The Airline Industry: Facing The Challenges Of The 21st Century

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The Airline Industry: Facing The Challenges Of The 21st Century

Peter W Jones

Volume 1

ECONOMIC DEVELOPMENT INSTITUTE Information Booklet Series III

October 2004
GLOBAL THINKING RESEARCH & DEVELOPMENT

2 TABLE OF CONTENTS

INTRODUCTION.....................................................................................................................3 AIR JAMAICA AND GOVERNMENT SPENDING..............................................................4 SOCIAL AND LABOUR CONSEQUENCES IN THE 21ST CENTURY TRANSPORT INDUSTRY ...............................................................................................................................7 PASSENGER AVERAGE TRIP LENGTHS AND FARE LEVELS IN ..............................11 US DOMESTIC MARKETS ..................................................................................................11 AIR TRANSPORT COSTS AND COMPETITION REGIMES...........................................13 AIR FREIGHT IN ASIAN MARKETS: BOOM OR BUST? ...............................................17 THE EFFECTS OF FARE SEGMENTATION FOR AIRLINE BOTTOM LINE .............23 UNDERSTANDING AIRLINE PRICING ............................................................................25 STATE OF THE U.S. COMMERCIAL AIRLINE INDUSTRY AND POSSIBLE ISSUES FOR CONGRESSIONAL CONSIDERATION.....................................................................30 AIRLINE INDUSTRY CASE STUDIES ...............................................................................41 CASE STUDY 1: THE IMPACT OF 11 SEPTEMBER 2001 ON THE CIVIL AVIATION INDUSTRY: SOCIAL AND LABOUR EFFECTS ...............................................................41 CASE STUDY 2: THE CONTRIBUTION OF THE AVIATION INDUSTRY TO THE UK ECONOMY.............................................................................................................................44 CASE STUDY 3: THE RUSSIAN AVIATION INDUSTRY ................................................51

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Acknowledgements
U.S. & Foreign Commercial Service And U.S. Department Of State Bureau Of Transport economics, Commonwealth Of Australia Honorable David M. Walker Comptroller General of the United States

Introduction

The last quarter of the twentieth century has seen vast change in the transport sectors of many countries, imposing much dislocation on both people and companies engaged in the provision of transport services. Some of the problems have resulted from macroeconomic instabilities like the Asian financial crisis of 1997 and 9/11 in 2001 but most have been the product of changes within the industry. These sometimes-harsh transformations have contributed much to broader social welfare by strengthening exporters' competitiveness significantly, by making possible improvements in the variety and price of goods available to local consumers, and by reducing the burden of transport on government budgets. However, in the Western Hemisphere, North America Airlines have been brutalized by these 21st century changes coupled with External shocks such as oil price increases and more recently acts of blatant terrorism.

This paper will look at the Airline Transport Industry, worldwide examining trends that many small and large airline have been forced to do in order to survive The Challenges Of The 21st Century.

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Air Jamaica And Government Spending

The Sunday Herald carried recently a very good investigative piece on Air Jamaica losing $JA33 Billion dollars over 10 years. It should be noted the last time Air Jamaica made a net profit was in 1974 of $US 250,000 under President Guillermo “Bigge” Machado(a Jamaican President). The Government has come out and said clearly they will continue to support Air Jamaica. In addition not mentioned in the article, IATA has stated that World Airlines for 2004 will loose $US5 Billion dollars. More importantly this speaks to a greater issue of Government spending and its effect or lack of thereof. In contrast...
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