The History Of The Airline Industry

“A Tale of Two Airlines” is an article written by Christopher Elliott to educate to economy on travel planning. He was born on May 31, 1960. He is a journalist and consumer advocate who writes for people who want to become more informed travelers (www.nbcnews.com/id/10912488/ns/travel/t/Christopher-elliott/#.Vc_RIO9RGM8). He is known for his many articles with the National Geographic Traveler Magazine and being a travel columnist with the Washington Post and USA Today. A Tale of Two Airlines or is Good Vs Evil in the air; Southwest Airline vs Spirit Airlines.

Southwest Airlines was incorporated on March 15, 1967, in Texas as Air Southwest Co. by Rollin King and Herb Kelleher. At the time, Southwest Airlines had a fleet of three Boeing 737 aircraft serving Dallas, Houston, and San Antonio. Southwest Airlines Founder Herb Kelleher had faith that by operating within Texas, the airline could escape from federal regulation. According to SWA, on February 21, 1968, Braniff, Trans-Texas and Continental Airlines attained a provisional restraining order from a District Court forbidding the Texas Aeronautics Commission (TAC) from delivering SWA Certificate. On May 13, 1970, the Texas Supreme Court unanimously votes to overturn the lower courts ' findings and rules in favor of Air Southwest (SWA, History by Date, (1)). Conclusively, on December 07, 1970, the United States Supreme Court denies appeal by Braniff and Texas International (TI) of Texas Supreme Court decision (1).

In order to determine whether the Five Forces are still applicable, this part will analyse Industry in general concerning structural changes due to Digitalization. Because of Digitalization, another two forces significantly affect the competition which are Globalization and Deregulation. The impact of Globalization on the Industry structure is the customers gain benefit as comparing global prices become much easier and faster in from the Globalization process (Dalken, 2014).

Southwest Airlines was started 45 years ago in 1967 by two entrepreneurs: Herb Keller and Rollin King who had the right vision and culture by which to become successful entrepreneurial leaders. This vision was achieved as Southwest Airlines became the greatest airline in the USA. As a young business in the airlines industry, Southwest Airlines in the initial years confronted very tough situations, and it was due proper planning and with the assistance of its employees that kept Southwest Airlines afloat from sinking. There were already pioneer big companies well established in the airlines industry when Southwest Airlines joined the industry. Some of these companies had a good share of

Today Southwest Airlines is the biggest domestic passenger carrier in the United States of America operating more than 3,400 flights a day. They provide service to 93 cities and 5 countries internationally. Last year Southwest Airlines, “Enplaned approximately 136 million Customers (About Southwest). The airline has grown since it’s first years flying out of Love Field in Dallas, Texas. In the beginning, Southwest provided flight service to only three Texas cities in 1971. One of Southwest Airlines’ early advertisements was a double page ad that ran in Dallas newspapers during May announcing their first flight on June 18, 1971 (Lusk). This advertisement introducing a new airline would soon revolutionize the airline industry and create the new category, of low cost carrier, to the world.

Flight has become romanticized by humanity, it provides “Freedom”. Throughout the majority human history, humans have used land and water for their transportation needs. The invention of the airplane opened the use of a third medium, air. Flight only has the illusion of freeing us from earth. Airplanes would not be able to maintain flight without their ground based systems. These systems are arranged along flight corridors or airways. The Transcontinental Airway was the first major flight corridor constructed in the United States. The ground systems constructed along these corridors have made major impacts upon the landscape of the early 20th century.

The development of Trans Canada Airlines (T.C.A.)’s effect on Canadian immigration is often historically seen as one of the most important advancements in the construction of Canadian identity. TCA created thousands of new jobs for immigrants. The Airline also united the country, providing immigrants and tourists a rapid and reliable mode of transportation across the country, and with the transborder service and thousands of transborder flights to follow, it connected countries all around the world to Canada. Firstly, in only initial few years of the TCA, not only did it create thousands of new jobs, but it also managed to save Canadian immigration during the great depression. The depression had Canada almost completely halt immigration, due

2 Specifically, on June 13, 2008, Continental Airlines announced that it planned to reduce its flight capacity by 11 percent. By shrinking capacity, Continental expected to reduce the number of domestic and international flights from its three major hubs in Houston, Cleveland, and Newark (Maynard 2008).

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.

Airlines use a formula of combining their yield and inventory costs to determine ticket prices. While it is imperative to focus on the idea of being profitable, the focus is to maximize the cost of the flight revenue. One huge factor that encourages an increase in the cost of tickets relates to a customer ordering a ticket close to the departing date, define this as a risk factor because they need to make up for all unsold seats. A high percentage of the revenue is dedicated to overhead costs such as fuel and labor. When a ticket price is higher with one airline than the other, the customer interprets this as being an excessive cost. The demand is greatly affected by the external market

One of the world’s most competitive and prominent industries is the airlines industry. It generates huge amounts of income as well as employment each year. Some of the common names in US air travel service providers are Alaska, Northwest, Southwest, US airways, American etc.

Southwest Airlines was created in the late 1960’s by a businessperson Rolling King, and law school graduate Herb Kelleher, who sought a faster travel time between Houston, Dallas, and San Antonio, Texas (Dess, et al., 2014, p. C137). After overcoming all of the antagonism and legal problems of many major airlines, Southwest was able to take its first flight in 1971 (Dess, et al., 2014, p.C137). With a dedication and will power to grow the company, King and Kelleher sought out ways to increase growth.

In the airline markets, SIA has strong competition from not only Asia areas, airlines but also many international brand airlines such as United Airlines and American airlines (best airlines in American for 2012). Although SIA has a great brand reputation with global markets, but it also continually develops the new equipment in the busy airline industry to provide the new attractive point for increasing the customer satisfaction.

Closely linked to economy - The airline industry can be described as highly cyclical since it

In the last decade, Continental Airlines has had a spotty track record. The airline twice filed for bankruptcy, realized diminished performance culminating in a $613 million loss in 1994, and was ranked dead last in industry indicators such as on-time performance among the major carriers. During these years, employees at Continental had undergone several series of layoffs and withstood both wage cuts and delayed wage increases in an effort to slash Continental’s costs. The result of these efforts was a demoralized workforce and a corporate reputation that put Continental near the top of Fortune’s list of “least admired” companies.