The Current Marketing Environment of the Airline Industry in Europe.

Personal consumption expenditure also increased in 1998 compared to 1997. Because the aging population will decrease the labor force growth, this will reduce the economy’s potential to produce. This will increase the cost of labor for the airline industry. Households in the Northeast and West spent more than the Midwest and South in 1995. Because regional spending patterns are partly determined by climate, spending by region is not likely to change in the years ahead. 4. Political/Legal Environment With the deregulation of the airline industry came the advent of hypercompetition and also a decrease in wages for airline industry employees. Censuses show a 10% decline in the relative earning of airline workers after deregulation. Excess government intervention will be the only thing that will inhibit the rapid growth effects of deregulation both domestically and internationally. 5. Global Environment Growth in international travel will be determined on the successful application of Open Ski legislation and other agreements with foreign governments and carriers. On June 16, 1999, the United States and the United Kingdom were on the verge of a break through in their negotiations on an open-skies agreement between the two countries. This would create an open and competitive environment in one of the world’s largest international aviation market. The European Community has been working on its own version of Open Skies deregulation. European regulation is a national

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.

The airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B.

The sector employs more than 3 million people. Prior to the 1990’s, the air transport industry in Europe had been traditionally highly regulated and dominated by national carriers and state owned airports. Since then a single market for aviation has been created. The single market has seen the removal of all commercial restrictions for airlines flying within Europe. These include restrictions on routes, number of flights and the setting of prices.

Based on these factors, we can conclude that with the strict safety and operational rules and regulations imposed by the regulators in current political environment, stiff competition from the budget “ No Frills” carriers, the evolution of the passenger profile and airline accidents ( missing planes / air plane crashes and environmental progresses have affected the viability and profitability of the global airline industry.

Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.

One of the most important events in the U.S. aviation history and in particularly commercial aviation is the Airline Deregulation Act of 1978. With the signature of the act by Jimmy Carter started a new beginning of a never seen before airline approach in the United States. This new approach did not just changed the way passengers experience airline aviation with the freedom of pricing and routes, but it affected as well other areas such as aviation safety and employment. Its creation encouraged development by relying in a competitive market that was going to determine the variety, quality and price of air services. Before the act came into effect, the Civil Aeronautics Board (CAB) controlled factors such as: routes, ticket’s prices and charters

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.

The Airline companies now a day are mainly depending on marketing to attract new customers and to maintain sustainable relationships with them by promotions, Rewards and Loyalty programs.

Section four, will be an overview of post-deregulation strategies and its success. Section five, will address the present day oligopolistic domestic airline market and explain how it is hurting social welfare. Section six, will present methods such as “mergers” or “alliances” which are being utilized to prevent competition. Section seven, will outline the major historic event of 9/11 and the impact it had on the airline industries, as it strongly called for government involvement. Lastly, I will conclude with few remarks.

Airline deregulation was the process of removing the government imposed regulations on the entry of new airlines as well the airline fare limiting the competition and growth of the airline industry. In the United States, airline deregulation mainly refers to the Airline Deregulation Act of 1978 signed by President Carter. President Carter signed the Act, but the act was proposed initially during Nixon’s administration, and carried through Ford administration. The airlines industry was growing dramatically during 1960s and mid-1970s. Due to the steady increase in air travel, and strict regulations imposed by the Civil Aeronautics Board, the industry faced three major difficulties- lack of free and stable market, high ticket prices leading to poor productivity, and rising labor and fuel costs. Airlines have adopted many new strategies ever since the industry has been deregulated. The path since the deregulation has been challenging, as the airlines have faced various hurdles such as terrorism, war, recession, high fuel prices over the years impacting the economic structure of the United States. These challenges have raised the question concerning whether the deregulation should be considered or even reversed.

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.

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

With the demand on transportation and advancements on technologies, airline industry became one of the fastest developing industries on the world. These developments, high leveled competitive market and the never-ending demand on faster transportation reduced the plane ticket

Nowadays, the commercial competition has surpassed the limits of the previous era in which dominant markets are protecting their set market shares. Mega commercial activity back then was completely regulated by the government. The United States has privatized a lot of sectors related to energy, telecommunication, and transportation sectors. In response, the USA introduced the deregulations in the aviation industry to increase the competition in the aviation market.