Airline Industry Analysis
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U.S. Airline Industry
The airline industry is a complex industry. It involves huge capital requirements for aircraft, observation by government regulations, limitations and state policy, competitive reaction from substitute tourist transport and requires high level of expertise to operate and manage.
In 1993, the U.S. Airline Industry sustained enormous losses. A United States government report published in 1993 indicated that the industry had, “Lost huge amounts of money in the past three years, and it has never made a sustained, substantial return on investment.” Among this industry slump, Southwest Airlines was the only airline to post a profit in 1992. There are four general areas in which an airline must be effective in to be successful, these include; attracting customers, managing its fleet, managing its people and managing its finances.
Customers of an airline are mainly concerned with the attractiveness of the airlines services. The typical airline passenger is price sensitive; therefore, the most significant factor of attracting customers is the attractiveness of the ticket price. Relatively, a lower price would generally be more appealing to the majority of travelers.
In the area of fleet management, airplane utilization in hours per day deals with how well the companies fixed assets are used as a group. The load factor is defined as the proportion of an airplanes seats that are sold and actually filled at departure. The load factor relative to the industry average indicates how successful the average individual plane is utilized. The industry average for load factor is
There are two main factors with respect to how well the airline manages its people. First, productivity is a measure of how effectively the employees work together in providing the physical service of getting passengers from one place to the next. Second is morale, which is a measure of how