.0

8.0

8.0

10.0

9.0

Technology 1. Product creation industry innovations   
2.Marketing innovation 
3.0 
 

4.5

7.0 
 

7.0

10.0 
 

11.5

 
PEST analyses are also very important   for  running  any business. PEST involves Political, Environmental, Socio-Cultural and Technological factors.  As it was said by Anthony Henry 
"PEST shows an organization can detect and monitor weak signals in the hope of recognizing the discontinuities or trends that shape  the environment." (2008).  
 
PEST Analyses Table for Aeroflot Company.  

Political 
Russian Federation political control and sustainability plays a huge role for Aeroflot company, because, as it was said before more than 50% is owned by the government and Aeroflot partly depends on what government decides. Nowadays Russia  is a developing government and it does not give the assurance of sustainability  tomorrow.

Environmental  
As for environment, Russia is famous for its oil resources, the  mark of the status is only 5,  because  these  kind of resources are not lasting forever.

Socio-cultural 
There has always been a Socio-Cultural  barrier with Russia.  It was also discussed in Douglas W. Blum  "Russia and globalization " book,  where  the authors  think that barrier has been made because of the Worlds History and Russian role in it (2008).
 

Technological  
Before the USSR collapsed, there has been a lot of factories and technology made on the territory of the country, it was well known and  USSR where using it (Robert C. Allen "Farm to factory: a reinterpretation of the Soviet industrial revolution", 2003). Nowadays, It is  a fact that there are no famous Russian technological products on the market. As it was said by L. Kosals the main problem of new innovations in Russia can not survive, as the competition nowadays is too strong and " these explains the frequent quick demise of useful innovations, as a result of which enterprises have to revert to old ways" (1994).
 

Michael Porters 5 forces.

 

 
 
 

 
 
 
 
 

Porters 5 forces analyses for  The Aeroflot company. 

1) Rivalry Among Existing Competitors.

From the one side Aeroflot services and products are unique experience, because these are the biggest  Russian airline that are known for  70 years.  From the other side, there are more  better quality service on other airlines, which are also well known  such as British airways, that also offers similar prices and places (outside Russia) . Today it is  also more "fashionable"  to use more  budget airlines , such as Ryanair Airlines or Wizzair. Aeroflot still is able to compete, as the company offers unique domestic routes with  better service then other smaller local airlines.   
 

2) The threat of new entrants.

The level of new entrants in given segment is  quite high, as this segment is quite new and not competitive.  But Aeroflot is renovating their system, technology and the airpark, the company is joining new alliances and  developing, which makes extra complications to enter the segment of the market. Also, the entry of  new airfreight  requires significant investments that will only increase  in future. Because of the   potential growth  of Aeroflot company (see Appendix 3 "Aeroflot performances  Table") probability of occurrence of new competitors decreases.

3) Bargaining power of suppliers.

As it was mentioned before there are a lot of  future plans and strategies of Aeroflot company, that are based on  partnership contracts with more other global alliances and  different powerful aircraft companies. Such strategy and movement  is giving more competitive strengthens to Aeroflot company. Taking into account, that the bargaining power of suppliers  are going to be  partly monopolised,  it complicates the entrance of new competitors on the  Russian market, especially, when Aeroflot is the oldest and the biggest Russian company and it has more advantages, cooperating with other airlines.

4) Bargaining power of buyers

From the one side Aeroflot company is offering a huge  number of domestic routes, that other companies does not do.  That   partly  reduces the bargaining power of buyers,  because there are not a lot of  other "players" in this segment. But there are also different local and small  air companies on different part of Russia, that  can offer cheaper flights.

5) Threat of substitute products or services

The threat of substitute products or services are the most dangerous for Aeroflot company.  Such as other transportation.   Especially the fast express railway service, that connects Moscow and other large cities in Russia. Here Aeroflot company can offer faster transportation and easier way of booking. 
 
 
 
 
 
 
 
 
 

Strategy and recommendations. 

Formula:  AEROFLOT - cozier, tastier, dearer!

According to predictions of passenger transport market (see Appendix 4 )Russian Federation has  really good future. The indicators are growing and there is a possibility for Aeroflot company to develop. To build better future, the company should forget their past and build  new era of modern, well developed  national company.

 
Yesterdays`  Aeroflot is reserved, alienated and  serious. Some of airplanes are "older then your granny", Aeroflot company is just for "people with strong nerves", you will have to eat your meal or steward will punch  you, minimum comfort, minimum service, Aeroflot is just for extreme circumstances!  
 
Tomorrow Aeroflot  is INDEPENDENT experienced, safe, confident, effective, modern, comfortable, global company with  good quality of comfort and service
(See appendix 5 for more information). Aeroflot company primarily is focused on their customers. The staff is trained, friendly and motivated. The  technology is modern and progressive and the product is qualified.

 
 
According to appendix 6, British Airways and Air-France has their brand values, what makes them one of the most successful companies. It is really important for Aeroflot company start to believe in themselves and their future and to create their own values, remembering their better qualities such as : 
 
*Respect 
*Professionalism 
*World Class company 
*Global company 
*Russian company 
*From Russia 
*Reliability 
*Performance 
* Security 

Aeroflot should also think  about changing from industrial to commercial-production mentality  and to provide a common team strategy of the airline company. Orient all departments staff on better knowledge of service. To develop connections with other companies and alliances. To develop and strengthen the companies leadership position in the Russian Federation. To Provide the delivery of passengers in most major cities in the  

world. To be economically available and to provide different quality of services for different customers. To be competitive  and to establish an effective system of relations within the company.  
 
 

 
 

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

1460 WORDS 

List of references 
 

1)Allen, R.C. (2003). Farm to factory: a reinterpretation of the Soviet industrial revolution. Oxford: Woodstock . p34-56.

2)Henry,A (2008). Understanding Strategic Management . New York: Oxford University Press. p230-240.  
3)Blum,W.D. (2008). Russia and globalization: identity, security, and society in an era of change . USA: Woodrow Wilson Center Press. p66-78.

4)http://www.bts.nsw.gov.au/ 
5)http://www.skyteam.com/en/About-us/Our-members/Aeroflot/ 
6)http://www.aeroflot.com 
7)http://www.worldairlineawards.com/Awards_2011/easteurope.htm 
8)http://news.bbc.co.uk/1/hi/world/europe/2986535.stm; http://www.skyteam.com/en/About-us/Our-members/Aeroflot/

9)http://www.kommersant.com/p-11187/r_500/Aeroflot_top 10)http://www.skyteam.com/en/About-us/Our-members/Aeroflot/ 
11)
http://www.ram.ru/ 
12)
http://www.tpub.com/content/cg1996/ns96005/ns960050020.htm 13)http://www.britishairways.com 
14)
http://corporate.airfrance.com/en/the-airline/at-a-glance/ 
15)
http://aviaforum.ru/archive/index.php/t-188-p-5.html 
16)
http://www.fitchratings.ru/media/creditreport/issuers/russia/Aeroflot_report_160610_RUS.pdf 
17)
http://www.superjetinternational.com/blog/?p=451

18)Kosals,L. (1994). Why doesn't Russian industry work? . London: I.B.Tauris and Co.  p44-93.

19)Griffin, R.W. (2008). Fundamentals of Management . USA: Nelson Education. p50-70. 
20)Huntington,E. Williams, F.E. (1992). Business Geography: The Huntington Geography Series. USA: Wildside press. p34-56.  
21)Behl,R (2009). Information Tech For Mgmt . Delhi : Hill Education. p50-68.
 
 
 
 

Appendix 1.  
 
*The Trusted & Respected Airline Awards

Known as the Passengers Choice awards and based on the SKYTRAX global, independent passenger survey of airline standards. 

*The Top Eastern Europe 3 Airlines at the 2011. 

1)AEROFLOT RUSSIAN AIRLINES 
Aeroflot is Russia's National carrier and largest airline. Aeroflot is among the world's oldest airlines and one of Russia's most recognised brands. Through its hub at Sheremetyevo Airport in Moscow, Aeroflot operates flights to 109  destination cities  in 53 different countries. Inside Russia, Aeroflot has six branches - in St. Petersburg, Sochi, Magadan, Krasnoyarsk, Kaliningrad and Vladivostok.
2)  AIR ASTANA 

"Air Astana was founded in 2002 and is now the principal airline of Kazakhstan. It flies 24 aircraft on 51 domestic and international routes and has developed a comprehensive network within Central Asia and the CIS from its twin hubs of Almaty and Astana. It is a joint venture between Kazakhstan's sovereign wealth fund Samruk Kazyna and BAE Systems PLC".

3) MALEV HUNGARIAN AIERLINES 
Malév Hungarian Airlines is the flag carrier and principal airline of Hungary. its main operations at Budapest International Airport. From there, the airline flies to 50 cities in 34 countries worldwide using a fleet of 22 aircraft. Malév is a member of the One world alliance.
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OJSC Aeroflot-Russian Airlines is the biggest airline in the Russian Federation .Aeroflot Russian Airlines was also named "The Best Airline Eastern Europe" at the 2011 World Airline Awards, in a ceremony held in the French Air and Space Museum at the Paris Air Show.("SKYTRAX" The World Airline Awards™, 2011).
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