Bài tập nhóm Critical Thinking.pdf

Bamboo Airways has been keeping flight routes that are nearly unprofitable or routes that aren’t common if the tourist season doesn’t occur.. Moreover, by renegotiating with creditors an

Table of content

I Executive Summary………2

II Ideal Scene………3

III Ishikawa Analysis………5

1 Evaluating fuel price………6

2 Low demand for traveling by airplanes……… 7

3 Unprofitable flights and airways………8

4 Costly expenses related to operating activities……9

IV Solutions……….10

1 Change the flight network……….10

2 Restructure aircraft fleet……… 11

3 Requesting financial assistance from creditors….12 4 Increase demand for traveling by airplane by special offers……… .13

V Gantt Chart……… 13

VI Resources ……… 1 4 1 Service……… 14

2 Fleet………16

Executive Summary

Bamboo Airways is a Vietnamese aviation corporation, which was founded in 2017 by FLC - its mother company, aimed to become a luxury airline with reasonable prices for Vietnamese people It has somewhat lived up to the public expectations as it constantly is the top airline with least delays, with the punctual departure rate standing at 92.7% in 2023 (KC, 2023) Despite gaining positive reviews from the passengers, Bamboo Airways still experiences losses in many years To tackle this situation, our group would like to suggest some solutions that Bamboo Airways can consider to apply to their company

Bamboo Airways has been keeping flight routes that are nearly unprofitable or routes that aren’t common if the tourist season doesn’t occur By removing unprofitable flight routes, particularly to international destinations, the airline can save a major amount of budget on operational costs, particularly $266,250 Simultaneously, focusing on expanding into lucrative markets such as China, India, and Southeast Asia allows the airline to gain profits in areas with high demand for air travel These changes are expected to receive more customers by 20%, increasing Bamboo Airways' revenue by approximately $1,065,000

Restructuring the aircraft fleet is also essential since it plays a critical role

in innovating the airline By stopping utilizing some aircraft ,specifically two Boeing 787s, one Airbus A321, and one Airbus A320, Bamboo Airways can save around $6,550,000 in renting costs and an astonishing

$114,251,161 in fuel expenses Reducing crew members in accordance with changes in the number of aircrafts can also effectively reduce operating costs, as it can help save an amount of $150,000

Moreover, by renegotiating with creditors and aircraft lessors to have more favorable conditions and financial support, Bamboo Airways can significantly reduce its fuel and leasing expenses (Nam, 2023) By doing

so, annual fuel costs can be reduced by around $39,331,392 and leasing expenses can be saved by $6,000,000 In the passenger service segment, revamping the Business Class service by replacing exclusive lounges with shared ones would save Bamboo Airways a staggering $2 million, while competitively pricing tickets in both Economy and Business class helps in attracting more travelers, combining for a total of

$2,255,700

The most important issue that causes the most detriments to Bamboo Airways is the high fuel expense The war between Russia and Ukraine caused scarcity in fuel supply, hence lifting up the prices and fuel became less affordable for airlines around the world Due to this, Bamboo Airways should reach out to creditors to request support in this situation If creditors can assist the firm on 20% of annual fuel costs, the airline could save around $39,331,392 annually

In summary, with these strategic implementations, Bamboo Airways not only can save substantial costs but also effectively generates revenue significantly Particularly, the combined potential costs saved and revenue gained could be listed at $179,880,753

passenger numbers, by expanding services and increasing flight frequencies on high-demand routes, both domestically and internationally The goal is to secure at least 40% of Vietnam's domestic market share,

up from the current 15% (Nguyen, 2023), and to establish a significant presence in the Southeast Asian international market by adding more direct flights to key cities across Asia and beyond

The fleet will be increased to over 100 aircraft, matching Vietnam Airlines (Tuyet, 2023), the current market leader, and focus on acquiring fuel-efficient and longer-range models to support our expansion and boost operational efficiency In pursuit of excellence, Bamboo Airways will strive for top ratings in airline quality standards, including achieving Skytrax’s 5-Star Airline Rating (Certified Airline Rating | Skytrax, n.d.), and we plan

to revolutionize in-flight services and customer experiences by integrating the latest technology for entertainment and comfort Operationally, Bamboo Airways will maintain an on-time performance of over 97%, emphasizing reliability in our operations We will enhance logistical operations and crew scheduling to maximize efficiency and minimize downtime Our target is to achieve an ideal annual revenue of

$2,542,000,000, positioning Bamboo Airways not just as a market leader

in Vietnam but as a distinguished name in the broader Asian aviation market

Ishikawa Analysis

Elevating fuel price

The Russian-Ukrainian war has caused numerous detriments globally in many fields, such as agriculture products, and fuel is unarguably the most damaging aspect as it is one of the most costly expenses incurring within many corporations In 2022, Jet A1 - exclusive fuel for airplanes, was listed at $93,2 per barrel and increased to $100,3 per barrel in the next year This situation could be problematic to Bamboo Airways as they exploit various types of airplanes, which have different fuel-consuming levels listed in the table below

Airplane type Fuel consume d/ Flying hour Airbus A320 2700 Liters/ Flying hour Airbus A321 3100 Liters/ Flying hour Boeing 787 5700 Liters/ Flying hour Embraer E190 2800 Liters/ Flying hour

The statistics above illustrate that the average fuel consumed of each airplane is 3575 liters per flying hour Moreover, some news articles report they operated 52,000 flights in 2023, increasing from 38,600 flights in

2022 and the average commercial flight duration might be around 2.43hours (Bianfable, 2019) With the information above, it can be computed that the budget spent on fuel in 2022 was $284,963,654 and the figure for

2023 was $196,556,958, meaning that Bamboo Airways experienced

$88,406,696 in revenue loss

Low demand for traveling by airplanes

During economic recessions, people often prioritize essential expenses and cut back on discretionary spending, such as travel This shift in consumer behavior is evident in the recent global and regional economic downturns that have started to impact Vietnam With the tightening of budgets, individuals and families are re-evaluating their spending habits, particularly in areas that can be considered luxurious, such as air travel (Ng c, 2023)ọ This trend has led to a decrease in demand for more expensive forms of transportation, including airplane flights When money becomes tighter, people start looking for more cost-effective ways to meet their needs, including travel They may opt for alternative methods that offer better value or postpone non-essential trips to manage their financial resources more efficiently

As a result, the demand for air travel decreases, and individuals choose more affordable alternatives like car, bus, or train travel Thanks to the completion of a series of highway projects, traveling by car within a distance of 500 km is no longer an obstacle Therefore, the tourism map has shifted towards increasing short-term, weekend, self-arranged family travel instead of long-distance air travel In addition, the railway industry has also improved service quality and attracted a certain number of passengers on long journeys (Ng c, 2023)ọ

After the quarantine period in 2021, the trend for traveling by airplane rocketed with the number of passengers in 2022 fourfolds the previous year, particularly at 9,512,300 In the first half of 2023, Bamboo Airways carried 3,896,801 passengers on its airplanes (Vnexpress, 2023) Following the declining tendency of traveling by plane resulting from a post-pandemic pullback, the number of Bamboo Airways passengers also reduced a noticeable amount to 8,437,000 at the end of 2023 compared

to the figure for 2022 Hence, the revenue of Bamboo Airways in 2023 can

be reduced by $2,130,000

Unprofitable flights and airways

Some airways have a small number of customers When a route has a small number of customers or consistently low passenger numbers, it becomes financially unsustainable for airlines to continue operating it Some of the niche routes are only crowded during the tourist season (Dien 2023) Niche routes have fewer passengers on regular days outside of the

peak travel season because the demand for travel to specific destinations

is not consistent throughout the year

Operating flights to these unprofitable markets results in substantial losses Factors like a low load factor of about 50 60%- and lower fares due

to decreased demand contribute to these challenges With variable costs, including crew, maintenance, and airport fees, making up about 50% of the total operational costs, and fixed costs remaining constant regardless

of flight frequency, the financial strain becomes evident Assuming an average loss of about $146 per flight due to these inefficiencies, and with

an average of one flight per day per aircraft to these unprofitable routes, the total number of such flights per year across the fleet adds up to 3,650 (Di p Anh, 2024)ệ This results in an annual financial loss for Bamboo Airways of approximately $532,500 due to these underperforming routes Costly expenses related to operating activities

In 2023, Bamboo Airways incurred significant expenses amounting to

$10,650,000 for operating activities, specifically related to the maintenance of their fleet of 12 aircraft The fleet consisted of 2 Boeing 787s, 3 Airbus A320 planes, 3 Airbus A321 planes, and 4 Embraer E190 planes (Wikimedia, 2018) with its annual costs illustrated below

These expenses were primarily associated with the upkeep and servicing

of the aircraft, ensuring they remained in good condition for safe and efficient operations Additionally, the costs also encompassed various other services essential for the airline's functioning

Solutions

Change the flight network

Bamboo Airways can improve its financial situation by restructuring its flight routes (VNA, 2023) This means stopping flights on routes that don't make enough money, especially those to foreign countries By doing this, the airline can save about 20% of its costs, which is around $1,065,000 They can also reduce service on routes that are only busy during tourist seasons, saving an additional 5% of costs, or about $266,250

At the same time, Bamboo Airways has a chance to expand into more profitable markets like China, India, and Southeast Asia, where people constantly want to travel (Bamboo Airways charts new course,

Airplane type Cost/ Airplane Quantity Total cost/ Airplane

pushing ahead with restructuring - Bamboo Airways, 2023) By opening new routes to these places, they can fill more seats and make a lot more money They expect that by doing this, the number of filled seats will increase by 20%, which could bring in an extra $1,065,000 in income

To summarize, by stopping unprofitable flights and focusing on popular markets, Bamboo Airways can save about $1,331,250 from spending less and make an additional $1,065,000 in income These changes in the flight routes and focus are important for making the airline's finances stronger and helping it grow in the competitive aviation industry

Restructure aircraft fleet

Bamboo Airways can take significant steps to restructure its aircraft fleet

to boost cost efficiency by stopping the use of two Boeing 787 airplanes, along with one Airbus A321 and one Airbus A320 (Kim 2023) By discontinuing these leases, the airline will save approximately $5,000,000

on the Boeing 787s and an additional $1,550,000 from the Airbus aircrafts The total savings from ending these leases will compound to $6,550,000 Moreover, by not operating these four aircraft, Bamboo Airways will also save $114,251,161 in fuel expenses, drastically reducing its operational costs

In line with reducing the fleet size, Bamboo Airways also can cut down on

crew management is essential for keeping the airline competitive and financially healthy in the evolving market

Requesting financial assistance from creditors

Bamboo Airways can work actively with its creditors to get financial support and lower its fuel expenses The creditors understand that if the airline goes bankrupt, they will also lose out, so they are supportive of Bamboo Airways' efforts to restructure This partnership aims to help the airline survive in the long term (Nam, 2023) If the creditors agree to a plan that delays fuel payments or provides subsidies, Bamboo Airways could save about 20% on its annual fuel costs These costs add up to around $196,556,958 per year, so such an agreement would save the airline approximately $39,331,392 annually

On the other hand, Bamboo should convince the aircraft lessors to agree

to withdraw the number of leased aircraft from Bamboo Airways before the contract expires because the airline changes its business model They can even go a step further by asking lessors to waive or significantly reduce remaining lease arrears (Nam, 2023) For example, if a lessor retires three aircraft one Airbus A321 and two A320s— —and cuts lease costs by 50%, the savings will be significant With each aircraft typically costing around $4,000,000 to lease annually, halving this cost would save

$2,000,000 per aircraft Therefore, the total savings from this arrangement will reach $6,000,000

Increase demand for traveling by airplane by special offers

Bamboo Airways can streamline its Business Class offerings by replacing exclusive luxury lounges with shared ones (Stawski, 2021), significantly reducing costs The decision to discontinue operating a separate luxurious lounge, which costs $2million annually, helps the airline cut significant expenses With this change, and by lowering Business Class ticket prices, Bamboo Airways aims to attract more customers This strategic adjustment is projected to fill an additional 10 seats per flight, across two flights daily, potentially increasing daily profits by $1,180 and annually by

$430,700

In Economy Class, Bamboo Airways can compete with low-cost carriers

by matching their ticket prices (Anh, 2024) This competitive pricing can

be designed to fill an extra 50 seats per flight, with the same frequency as Business Class flights The potential daily profit increase from this strategy could be $5,000, equivalent to an annual additional profit of $1,825,000 These adjustments in pricing and services are crucial for Bamboo Airways

to enhance profitability while maintaining attractive offerings for passengers

Gantt Chart