Airline Industry Analysis

The United States carries over one third of the globe’s total traffic, where Over 1.5 billion passengers fly annually. Over the past 20 years, air travel has grown at an average of about 5% per year, the reason for annual change is usually differences in economic growth, and of course other environmental factors, such as the current war. As a rule, the annual growth in air travel has been about twice the annual growth in GDP. Deregulation, liberalization, and competition have essentially altered the management strategies and practices of airlines. Productivity improvements and cost management have been two of the greatest concerns for US airlines for the past twenty years. As a whole, the airline industry must continue to improve their specialization in terms of fleet utilization, pricing and revenue management, and schedule optimization.

The terrorist attacks on September 11, 2001 shook the United States in a profound way, deeply upsetting the national perception of safety within U.S. borders. No industry or sector of the economy felt the impacts of these events more than the airline industry. Both the immediate reaction to the attacks and the long-term repercussions have negatively affected the industry. Today’s airline industry is much different than it was prior to September 11. There is a much smaller work force, more low-cost carriers, more security and more fees associated with flying.

September 11, 2001, was a horrific event that rocked the world and the way people viewed the safety of airline travel. The airline industry was hit the hardest after that day and it was uncertain if they could regain their customer’s

The objective of United is to make a continuation of growth in the market share simply through offering the lowest rates in terms of fares. Currently, the health of US economy relies heavily on United Airlines. Businesspersons travelling have been seeking participation in meetings for companies through meeting spaces that are vital like the second life by telephone and videoconferencing. Many families have sought out from flying to location of vacations because of the economic downtown in the two previous years and the weak stock market, as well as concerns of job security. However, experts are trying to resolve the case arguing that the economy of United States is recovering. This is

Since the 9/11 terrorist attacks, the U.S. economy has been in a struggle to recover from the damage that was caused. Corporations, in particular, took action by cutting their travel budgets in order to save money. The budget-cutting forced them to become much more cost-conscious, prompting them to look for other means of meeting instead of traveling. The way that corporations are dealing with this is by taking advantage of the new technologies that are available, such as videoconferencing. Another popular technology that is catching on is web casting--the transmission of audio and video to personal computers via the Internet (Caplan 2001). Frost and Sullivan, a consulting firm that specializes in high technology, estimated that in 2003, the web casting business would see revenues of up to $533 million (Lollis 2003). One U.S. corporation has already eliminated 20-70% of air travel due to new technologies such as videoconferencing (Hughes 1993). Also, videoconferencing could replace 13-23% of business-related travel by 2010.

Another emerging trend in the past five years has involved the progress made on open skies agreements between the United States and other countries. Open skies agreements serve to liberalize Orlando International Airport transport markets between the two signing countries or parties in the agreement. These agreements remove government restrictions, such as limits to the number of flights any one airline is allowed to operate per week between countries. The removal of these limitations has opened some routes up to increased competition, by allowing Orlando International Airport to fly more frequently and making these routes more accessible. Orlando International Airport could not previously justify the capital expense of operating on routes with limited flights are now able to profit on routes with high demand.

To combat the escalating expenses of enhanced security and diminishing supply demand, employee layoffs and service trimming were the first areas to see cutbacks. This is certainly a competitive industry with new companies surfacing and others failing. The restructuring will definitely influence the airline industry’s inclination concerning the development of both domestic and international service. It has been hard for this industry to keep revenue up and cover all the rising expenses, which makes for an obstruction in growth and prosperity.

This comparison between American Airlines (AA) and US Airways (AWE) starts from the year ending report in 2008 after AWE finally completed embedding America West into their operations in October, a process begun in 2005. Neither has taken part in any mergers or takeovers since then and, despite AWE briefly flirting with the idea of taking over United Airlines in 2008, merger and acquisition plans for both had been subordinate to recovering from the Global Financial Crisis (GFC).

Meanwhile the external analysis refers to the people and the process that are outside the organisation and it most unlikely that this factor can be controlled by the organisation. External Analysis can be assessed by using PESTEL.

The airline industry is interpreted as being very unstable due to the immediate reaction to tragedies. The airline industry was affected following the September 11th tragedy and it affected other industries indirectly. The airline industry plays a key role in

Morrison and Winston (1996) claims that airline deregulation, coupled with the economic volatility brought about by the Gulf War saw the airline industry incur chaotic costs and suffer massive losses. It is speculated that this economic contraction, plus the increased, unexpected demand for air travel, may have been the impetus for the fare wars that ensued. Figure 1 below illustrates the quarterly airline industry cost increases, and it can be clearly seen that costs fluctuated between a twelve year high and a comparatively significant low in the time-span of a couple of quarters. Also, as a result of the increased demand for air travel, smaller airlines

The airline industry is one that is both costly and necessary to the economy. Costly because of the funding provided by the government, recent layoffs; which has a hand in rising inflation, dealing with negative externalities and high security risks; necessary because the ease and speed of air travel is needed to keep countries productive and competitive. It is a key component to the economy. Many businesses rely on air transportation as well as consumers and individuals employed within the

Socio/cultural, economic, political, and technological are all factors that influence the airline industry (Boyens, Cha, Livneh, Pan-Fea, Singh, & Vintrou, 2002). The most important socio/cultural influence that affected the airline industry was the attacks on September 11th. The Department of Transportation reported a revenue drop associated with an increase in operating cost and a new fear of flying. After September 11th, Jet Blue was one of only a few airlines that made a profit during a sharp draw down in airline travel (“Jet blue airways”, 2003).

Airline behavior could not be explained effectively with changing cost structure. In the bottom line of any alliance marketing strategies and demand response are important. With Star Alliance, the airline can offer their consumers large and denser global network of airlines with smooth connections among airlines. Airlines have demands with competitive prices in Star Alliance due to economies of scope, scale and density. In Star Alliance partners are able to offer better products and services due to airlines increased capacity to retain and generate passengers (Cullen, Johnson and Sakano, 2000).

Airline industry is a growing and a challenging industry across the globe and it is becoming more competitive on quality, pricing and most prominently safety in the contemporary world.