External Forces Shaping the Future of the Airline Industry

1792 Words Jun 7th, 2005 8 Pages
INTRODUCTION The purpose of this report is to inform airline executives about the external forces affecting their industry and what they can do to keep up with the changing business atmosphere. The terrorist attacks of 9/11 had a grueling effect on the economy, and while most industries are almost back to their pre-9/11 financial status, the airline industry is lucky to break-even. This report will explain three leading trends that are forcing the airline industry to re-think their stance on strategic planning. The first trend discussed will illustrate the effect that online booking has had on the way airlines do business. The second trend will describe how obesity has caused new standards to be set within the industry. The final …show more content…
Also, according to Standard and Poor 's recent airline industry survey, 90% of 2003 's ticket sales were electronic. Standard and Poor 's (2004) is also predicting that the percentage will rise up to 95% this year. Since more airlines are putting bookings online, it 's causing them to be more competitive with prices. Potential passengers want the lowest price possible; if an airline doesn 't offer that, the individual will switch to the next affordable airline. It forces airlines to keep ticket prices low. If their prices get too high, people will not be willing to pay and will go for the cheaper alternative. Airlines are saving money with online booking by eliminating paper tickets. United Airlines stated that electronic ticketing eliminated 14 accounting and processing procedures and only costs 50 cents per ticket (Corridore 2004). The paper tickets cost $8; the difference saves United $7.50 per ticket. That extra money can add up when talking about millions of sales. Industry wide online ticket sales save carriers about $200 million a year (Haddad 2003). Major airlines are starting to charge extra fees for paper tickets, sometimes up to $25 (Corridore 2004). The goal is to get more flyers to go online to get their tickets, which will end up saving the airlines millions of dollars in the end. If people started to book online more frequently, it could be the cost change that could help many
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