Task 1 Conduct desk research
Consider the air travel industry’s environment, conduct research on the main forces in the macro environment facing air travel industry companies. Based on your research prepare a report. Your report should cover the following information a)Background of the research
Industry Specific Metrics
Aircraft Utilization: The most basic metric for an airline is aircraft utilization. This is a measure of the average number of hours that each aircraft is flying in each 24 hour period. Planes that are flying are probably making money. Planes that are sitting on the ramp, whether undergoing maintenance, suffering delays due to weather or waiting for crews to fly them are not making money. Utilization is a statistic that varies from carrier to carrier and is normally considered a closely guarded corporate trade secret and is not tracked by government. Part of the "art" in running an airline is keeping utilization high. Load Factor: The next most important metric for an airline is the Load Factor, which measures the percentage of available seats that are filled during a specific period. In 2007 load factors for major airlines ranged from 72-84%. In 2008 U.S. airlines averaged a Load Factor of 79.74% on domestic flights and 78.74% on International flights  Available Seat-Miles (ASM): The ASM metric is used to track seat supply among airlines. ASM is equal to the number of available seats times the number of miles flown. Revenue Passenger-Miles (RPM): RPM measures the number of seat miles flown for which the company earned revenues. That is, RPM equals the number of filled seats times the number of miles flown. Yield: The amount of revenue earned per RPM is known as the airline's yield. This metric is generally expressed in cents and ranged from 9.8-13.1 cents for the major airlines in the first half of 2007. Fuel Costs: Most factors that affect the profitability of airlines are fairly stable, except for fuel costs. Fuel costs are facing extreme risk from the threat of Peak Oil. During January 2009, airline fuel costs averaged $1.76 USD per gallon. Trends and Forces
Joseph Weisenthal said in a recent post Airline-In-A-Box: Few businesses have as many variables and challenges as airlines. They are capital-intensive. Competition is fierce. Airlines are fossil fuel dependent and often at the mercy of fuel price volatility. Operations are labor intensive and subject to government control and political influence. And a lot depends on the weather. The "Dual Mandate" Problem
The general public, including most investors, is not aware that congress long ago created what is referred to as a "dual mandate" for regulation of the airline industry. This means that the Federal Aviation Administration (FAA), which is a sub-agency under the U.S. Department of Transportation (U.S. DOT), is charged with both the promotion of the airlines and the safety regulation of the airlines. This creates an obvious conflict of interest and the dual mandate has been questioned and criticized for decades. The question has been asked if the FAA should be divided into two separate divisions, one that would function as a "Department of Airline Promotion" and another that would function as a "Department of Safety." Another proposed solution is to shift the "sky police" functions involving safety to the National Transportation Safety Board (NTSB). Although the NTSB seems like it might be a good solution to police safety, the political realities of the U.S. Congress, the FAA hierarchy and the extreme size and funding imbalance between the two agencies make it impractical and unlikely that any shift would be feasible. The FAA generally maintains that they do not "directly promote" the airlines, which is true in the sense that the public doesn't see billboards and television commercials and email campaigns from the FAA promoting airlines. However, the FAA indirectly promotes the airlines in a huge way on...
Please join StudyMode to read the full document