Airline Industry Overview

1514 WordsMar 27, 20067 Pages
Airline Industry Overview History – The airline business has been in existence for over 75 years. There have been many upward and downward swings in the overall airline business economy. History has recorded that while 140 airlines have declared Chapter 11; only two have emerged. Today, the U.S. airline industry is facing an unprecedented financial crisis and the outlook is bleak. Only one major carrier that has shown a profit over the past four years and, in the same timeframe, the other major carriers show a combined total loss in excess of 25 billion dollars. This downward spiral cannot be attributed solely to the 9/11 disaster, many other factors contributed to their downfall. From an investor 's point of view uncertainty,…show more content…
With crude oil topping 50 dollars a barrel, a sluggish economy, and another major airline filing chapter 11, the entire industry has taken a fall. The Dow Jones airlines index was down 25% at the start of 2004 and, since then, the industry has not had any significant improvement. The ticket pricing structure is in total chaos. The government and lenders are enabling bankrupt, financially unstable airlines to continue operations by extending loans to keep them flying. One result is a glut of empty seats in the market. Additional seats are flooding the market with start up airlines and supply is outweighing demand. While these bankrupt airlines continue to fly they reorganize under bankruptcy protection and lower costs through cuts in worker benefits. Major carriers have made several recent attempts to raise ticket prices only to rescind them after customers flocked to low-fare carriers offering the same ticket for as little as one dollar less. Customer loyalty is a thing of the past. Trends – Over the past 75 years not one major airline has ever been a big profit gainer, some have done very well to just break even over the course of existence. A positive trend is the renewed focus on technologies that streamline operations, improve passenger facilitation and loyalty, and create flexibility in changing business processes that will eventually lead to lower costs. The news in 2005 will be the revival of the major carriers. New
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