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In 1990, Fly Strong was organized as a low cost airline providing service from a number of regional airports in Europe. Using these less popular airports was a much cheaper alternative to the major city airports and supported Fly Strong's low cost service, modeled on existing low cost competitors. These providers had effectively transformed air travel in Europe and, in so doing, contributed to an unparalleled expansion in airline travel by both business and leisure passengers. Fly Strong used one type of aircraft, tightly controlled staffing levels and costs, relied entirely on online bookings and achieved high levels of capacity utilization and punctuality. Its route network had grown each year and included new routes to some of the 15 countries that had joined the EU in 2004. Fly Strong's founder and Chief Executive, John Sykes, was an aggressive businessman ever willing to challenge governments and competitors wherever they impeded his airline and looking to generate positive publicity whenever possible. Billy Airwinger is now looking to develop a strategy which will secure Fly Strong's growth and development over the next 10 years. He can see a number of environmental trends emerging which could significantly affect the success or otherwise of any developed strategy. 2006 had seen fuel costs continue to rise reflecting the continuing uncertainty over global fuel supplies. Fuel costs currently account for 25% of Fly Strong's operating costs. Conversely, the improving efficiency of aircraft engines and the next generation of larger aircraft are increasing the operating efficiency of newer aircraft and reducing harmful emissions. Concern with fuel also extends to pollution effects on global warming and climate change. Co-ordinated global action on aircraft emissions cannot be ruled out, either in the form of higher taxes on pollution or limits on the growth in air travel. On the positive side European governments are anxious to continue to support increased competition in air travel and to encourage low cost operators competing against the over-staffed and loss-making national flag carriers. The signals for future passenger demand are also confused. Much of the increased demand for low cost air travel to date has come from increased leisure travel by families and retired people. However families are predicted to become smaller and the population increasingly aged. In addition there are concerns over the ability of countries to support the increasing number of one-parent families with limited incomes and an ageing population dependent on state pensions. There is a distinct possibility of the retirement age being increased and governments demanding a higher level of personal contribution towards an individual's retirement pension. Such a change will have a significant impact on an individual's disposable income and with people working longer reduce the numbers able to enjoy leisure travel. Finally, air travel will continue to reflect global economic activity and associated economic booms and slumps together with global political instability in the shape of wars, terrorism and natural disasters. Billy Airwinger is uncertain as to how to take account of these conflicting trends in the development of Fly Strong's 10-year strategy and has asked for your advice. Required: (a) Provide Billy Airwinger with an environmental analysis of the conditions affecting the low cost air travel industry. (15 marks) (b) Identify and describe the company's current strategy(s)? Explain your answer and cite example of their actions to execute the strategy/ strategies). (15 marks) (c) You are a consultant to Fly Strong Airline outline to Billy Airwinger three critical resources and competences of the airline which he should take into consideration in shaping Fly Strong's 10-year strategy. You should say why you regard these as critical resources and competencies. (10 marks) (40 marks)