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Overview Of Airline Industry
Airline industry and information technology
Solutions for challenges in the airline industry
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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.
Rivalry is one of the main issues in this industry. While rivalry may not typically doom an industry, the airline industry is too dependent on the ability to dictate price on its most popular routes to drive overall profitability. Airlines depend on these routes, called ‘city pairs”, to bring customers in as they are popular with them. Airlines enter these routes, hoping to attract these customers, which puts too many seats for these city pairs, thus making supply exceed demand. To compete, airlines drop their fares, many times to the point of eliminating profitability. Airlines are then unable to pull out of the city pair because they would risk losing too many customers which they hopefully can build loyalty with so they will fly with them on profitable ...
The U.S. airline industry experienced year-over-year growth in passenger revenues, in 2013, driven by strong demand for air travel.2 Additionally, on average, fuel costs were down in 2013 as compared to 2012.2 The U.S. airline industry is also a very competitive market. Due to government deregulation in 1978 there are few regulatory barriers to new entrants in the market, although there are other barriers to consider. Starting a new airline is very capital intensive. Purchasing a commercial airplane from Boeing can cost anywhere from $76million to over $300million.4 Another barrier to entry is risk in the industry. Airlines tend to experience volatile costs such as fuel prices, which can be difficult to predict in the long run. A regu...
whether or not that city had enough gates for the new carrier, and whether the
Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are to focus on the change process post the merger with AirTran, and to evaluate alternatives to address the impacts of the merger. II.
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.
In today's competitive marketplace, all firms are seeking ways to improve their overall performance. One such method of improvement, recently adopted by many firms, is benchmarking. Benchmarking is a technique used to evaluate internal business processes. "In this analysis, managers determine the firm's critical processes and outputs, baseline those processes, then compare the performance of each process against a standard outside the industry" (Bounds, Yorks, Adams, & Ranney 1994). To effectively improve a business process to world-class quality, managers must find a firm that is recognized as a global leader, not just the industry standard. Successful benchmarking requires tailor-made solutions, not just blind copying of another organization. Measurement and interpretation of data collected is the key to creating business process solutions.
"Problems" in the airline industry have not risen due to too much competition within the industry. To the contrary, Washington regulators should turn the industry loose in any more ways that it can. Lowering restrictions to enter the market place, emphasizing private ownership of aviation matters, and encouraging open and free competition within the scope of anti-trust law should be the goals of the Clinton Administration. Instead of heading towards re-regulation, Washington should get out of the airline business for good.
Buyer Power- WEAK Within the airline industry, there are a large number of buyers compared to the number of airlines. This is a low threat because there isn 't many options for customers
In a dysfunctional time for the airline industry, most airlines, especially major carriers, are adapting the concept of "doing less with more." One low-cost carrier, JetBlue, is changing the domestic aviation landscape in this regard and is defying the odds. Here is a company that has examined each marketing mix elements carefully, has adapted them to its customer’s needs, and is succeeding because of this approach.
The Global Industry, with the help of globalization, has been connecting the world for the past few years, and have been the missing link to a global economy that is slowly but steadily dominating the world. Over the past 30 years, statistics have shown an average 5% increase of World Air Travel, with the statistics constantly fluctuating up and down, varying due to the economy influence all over the world but it is unquestionable that there has been a steady improvement of demand. Airlines have been increasingly gaining popularity from across the world. According to the International Air Transport Association (IATA), statistics has shown that the airline industry has been generating a lot of profit for the global growth of the economy, with
The airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B. Because the reasons can differ greatly in the motivations for a customer wanting to fly, it can be difficult to divide the market into discrete segments, that is, there is always going to be overlap in the preferences and characteristics of any given segment. With that in mind, the commonalities that are shared between the clientele that make up the respective classes can easily withstand analysis.
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).
Before we discuss government intervention and its affect on an industry’s competition we must first seek to understand the five forces framework. The theory, discussed in 1979 by Micheal Porter seeks to evaluate the attractiveness of an industry. Throughout this essay I will explore the theory and then relate government action and its well-documented affects on the airline industry.
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
Air travel has grown in the past decade. Travel grew strongly for both leisure and business purposes. India will have nearly 800 to 1000 airplanes by 2023, it was estimated by Airbus. In spite of growth between 30 to 50 per cent in Indian aviation industry, losses of approximately 2200 crore is estimated for the current year.