Airline Asset Usage American Airlines utilizes a hub-and-spoke system to better serve the small communities. Many flights that are offered through American would require a connection through one of their hubs. American has placed it footprint in 5 great locations, John F. Kennedy, Chicago O’Hare, Dallas/Fort Worth, Los Angeles, and Miami International, to offer the best viable solution to any one traveler’s needs (Horton, 2013). By using the hub-and-spoke system, American can offer an exponential amount of locations to travel to for a reduce cost (Combs, 2003). Although this may save time and money for the consumer as well as the business, the negative aspect would be the extended duration in travel for the customer. For an airline to continue to operate efficiently to a multitude of locations there has to be a quality scheduling system in place. There are many considerations that need to be taken into account before this can be done. Traffic flow, salability, schedule adjustments, time zones, chain reaction effect, and load-factor leverage are of the primary to ponder when m...
On the surface, the players in the U.S. Airline Industry appear to be in an enviable industry filled with glamorous perks and a solid business model. However, analysis paints a different story. Digging deeper reveals significant issues with little possibility for industry wide solutions, therefore making the industry unattractive.
The Hartsfield-Jackson Atlanta International Airport is one of the largest airports in the world and is the main hub for Delta Air Lines, one of the largest airlines in the world. This case study will examine the relationship between demand and capacity for the home hub of Delta Air Lines. Future predictions for air travel estimate enormous growth rates as high as 50% by the year 2025. Airlines, airports, and the entire air-travel infrastructure will be challenged with the task of keeping up with this level of demand as we move towards the future.
The airline industry is fragile and especially vulnerable due to increase security demands, the cost of fuel with limited resources, highly expensive industry, very highly regulated industry, and labor intensive industry. Despite the vulnerability of this industry Southwest Airlines has managed to survive despite the odds, when larger airlines were forced to merge, have huge lay-offs of employees and some even when under. It is interesting to review just how Southwest Airlines survived the rapid changes, while presently recognizing a growth spurt.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
flexibility with geographical area and time. In order to sell that flexibility and time, airlines have
The airline industry as a whole has a long list of services required for overall economic market success. Alaska Air has endeavored to lead the way in both service and maintenance. They unwillingness to settle on the lowest acceptable form of service has allowed them to build a loyal customer base. By adapting to a unique market and learning to balance cargo and air passenger travel, they have learned not only to survive, but thrive in what is considered a “limited” operating area.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
The complex nature of commercial aviation creates immense gaps and obstacles for organizations, like United Airlines, to address. Given that demands for lower travel cost have caused “since the 1950s, airline yields (defined as the average fare paid by a passenger per kilometer) [to] consistently [drop]” companies have had to search out alternatives to continue to operations (Clayton, 2014). Thus, creating throughout the industry a growing pressure to reduce costs and improve
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
The basis for Value Creation of a classical hub-organised airline consists of its operating hub and spoke strategy. This system implies that all flights move along spokes connected to a hub placed at the centre. In fact all long-haul flights depart from the hub, to which all passengers are flown in the first place. Therefor it is necessary to own a heterogeneous fleet to secure an outstanding efficiency of the long distance flights. To have an attractive and used to capacity hub at one’s disposal is the linchpin of the entire operation. For this purpose it is extremely important for the airline to possess a high percentage of the airport’s available slots and gates which represent a distinctive key resource in this dynamic industry. Some of the major flag carriers own their capacities for decades through the protection by the grandfather rule which signifies a competitive advantage in this infrastructure restricted industry. Besides this, human capital can be seen as another crucial resource. This relates on the one hand to a capable and motivated workforce and on the other hand on the management. Foremost to cope with the extensive scheduling of a hub demands a high degree of management skill which decides of the success or failure of the operations. In addition the fact that hub-organised airlines control such a significant number of slots leads to a high negotiation power with this airport. Furthermore customer retention and loyalty is of great importance for a flag carrier, because their passengers are normally less price sensitive than low-cost carriers’ customers and are consequently able to fly more often. This goal can be achieved for instance by excellent customer service, frequent flyer programs and strong brand reputation. The mentioned capabilities apply best to long-haul traffic and business travel. The reasons therefor are that business passengers are willing to pay higher prices for more convenience and service on board which is also true for long distance flights where entertainment, food and service in general get more important. Accordingly this leads to higher yields for the airline. This does not fit for price-conscious customers, because they prefer cheaper flights.
The following report provides an understanding concerning the Airline Passenger Reservation System. It will briefly discuss the advantages associated with integrating the system across the airline industry and what and where are the potential gains.
These cheap, no frills carriers have revolutionized the airline industry, making European and worldwide travel affordable for all and forcing the established brands to take a long hard look at their operations. There is no doubt that this low-cost model has been a resounding success. However, some airlines have experienced considerably more success than others.
The hub-and-spoke system or network is a system that feeds air traffic from small communities through larger communities to the traveler’s destination via connections at the larger community (Wensveen, 2007). The airline will do most of its operations in the larger communities which the airline will call it its hub. The small communities are the spokes of the network and are connected to the hub by non-stop flights between the different spokes (Aguirregabiria & Ho, 2010). For example, a person wants to travel from Louis Armstrong New Orleans International Airport which is considered a “spoke” city to San Antonio International Airport on United Airlines will have to travel to Houston George Bush Intercontinental Airport and change planes as due to Houston being a hub for United Airlines. Many travelers would wonder why it would not be a direct flight to their destination...
The aviation industry has witnessed key structural changes over the past few decades (Dennis, 2007). Notably, the changes have seen the rise of low cost carriers otherwise known as budget carriers. The low cost airlines have significantly won the support of many startup airlines leading to their spread all over the world into both the long-and short-haul markets. This phenomenon has resulted in a change in the competitiveness of major airlines in the industry (Dennis, 2007). Since the budget airlines charge low on ticket prices, the lost revenue is recovered through food, seat allocation and priority boarding. A good example of low cost carriers is the Southwest Airlines that operates in the United States.