U.S Airlines Industry Case Analysis
“Given the current instability in the global economy, there is much uncertainty as to the timing and strength of recovery in aviation demand” (Federal Aviation Administration, 2012, p. 32). A number of factors have affected the U.S. Airline industry; most of these factors are detrimental and threaten the viability of the legacy carriers, but also the long term success and survival of the low cost carriers. Without change in the current situation, many U.S. Airline companies will be at risk for complete loss. Synopsis of the Case
In the past decade the U.S. Airline industry has endured devastating setbacks caused by terrorist attacks as well as foreign and domestic economic troubles, the manifestation of which can be seen through increased fuel costs, decrease in work force, and a steady decline in those who actually utilize airline services. Relevant Factual Information
“Fuel prices represent the most volatile and unpredictable cost item for the airlines due to fluctuations in the price of crude oil” (Grant, 2010, p.41). Fuel expenses account for an estimated 40% of an airline’s operating budget, according to a 2009 study (Wensveen, 2010, p. 10). “The current price of crude oil is $96 per barrel” (Gorondi, 2013). There’s been a 10.8% decrease of people working in the U.S. Airline industry in the last 10 years (US Bureau of Transportation Statistics, 2013). In 2013 the nation’s air transportation will likely see a 1.5- 2% drop in traffic (Boyd Group International, 2013). Explanation of Relevant Concepts, Theories and Applications Derived from Course Materials Using Porter’s five forces of competition framework, it is clear that the U.S. Airlines industry is at risk. First, there is risk from competitors, often smaller airlines, who seize market share and have consistently lower prices. Second, the threat of new entrants. Obviously, there is...