Essay about Case – The U.S. Airline Industry Public Support

Business Strategy – BAD 4013 – SUMMER 1999 Case Study Southwest Airlines I. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Twenty-seven years ago, Rolling King, owner of floundering commuter airline, and Herb Kelleher, King’s lawyer, got together and decided to start a different kind of airline that would provide a short-haul, low-fair, high-frequency, point-to-point service in the United States. The company began service on June 18, 1971 with flights between Dallas, Houston, and San Antonio (“The Golden Triangle” as Herb called it). Southwest Airlines is the fourth

The odds are that at some point in time, most people in America will travel by air. What most of these people do not realize is that a simple flight is in reality a well-oiled, complex machine unlike any other air navigation service provider in the world. After the Wright brothers took their first successful flight, America embraced air travel.  The Federal Aviation Agency (now Administration) officially began operations in May of 1958, and later developed a sophisticated air traffic control system that is responsible for the largest volume of air traffic in the world (“A Brief History of the FAA”). Today, however, many politicians believe that government involvement in air traffic control is inhibiting the overall performance of air traffic control. Several bills have been proposed to Congress since the 1970s in attempt to separate air traffic control (referenced as ATC) from the FAA by privatization, corporatization, or other means (Elias 2). The most recent of these bills has caused serious debate in the aviation world over economic policies, safety regulations, and overall effectiveness of the current ATC system. The Aviation Innovation, Reform, and Reauthorization Act (21st Century AIRR Act) as proposed by Representative Bill Shuster should not be passed by Congress because it would privatize air traffic control by removing it from the Federal Aviation Administration. This would entail the creation of a board of stakeholders who would have the power to make regulatory

The United States Airline Deregulation Act of 1978 was a dramatic turning point in America. It was the first systematic dismantling of a comprehensive system of government control since the Supreme Court declared the National Recovery Act unconstitutional in 1935. It was also part of a broader movement that, with varying degrees of thoroughness, transformed such industries as trucking, railroads, buses, cable television, stock exchange brokerage, oil and gas, telecommunications, financial markets, and even local electric and gas utilities. Since the Airline Deregulation Act of 1978, the airline industry has experienced significant growth,

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.

Tickets for airplanes had a “September 11th” fee added on, and eventually accumulated 15 billion dollars over a time period of nine years. Just as the airports security and actual security on the planes themselves, war had been the cause of all the major changes to everyday traveling.

Some argue that the 9/11 attacks hastened the airline industry to make changes that would have come sooner or later because many carriers were already in financial trouble. The airlines were forced to make cuts in their cost structure and renegotiate labor expenses due to a decline in passenger demand, which realistically was needed regardless of the 9/11 attacks (Logan).

People were terrified of flying and thus, the number of passengers flown started to decline. Rather than taking vacations, the vast majority of people were taking “staycation”. It took the airline industry about “three years to start recovering from this terrible disaster” (IATA).

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

At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based

Although the airline industry is in the business to transport people from one place to another they could not function without those who keep the airplanes operating on schedule. The airline industry has become the major provider of public transportation for Americans traveling between the nation's cities. Scheduled airlines now account for 92%

The years since regulation have been rocky for the airline industry. Airline after airline has declared bankruptcy and either ceased existence or emerged as a weaker airline. The surviving airlines have done so by merging and protecting their territory with tactics not even dreamed of in most industries. Robert Crandall said it best when he noted, "This is a nasty, rotten business (Petzinger,1995)." You would think that with the competition allowed by deregulation that a large number of new names would exist, but that does not seem to be the case. Most Americans still travel on American, Delta, United, US Airways, or Continental (Kane, 2003). The only true champion of deregulation is Southwest Airlines, whose success is paving the way for others such as JetBlue, but the obstacles are enormous. Initially, the airlines went after each other by slashing fares and driving competitors out of business. The industry quickly learned that although this tactic was effective, it was not profitable, and it was more economical to focus on controlling the air out of a few cities (hubs) than to attempt to directly compete in every single market. Since most of the major airlines already had key cities in which they controlled most of the takeoff and landing slots, airlines could charge higher fares and take in greater profits without any real head to head

The terrorist attacks of September 11, 2001 severely affected the airline. On the morning of September 11, 2001 the Federal Aviation Administration suspended all commercial airline flights and Southwest did not resume flight operations until September 14. During this time Southwest canceled about 9,000 flights. After flights were resumed, revenues were severely impacted and ticket refunds increased. To aid the airlines affected by the terrorist attacks, the Air Transportation Safety and System Stabilization Act provided some compensation to qualifying United States airlines to help compensate for the losses (Southwest 2005).

In examining the history of aviation in the U.S. and the development of the airlines, it is clear that the Federal Government played a vital role in the development of both. Historical records clearly show that this involvement by the Federal Government was critical in getting them established and in helping to develop them into the globally dominant enterprises they are today. Furthermore, it can be easily argued that U.S. aviation as a whole, and the airlines in particular, would not be where they are today without this direct involvement by the Federal Government and some of the very specific actions that it has taken to keep them relevant and competitive during the most dire of times. The Federal Government ensured that U.S. aviation and its airlines would develop and achieve a worldwide leadership role by becoming involved in three major ways: through funding, legislation, and policy setting.

2. Terrorist attacks on the World Trade Center and Pentagon on September 11, 2001 severely affected the airline industry that security concerns and security costs increased.

One of the world’s most competitive and prominent industries is the airlines industry. It generates huge amounts of income as well as employment each year. Some of the common names in US air travel service providers are Alaska, Northwest, Southwest, US airways, American etc.