The Changeable Nature of the Air Transport Markets Over the last five years the air transport markets were marked by three main crucial events; the economic recession, the rise in fuel prices and terrorism. All these factors had an enormous effect on the passenger market, which included business (network carriers, business focused carriers, fractional ownership and private charters), the leisure industry (network carriers, scheduled carriers and charter carriers) and the cargo market, which is divided in scheduled combination carriers (passenger & cargo and all cargo carrying aircraft) and all-cargo (integrators, airport to airport and charter). Recessions tended to hit the industry every 6-9 years and last for 2-3 years at a time. …show more content…
In the business market it is clear to see that this market aims at providing a premium service which include luxuries, for example the use of airport lounges and bigger seats on the aircraft and people are willing to pay extra money for these luxuries. It is possible to assume that in times of recession and rising fuel costs that pricier seats, such as the seats in business and first class, would be less popular and harder to sell but that does not seem to be the case. IATA estimated that average ticket costs for business class flights have risen 8 percent in the first half of 2010. Business travellers make up 8 percent of overall passenger numbers but contribute 27 percent of ticket revenue, IATA said in its latest snapshot of the airline business. Premium travel has risen almost twice as far in percentage terms from its 2009 low as economy travel, but, such was the depth of the fall of the premium segment, current levels are still 10% below pre-recession peaks, whereas economy travel is now 5% above its pre-recession peak. The cargo market is expected to grow at a CAGR of 8.2% over the forecast period. Excluding the impact of the rapid post recession rebound in 2010, for the 2011-2014 period, the consensus view for air freight is that it will stabilize at 5% CAGR. This is slightly below the forecast growth in world trade (6%) suggesting a still conservative
The demographic characteristics of customers can be broken down by the class they choose to fly. First Class is chiefly attracting high-income earners, who are concerned with a high level of service and enjoy an air of exclusivity. These are knows as “comfort seekers” and they can include business magnates, federal politicians, sporting stars and a-list celebrities. The First Class market is highly concentrated; less than 3% of passengers will choose to fly First Class but those customers make up close to 30% in revenue for the airline (Keen and Strand 2007). Because the focus is on service and
This section will examine each of the five competitive forces that are active in the European Airline Industry. In this instance the buyers in the industry will be taken as passengers. Fuel companies, aircraft manufacturers and employees are the suppliers. Substitutes stem from modes of transport that fall under land and sea transit. Potential entrants are any airlines based outside of Europe or newly founded airlines based in Europe.
You are required to undertake a detailed examination of the changing nature of the long-haul transatlantic airline market. The market you are required to investigate comprises only the international passenger market (i.e. excluding the movement of goods by
Rising fuel prices has a huge impact on the airline industry. In an article published by the New York Times in 2007, oil prices were hovering ‘near $100 a barrel’ which caused the International Air Transport Association (IATA) to ‘slash’ their predicted profits for 2008 from ‘$7.8 billion to $5 billion’ (Clark, 2007). In 2008 high fuel prices were ‘dominant factor’ in the losses that faced the industry, and continued to same effect in 2009 (Dunn, 2009). Diagram 2 shows how fuel price has increased and fallen over the last 5 years.
In this assignment I was assigned the task of comparing 2 different airlines, one being a full service carrier and the other being a lost cost carrier, from United States of America, namely the Delta Airlines and South West Airlines. The points of comparison were market strategies, financial benefits, load factors, contrasting yield, revenues and passenger/cargo loads. The analysis was done on the business model and a long term strategy. Through this it would be known that which airline is performing better than the other. The disruption of air travel through various incidents like the terrorist attacks and global downturn, which can be considered as economic, political and social conditions, effect airlines adversely.
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.
In the airline industry, the two major market segments that can be readily identified are, (1) the Business travelers and (2) the Leisure traveler. This two segments to a large extent help airlines decide where to focus the first segment is driven by high ticket prices which helps airlines maximize the airlines yield
3,4- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the “ Deregulation” of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the
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).
Within the category of services, it applies to different types of customers such as family, solo travellers and business travellers, the key focus of this report is on the upper-class service for business travellers and how it influences business travellers to purchase a flight package from them instead of using their competitors Jet airways, British Airways or Emirates. We can discover the decision-making process and how it operates but it’s important to understand the marketing strategy behind the company that makes it very successful and attracts more business travellers to fly with them.
The implications of this analysis are that the focus on the Chinese market is justified. The Chinese air travel industry is booming, and indeed this is fueled by that country's rapid growth and the increased demand for
The growth of airline industry in any country is directly proportional to its GDP growth; the greater the business activity, the more air travel and the higher the GDP of the country. The demand
Airline ticket prices can vary from day to day, from airline to airline; with the most important variable being competition. Industry pricing for a market of such a magnitude is a micro-, and macro-economic decision. Its affects will in-turn effect the entire economy of the industry. We all know that when shopping for the cheapest price for an airline ticket, depending on various factors, Seaney (2011) you will pay hundreds of dollars more, or less, than the passenger seated right next to you. That being, the airlines primary goal is to maximize profit(s) on every seat, -on every plane, -on every route. This is the result of supply, demand, and price curve working cohesively
Demographic and geographic environment: Demand of air carrier is depending on population and geographic position which influence to economic of country. China, which has the largest population, is big market for travel industry. That relate on huge growth of air traffic in cross-straits between China and Taiwan while Korean airline can gain big profit in the last quarter of 2009 because their geographic position that on the doorstep to China (Geoffrey 2010, p42). Moreover, transport in some area suitable to travel by air. Furthermore, Natural environment become point of concerned in this industry.
Air freight market is not stable and might be weak because of uncertain international trade increase (Barnard,2015). There was fluctuation in air cargo demand over the last 10 years from 2006 to 2016 which indicates that cargo demand could be changed by some external and internal influences. Some figures were released about worldwide air freight market and presented that air cargo capacity increased 2.2%, comparing to 2014. While this was the 5% growth calculated by The International Air Transport Association (IATA), the growth of cargo volumes in 2015 was much slower than 2014(Barnard, 2015). However, some experts pointed out that global air freight market get a positive growth from 2011, and it is enjoying a relatively steady growth, due to the enhanced trade and economic recovery after the global financial crisis of 2008(Huang,2016). Because of sluggish world trade growth, air cargo suppliers face a lot of challenges including alternative transportation, perspective uncertainty and unexpected policy and here are some potential solutions: improving customers service, efficiency, security and reducing negative environmental impacts.