Airline Industry and Its Economic Outline
Frank L Mannino Jr.
Axia College of University of Phoenix
ECO/205 Economic Theory
May 09, 2010
Airline Industry and Its Economic Outline The question can be is. How has the economy of the airline industry performed throughout the many decades it has been? In addition, what did the industry do as it has gone through many events that have challenged its survival? In this type of industry, we can say that it has seen their share of success in profits but has seen its share of overwhelming down trends. You can definitely consider there is this industry depends on the economy around it and solely affected by it too. The airline industry has seen highs when the demand for their services was
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Rather than focusing on cutting jobs, they focused on reducing expenses and cutting back on unnecessary items. The terrorist attacks are only one of the causes of crisis in the industry because there are several issues that threaten the industry. One that was mentioned earlier gas prices. Labor disputes are a factor as well. You may say that the airline industry has hit an extremely bad era. The changes that these airlines are being driven to make will be very different from the way it used to be. As most people know, the government has had much in bailing out business and the transformation that some have undergone and the airline industry is no exception. The government has a major influence on the restructuring of the industry and the air transportation system in general. 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. Gas prices play a massive key role in the struggle of this industry. At one point gas prices were higher than ever before, which then started
There are many different factors that come into play regarding the airline industry. Airlines such as Delta operate in an extremely political environment that requires an abundance of government regulation, especially after incidents like 9/11. As shown in Appendix A, the state of the economy, such as changes in GDP, per capital income, disposable income, and industrial production can also drastically impact the Airline Industry (Teresa Cederholm). In order to remain competitive in the airline industry, companies such as Delta must adopt the latest technology. For a full PESTEL analysis, refer to Appendix
The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).
The terrorist attacks of September 11th caused many changes in our country. Although there were many after effects of the September 11th attacks, the airline industry was most impaired. This paper will explain two factors related to the airline industry that were most affected, the American people and the economy.
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.
The situation of the U.S airlines has been affected by a number of factors through time and is not a secret that has been passed by moments difficult, especially in the economic part. One of these factors were the terrorist’s attacks of 911. No other event in history has changed the way of doing business that the fateful events of September 11, 2001. Apart from the significant human loss, the millionaire impact to the economy of New York and in the United States and multi-million dollar expenditure associated with the global war against terrorism, attacks on the World Trade Center (World Trade Center or WTC) in New York and the Pentagon trembled the authority of the United States, at a time when it was going through a recession. All this made
I would characterize the U.S. airline industry in the early 1990’s as a steak being trimmed of all its fat, the economic climate created a financial calamity of bankruptcies and collapse by major airlines, which in turn created opportunity for smaller more efficient carriers with cost advantages to enter a near oligopoly industry. The economic distress the airlines industry encountered was spawned from recession and a doubling of fuel prices during the Gulf War in 1991. Fuel, the second largest cost to the industry, an uncontrollable cost that raised havoc on this industry,
American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.
The airline sector had already been suffering a slowdown as a result of lower economic growth and cutbacks in business travel. Then, at the moment the
Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50
Airlines Industry is large and growing, it is also the most fiercely competitive sector. It facilitates international trade, world economy growth, tourism and international investment. The airline industry has over time with the use of modern technology been able to take advantage of the short haul, high frequency and gained a competitive advantage over other forms of travel, such as buses and railroad travel. Additionally, the airline industry still holds the market for global travel at a low cost and convenient way to travel. The aviation industry gives a good contribution to the GDP which includes the following: airline services, general aviation, civil airport operations, aircraft manufacturing, and
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
Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive.
On the other hand governments support aviation industry by building airports, roads and hotels near airports, because they recognize this industry as an important ingredient for economic well-being. In addition governments arrange security at the airports to ensure safe journey. The terrorist attacks of September 11, 2001 have had negative implications for the industry. Over the years, all the airlines have changed their routes, marketing tactics and prices; they are also making an effort to reduce the fear and negative image associated with air-planes. Governments have imposed strict security checks on air travel passengers in order to avoid any unforeseen terrorist activity.
Situational Analysis The airline industry throughout the world and specially in Europe was facing hard time prior to the incidence of 9/11 with declining passenger growth rates and overcapacity was putting pressure on yields and margins. But afterwards budget airlines continued growth and profits as compared to increasing deficits of the mainstream airlines. European budget airline is
Dependence on oil prices - As already mentioned the fuel prices are one of the two greatest