External Forces Shaping the Future of the Airline Industry

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.

Airlines are now able to expand their outreach directly to consumers through e-commerce. For example, airlines like Qantas are able to introduce ticketless travel through the use of technology (Thompson and Gamble, 2012).

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.

When looking at the elasticity of demand Southwest is extremely impacted by the elasticity of demand. Items such as externalities, unemployment, inflation, and monetary, fiscal, and federal policies affect the elasticity of demand. The elasticity of demand is based solely on current market conditions, the customer’s purpose for travel, and available substitutes. The airline industry is viewed has being unstable because it is based on current market conditions, and the market is always changing.

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

Small business customers and leisure travelers were the ones benefited the most from American’s new fare structure. Previously, small business customers who does not have the power and volume to negotiate with airline companies for discounted deals had to pay higher rates for first-class or coach tickets. American’s new cost structure reduced the full coach fares which allowed small business customers to purchase flight tickets at cheaper prices more conveniently. Leisure travelers, unlike business travelers, have more flexibility in terms of travel dates, thus allowing them to take advantage of the advance-purchase discounts and Saturday-night stay discounts under the new fare system.

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.

Trend line such as seating space is important in the airline industry; travellers strive for convenience at all times. These days we see that airline seats are narrower and the legroom is tighter. This trend line is undeniable as evidenced by some carriers planning to launch Airbuses that includes increasing number of seats. Another trend line is an overcrowded airplane; from personal experience major airlines such as U.S Airways, including Delta Airline cabins continue to get fuller. This is a popular trend that needs to be addressed because it affects efficiency; for example it causes delays in boarding and even safety issues such as involuntary bumping. Airline consolidation is a trend line. Some of the merger requests these days have not been approved such as the American Airlines and US Airways merger. The mergers in this industry tend to reduce competition, diminish service, eliminate choices and raise prices. There are much more trends line to consider such as safety, security and service issues; but lastly I will discuss high fees. Several analysts have been predicting that airfares will increase.

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

There have been few inventions to change how people live and experience the world considerably as the creation of the airplane. Today, traveling by air has become the norm and it would be difficult to imagine life without it. Air travel has improved the way people are able to conduct business by shortening travel time and changing their thought of distance. The companies within the airline industry exist in a very competitive market. One of those companies, Southwest Airlines, features low-fare, no-frills air service with frequent flights of mostly short routes. Costs are kept down by the exclusive use of Boeing 737 aircraft, which allows for low maintenance costs and quicker turnaround times for flights, and by an emphasis on ticketless travel (Encyclopedia Britannica). This paper will address two segments of the general environment and how they affect Southwest and the airline industry; evaluate how Southwest has addressed two forces of competition; predict what Southwest might do to improve its ability to addresses these forces; assess the external threats affecting Southwest; discuss Southwest’s greatest strengths and most significant weaknesses; determine Southwest’s resources, capabilities, and core competencies; and analyze their value chain.

The Airline Industry is in an interesting situation. Simply adding a low cost alternative is not enough in the industry. The Internet has made the power of buyers grow with the transparency of ticket prices. This is not something that will change any time soon. Because of this profitability is predominately reserved for low-cost yet distinctive carriers. No consumer wants to ride what they consider a “lesser” airline. Airlines need a way to distinguish themselves from one another while also acknowledging the increased power of buyers.

Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998).

We have analyzed the existing booking policy of TransAtlantic Airlines and identified potential cost saving.

Due to globalisation, the flow of people is more rapid among the world. The demand for fast and easy transport increases in the past few years, and the passenger airline benefits a lot from the change which becomes a huge and important industry in the globe. Unlike some other industries, passenger airline business actually has target customers all around the world including you and me. There are a few main kind of purposes for taking a flight, for example, business, leisure, students etc. As there is a broad base of customers, different companies are set to target different customers group, such as Ryanair and Easyjet targeting the budget customer group and Singapore Airlines aiming for the high-end business and leisure customer group. The basic inputs of airline business are fuel, labour and aircraft leasing and others such as food and entertainment vary between companies. The outputs are the flight itself and the services provided in the journey.