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Airline industry analysis
Industry analysis of southwest airlines
Industry analysis of southwest airlines
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The Cause of Financial Distress in Airlines Industry Introduction According to International Air Transport Association (IATA), global airline industry has a history of 100 years (2014). Today, there were more than 3 billion passengers and 50 million tonnes of cargo reach their destination through the wonder of flight every year, supporting over 57 million jobs and $2.2 trillion in economic activity (IATA, 2014). The airline industry plays a crucial role in economic because it helps in opening up new possibilities for tourism, business, and human connections, as well as affecting aircraft manufacturers. It is a large and growing industry which required a large capital. Infrastructure of aviation industry has been undergoes a drastic development in term of quality and quantity. Nowadays, people could travel by air easily with an affordable price. Based on IATA fact sheet of World Industry Statistics, the total net profits of world airlines have shown remarkable instability over the past 24 years. From 1990 to 1993, due to the Gulf War and subsequent economic recession, the world airline industry announced four consecutive years of losses totaling over $22 billion. In the late 1990s, it returned to record profitability with total net profits in excess of $25 billion being reported by world airlines from 1995 to 1999. Even more dramatic was the industry’s plunge into record operating losses and a financial crisis between 2000 and 2005, with cumulative net losses of $40 billion. There are various factors that influence the airline performance such as efficacy of capacity, structural changes, increase in competition, economy slowdown, high labor, as well as, high fuel prices which jeopardize the aviation industry. Most of the aviat... ... middle of paper ... ...al distress. 4. To examine whether oil price give a significant impact on financial position of airlines companies. 5. To investigate the relationship between leverage and financial distress of aviation companies. 6. To study whether there is a positive relationship between profitability and financial distress airlines industry. Research Framework Works Cited International Air Transport Association. (2014). 100 years of commercial flight. Retrieved from http://www.flying100years.com/about International Air Transport Association. (2014). Fact Sheet: World Industry Statistics. Retrieved from http://www.iata.org/pressroom/facts_figures/fact_sheets/Documents/industry-facts.pdf Bankruptcy scores: Ranking the airlines (2011, September 28). The Street. Retrived from http://www.thestreet.com/story/11260679/1/bankruptcy-scores-ranking-the-airlines.html
"In early 2000 Air Canada along with entire airline industry faced huge loss due to the high global economic downturn. With slow travel outstanding to the downturn and September 2011 incident the airline industry was hit extremely hard. Air Canada consequently posted net losses of $1.32 billion in 2001 and $828 million in 2002. Furthermore, with the spread for SARS disease Air Canada’s Asian route got effected
The objective of this research report is to provide a thorough analysis of Alaska Airlines. In order to do this we chose to compare a similar company against them. The company in comparison is Spirit Airlines. Both companies compete in the same type of business through airline transportation. Many of their services include; security, safety, transportation of passengers as well as luggage, ensuring vehicle safety while in transit, concierge services, providing entertainment aboard plane, checking weather conditions prior to flight, and much more. All of the data gathered for this report was obtained from the company’s 10-k filings with the SEC.
The seventh largest major domestic airline in the United States (US), Southwest Airlines, is commonly known or referred to as a low-cost carrier. Southwest Airlines is the only major airline that provides short-haul, point-to-point service in the United States. In fact it was the first airline of its type ever started; it has become the archetypical low-cost airline. The idea has proven itself so well, that other start-up airlines have based their company strategies upon the basics of Southwest. Today, there are two other low-cost air carriers (the other two airlines are considered national airlines and not major airlines) that are actively and aggressively competing with Southwest Airlines for business and profit turning. The three American low-cost air carriers are currently posting profits even in light of the US economy’s current state of affairs, with Southwest Airlines first, JetBlue second, and Air Tran third, in profits. How is this possible when the major six airlines are reporting losses of millions and millions of dollars each quarter? The answer to this question begins about 30 years ago.
The Airline Industry is a fascinating market. It has been one of the few industries to reach astounding milestones. For example, over 200 airlines have gone out of business since deregulation occurred in 1978. Currently, more than 50% of the airlines in the industry are operating under Chapter 11 regulations. Since 9/11, four of the six large carriers have filed for and are currently under bankruptcy court protection. Since 9/11 the industry has lost over $30 billion dollars, and this loss continues to increase. Despite the fact that the airline industry is in a state of despair, JetBlue has become the golden example, a glimpse of what the industry could be.
After September 11th, 2001, the airline industry experienced a significant drop in travel. The reasons for the airline industry downfalls also included a weak U.S and global economy, a tremendous increase in fuel costs, fears of terrorist's attacks, and a decrease in both business and vacation travel.
According to the International Air Transport Association, 2001 was only the second year in the history of civil aviation in which international traffic declined. Overall, it is believed that the IATA membership of airlines collectively lost more than US$12 billion during this time (Dixon, 2002).
Southwest Airlines: A Case Analysis. ORGANIZATIONAL ANALYSIS It is evident that the greatest strength Southwest Airlines has is its financial stability. As known in the US airline industry, Southwest is one of those airlines who are consistently earning profits despite the problems the industry is facing. With such stability, the corporation is able to make decisions and adjust policies, which other heavily burdened airlines may not be able to imitate.
As airline industry is a competitive marketplace, the airline companies use new technologies to improve their efficiency and decrease the overhead costs, including ‘advanced aircraft engine technology, IT solutions, and mobile technology’ (Cederholm 2014). The technology changes including technology improvement, new innovation and disruptive technology. The disruptive technology need to meet the characteristics of ‘simplicity, convenience, accessibility and affordability’ (Christensen 1995). The technology changes would bring both opportunities and threats to airline companies. Since Labour cost and fuel costs occupy 50% of most airlines operating cost (Groot 2014). Therefore, if new technologies could be disruptive in the two aspects, there will be important changes to current airline
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 main opportunities that the scheduled air transportation will have in the next five years are the possible decrease of TSA agents at airports, technology increasing the safety and comfort of the flights for the passengers and ...
Flight fee is one of the biggest nightmares of the passenger. In this regard, such an initiative is a win-win situation for the Asiana airlines. The establishment of extensive cabin retrofits is also a great improvement to the customer service delivery. The airline also boosts customer experience in a bid to achieve the airline’s sustainability through the provision of lie-flat seats. The seats boost comfort for the passengers aboard; hence, reduction of exhaustion. According to Asian Development Bank (2009), the airline provides the passengers with a sizeable monitor, especially for the business class passengers. The practical productivity of team relies on upon its hypothetical planning, information of an aeronautical building, and tenets of its operation, including exceptional circumstances, and propensities for utilization of this learning, furthermore on order and determination of pilot-in-charge of aircraft and group individuals. The administration productivity air movement, the associations of flight action and a wide range of upkeep of aircraft in the greatest degree is controlled by the proficiency of the action association in the modern undertakings, cognizance of initiators, and the moral obligation of leaders of all positions for action concerning security control of
The airline industry is very susceptible to changes in the political environment as it has a great bearing on the travel habits of its customers. An unstable political environment causes uncertainty in the minds of the air travellers, regarding travelling to a particular country.
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.
Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometer ("ASK") via poor yield management and an inefficient route network.
Airline industry is affected by no. of factors such as fuel price fluctuations, high fixed costs, strong influence of external environment and excessive use of marginal costing by carriers. Recessions in the industry tend to last longer, while recovery periods are generally shorter. Over the past nine years, it is observed that industry has made losses for five years and during the profitable years margins were on a lower end. The airlines industry is acutely sensitive to external events such as wars, economic instability, government policies and environmental regulations.