After six consecutive years of profitability, the U.S airline industry was descended into a downward spiral. The number of passengers flying dropped from 56 million in August 2001 to 30 million in September with no passengers for two days after the attacks (Poling). It took three years for the airlines to reach the 56 million passenger mark again. The impact on the travel industry, specifically the airlines, was more severe than in other areas. Immediately following the September 11th attacks, the airline industry was severely damaged with a four day shutdown of the national aviation system. Across much of the United States and Canada, flights were grounded. Airlines and airports that did not have dedicated ground crews and additional …show more content…
Many businesses temporarily suspended non-essential travel for their employees, significantly reducing business travel (Logan). Congress responded by creating the Air Transportation Stabilization Board, a body authorized to give the airlines up to $10 billion dollars in loans (Logan). However, despite this funding, several important airlines including American and US Airways, declared bankruptcy while other smaller airlines ceased operations. The lack of passenger demand canceled flights and increased security expenditures resulted in massive financial losses. In addition to layoffs, airlines were forced to renegotiate labor contracts (Logan). Lingering effects of the 9/11 attacks continued over the next few years. Airlines struggled to match the decline in passenger traffic by cutting capacity and changing route destinations (Tyler). This spanned the development of low cost carriers and air fares decreased over the next few years. The rising dominance of low cost carriers in the domestic market place caused the major U.S. carriers to shift capacity from domestic to international markets. Passenger traffic finally reached its pre 9/11 levels in 2004, although, profitability did not return until 2006 (Tyler). The airline industry also had to adjust to changes in consumer attitude. The Transportation Security
The airline industry is one of the largest global industries in the world. Airline companies in the airline industry have gone through challenging obstacles in the past decade. Many changes have occurred within the industry and increased regulations have driven up cost for the industry. The attacks on 9/11 left the industry in shock when planes were used in terrorist attacks in the United States. These attacks changed the mentality of the industry and shifted the focus towards safety. Safety was also a major concern in the industry with the breakout of SARS in 2003 and the H1N1 flu in 2009. The airlines had to ensure that public health and safety of the travelers were
Although there was a deregulation of the airline industry, the one significant component that did not change was the infrastructure of the airline industry. Constrained by the limitations of the airports and the air traffic control system, airlines did not see significant increases in profits despite the large growth and operations. As the airlines increased the number of flights and structure, the air traffic control system did not experience the same increase. Because the ATC system was still controlled and owned by the government, growth was, and continues to be slow.
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.
Immediately following the attack the airlines had a 4-day forced shutdown, costing them about $1.4 billion. The amount of leisure and business travel, especially for short trips, both declined greatly due to the extreme security measures that were now being imposed. On top of the unnecessary hassle that people wanted to avoid with airline travel, fear also kept some travelers from flying, adding to the loss of revenue for airlines. About 165,000 jobs were lost in aviation when this downfall struck, causing over 30 carriers to file for bankruptcy. The only profitable airline during the months following the attack was Southwest, but it still was not operating at its full capacity. Although President Bush tried to provide that airlines with some financial relief, the industry was still at a historically low point well into 2002. The Air Transportation Safety and System Stabilization Act was signed on September 22, 2001 and allowed airlines to receive short-term assistance of close to $15
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
P. Airlines are subject to extensive regulatory and legal requirements issued by The Department of Transportation and The Federal Aviation Administration. The industry has to comply with laws and regulations not only domestically but also internationally which requires significant spending. After 9/11, many new security measures have been put into practice, resulting in expenditures for equipment, training the personnel, federal and airport charges, security taxes and etc.
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
A drop in fares has been the best result of the Airline Deregulation Act of 1978. It has been the impetus for the increase in the number of flights, which in turn has spurred a drive for greater safety in airlines. But with the current airline market, this development has given us one negative. Since ticket prices have dropped to new lows, the realities of an industry which operates on such economies of scale dictates that only a few competitors have the capacity to operate within the market. This is not the desired effect of either political side on this issue, but it is an economic necessity with the environment that has been created, very similar to that of public utilities and phone companies.
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
The airline industry has seen drastic changes since September 11, 2001. The government ordered a complete shutdown for three days of not only all commercial aircraft but such carriers as domestic flights and emergency aircraft. For days after September 11th, all aircraft stayed on the ground. Even military aircraft had to receive special clearance to fly. In a ripple effect, the entire economy of the United States and the world was put on hold. The New York Stock Exchange shut its doors because of the attacks on the towers of the World Trade Center.
Stagflation in US economy threatens outlook for the airline industry profitability. US airlines forecasting Q108 losses citing high fuel costs and a potential economic slowdown.
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
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).
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.
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.