The beginning of aviation dates back to 1903 when the Wright brothers made their first successful flight at Kitty Hawk. During this time in the early 1900’s, many people did not see airplane travel as an option due to the lack of safety appeal. World War I helped in the initial development of the industry; however, government research and development funding has resulted in a rapid decline in growth. Finally, in 1927, there was a breakthrough of greater interest in flying as Charles Lindbergh completed his journey across the Atlantic Ocean. .
In the United States, couriers also became one of the biggest factors in the growth of the air transportation industry during this period. The 1925 Kelly Airmail Act allowed private airlines to carry the cargo. Taking advantage of the profits of airmail, many private companies developed and eventually included passengers. Federal regulation began in 1926 when the Air Commerce Act was passed to assist passenger safety.
World War II helped generate aid for the research and development of airplanes, eventually leading to aid with commercial aviation. This help lead to the innovation of the four-engine aircraft which significantly reduced flying times. The planes were modernized, and jet service was introduced in 1959 to make cross-country service even faster.
The Federal Aviation Administration (FAA) was created after the Federal Aviation Act was passed in 1958, due to the large increase in air traffic that was occurring. The 1970s saw dramatic increases in costs, especially in fuel prices. The 1980s were marked by the deregulation of the industry, which resulted in the growth of smaller bikes and older bikes. The 1990s saw a dramatic increase in the number of travelers, including first-time passengers, as prices were cut and airlines increased their flights.
Cost Effective
Cost efficiency has become a significant factor in the ability of companies to compete and survive in the airline industry. Many companies within the industry value themselves as low cost operators, but this type of management approach does not take place when it comes to service. provided quality and in an efficient manner. The ability to use available resources to their fullest capacity at the lowest possible cost is very important in this concept.
The growth of “no frills, low cost” airline companies has changed the air industry. Major airline companies have tried different operating methods and fewer service offerings to lower the cost and fares of air consumers. Strong competition in the market forced the airline to respond or quickly fail. Without the ability to respond to increased cost efficiency, companies tend to fail mostly due to the rising costs of jet fuel in recent years. “Major drinks in US airlines saw a reduction in unit costs by over 10% between”
2004 and 2004, with a further 17% reduction in non-fuel labor costs over the same period”. (Smyth & Pearce, 2006) Again, the ultimate goal is to deliver services economically and efficiently to a specific target base. Pay for quality service.
“The causes of the dangerous industry are clear. The industry has always worked at high costs. Constantly high fuel prices, escalating insurance costs and working expenses, among other things, have exacerbated the underperforming economy with a particular vengeance. by the 9/11 string.” (May, 2003) As energy costs increase, fewer flights will be available and the prices will be higher. The airline industry is a very expensive business to manage and in order for these companies to remain active, they must work efficiently to increase their profits. This was and remains a struggle for many bows in business. Although the airline is still in demand in a struggling economy, there is much less demand for service than it used to be. Therefore, the consumer price will decrease and will continue to increase. Consumers who demand services will find alternatives as the price increases.
Economics
Several major attacks on the airline industry have severely weakened the ability for airlines to turn a financial profit. These include the terrorist attacks on September 11, 2001, rising fuel prices, the cost of replacing aging aircraft and rising wages among the airline workforce. All these factors are affecting the airline industry today and account for the immense amount of red ink in many bows balance sheet .
September 11, 2001 will always be considered a turning in American history. Terrorist attacks in New York and Washington D.C. It proved a major disaster for the airline industry. The airspace in the United States was completely closed for up to four days. Immediately following the attacks, the demand for the airline industry returned and the airline companies began to lose economic positions along with the number of flights. Six years on and the airline industry has since begun to emerge from the disasters of that day. Due to the included landings, the United States airspace industry saw losses of over $330 million per day. In the first week after the skyway was closed, the industry reported losses between $1 and $2 billion. Costs from the creation of the Transportation Security Administration, baggage screeners, and ticketing fees American are seeking to make substitutes such as skins, teleconferences, and webcasts that contribute to hindering the restoration of demand for the industry. Due to the decrease in demand, the price of airfares has fallen to accommodate the demand. However, the decrease in demand combined with high prices greatly reduced the industry’s revenue. This demonstration of declining demand in the airline industry has caused the airline industry to lose its value.
Rising fuel costs are also among concerns for the airline industry. Food is the second largest operating expense for airlines. For every cent increase in the gallon of jet fuel, the industry will suffer a cost of $180 million per year. “Again, in terms of consumption per day set off from 2005, every dollar increase in the price of a barrel of jet fuel adds approximately $1.3 million to the daily operating costs of the industry” (Heimlich, 2006). Some bows like the South could control the prices of food and therefore control costs in the effort to be a leader of short distances, low fares, high frequency, you ordered to show in the market. But these fuel contracts are for a fixed period. Many arcs are now forced to look at what they can do in the future to keep costs down as their fuel contracts expire. One solution has been the new wings, which breaks the drag coefficient through the jumbo wings and increases fuel mileage. Another very quick departure/arrival time. Jumbo jets consume most of their fuel in taking off, landing and sitting on idle axles. Some experts believe that fuel prices could easily be seen above $100 a barrel in the near future, while in 2005 the airline industry enjoyed a low price of $50.72 per barrel, (Heimlich, 2006).
Among the airline industry, labor constitutes the largest segment of operating expenses. Some 40% of the expenses for paying pilots, flight attendants, baggage handlers, rockets, and flight attendants. By reducing the number of aircraft in the fleet, cuts must also come from reducing the number of personnel working in the remaining fleet.
When reviewing the economic events that have faced the airline industry over the past several years, we see overwhelming evidence that the events that occurred on September 11, 2001, had a major impact on the airline industry. Demand dropped immediately resulting in a decrease in airfares even though not enough people were traveling through many arcs to earn a profit. New costs caused by security changes and delays directly pushed up energy and food prices. Airlines are constantly looking for ways to reduce their costs in an effort to be more profitable.
Weaknesses – Threats – Government
The airline industry has struggled over the past 5 years. The increase in credit card fraud, safety issues, and government intervention are all factors in the struggling industry. . Main and auxiliary expenses are fuel, insurance and labor expenses. These costs have driven the cost of flying. When the cost of flying increased, the demand for energy decreased dramatically.
He worked in the airline industry with great fraud; They think that there is a huge weakness in the bac industry. “The average airline experienced 446 fraud cases in 2006, with external fraud accounting for 413 of them. Although they included counterfeit or stolen tickets, theft of goods, false claims, frequent flyer abuse and boasting advertisements, the main culprits are omission abuse, cross-border ticketing, technology and Internet transactions and credit fraud. (Deloitte, 2007) “More than a third of airline They discovered credit card fraud, which adds up to about 60% of all foreign-related losses”. (Deloitt, 2007) Although this problem is not the only problem in the spotlight, it is a serious weakness that affects the entire industry. As more and more business is done online, the there will be more fraud credit card industry weakness According to Deloitte, “More business is conducted online today than six years ago was, especially in a small market in which airlines would make it financially profitable for passengers to book online. But with rewards comes increased risk.” Although fraud is one of the industry’s major weaknesses, many companies are trying to prevent it at high cost. “Delta reported a net loss of about $5.2 billion: $773 million, and $1.3 billion for the years ended December 2004, 2003, and 2002. respectively.” Datamonitor Delta Airlines 7) This is just one of many that has been taken seriously in recent times. Many airline companies have to drink, filing bankruptcy , and their profits remain in industry.
The biggest threat in the airline industry is the safety of passengers. After the 9/11 terrorist attacks, this was the biggest concern of many travelers. Safety is not only about terrorism, but overall safety is the most important concern of all flight operations. Two tragic crashes, ValuJet 592 plunging into the Florida Everglades and TWA Flight 800 crashing into the Atlantic Ocean, American made< /a> edgy The flying public has long counted on the Federal Aviation Administration to keep the skies safe. In the aftermath of these accidents, however, even officials such as former Transportation Department Inspector General Mary Schiavo criticized the FAA’s oversight of safety” (Kettl, 1996). With great concern for travelers, many travelers are choosing to fly instead. After the 9/11 attacks and the public recent airline crashes, many travelers choose bus, train, or car as travel instead of using airlines.
” There is interdependence between governments and airlines as airline governments sometimes use exercise policies conditions and airlines use the government for profit In addition, airlines sometimes join forces against the government (Hadzisavidis, 2006). they had to make safety regulations that governed the airline’s customers Although these changes were made to protect customers, many from the industry As time goes on, more customers are more likely to reconsider flying, but now there are more obstacles in the industry with rising fuel prices.
Competitive Structure
International competition and economies of scale are created within the airline industry through globalization, but the market is large and the cost is smaller, which creates an oligopoly market structure. This market structure gives airlines the power to set prices and change while producing similar services at different levels of output and competing with other firms within the industry. New entrants into an already established market make airlines vulnerable. Competitors typically lower prices for larger vehicles, because lowering prices still leaves them with higher costs. “Oligopolies tend to require high capital investment for their capacity which then becomes high fixed costs. About two-thirds of the cost structure of the airline industry is fixed costs.” (Hadzisavidis, 2006).
Periocha
“Although the airline industry continues to face turbulent times, higher passenger fares, longer lines, longer delays, and back-to-back service levels continue.” (Patiky, 2007) Along with economic disruptions, such as 9/11, the struggle within the airline industry has created a dramatic need for overall change. Cost efficiency and the ability of airlines to use resources to their fullest potential has become a very important concept in safety. The increase in food and labor costs has raised concern among airlines within the industry and has caused many to lower the number of planes they fly to help budget costs. The cost of flights is now rising and the services offered are being reduced to cut costs. Individuals, businesses and entrepreneurs also buy solo or partnership to buy private airplanes to save time and money.
It has become useful and affordable for businesses and personal developers. In fact, there are approximately 23,000 privately operated aircraft and access to more than 5,000 US communities. Time and money saved can significantly enable companies to operate and maximize their resources. Independent research shows that continuous time spent on your boat is actually more productive than time spent in the office.” (Patiky 2007) These aircraft carriers are now equipped with satellite communications and the ability to connect laptops, printers, and much more.
References
Deloitte & Touch LLC. (2007). Fraud in the Airline Industry. Retrieved April 27 from http://www.deloitte.com/dtt/cda/doc/content/UK_THL_FraudintheAirlineIndustry_Apr07.pdf
Energy Challenges Facing US Airlines A presentation on US airlines operating in an era of high jet fuel prices. Retrieved April 23, 2007, from http://www.airlines.org/economics/energy/fuel+QA.htm
Hadzisavidis, T. (2006). Impacts of Groups on the US Airlines Industry. Retrieved April 28, 2007, from http://www.mtholyoke.edu/~thadzisa/classweb/globalization_airlines/Oligopoly.htm
Heimlich, John. (2006, August). ATA 2007 Economic Outlook Q and A. Retrieved March 23, 2007, from http://www.airlines.org/economics/review_et_outlook/ATA2007EconOutlookQandA.htm
Kettl, D. (1996). Perspective on Airline Safety: Deregulation Increases Risk. Retrieved April 24, 2007, from http://www.brookings.edu/views/op-ed/kettl/19960724.htm
May, J. (2003). Air Transport Company of America, Inc. Retrieved April 27, 2007, from http://commerce.senate. gov/pdf/may020503.pdf
Patiky, M. (2007, June). The Illustrated Business Traveler. Forbes, Special Issue, 110-130.
Smyth, M. & Pearce, B. (2006). Airline Price Performance. Retrieved April 24, 2007, from http://www.iata.org
