Airline Industry

Topics: Airline, Price discrimination, Yield management Pages: 4 (1171 words) Published: October 26, 2013

The U.S. Airline Industry in 2009

At the beginning of the twenty-first century, airlines were the most dominant mode of long-distance transportation in the U.S. Shorter journeys were usually traveled by means of car, bus, or rail. Case 3: The U.S. Airline Industry in 2009, discusses the financial crash of 2008 and the tragic events that accorded on September 11th and how it affected the airline industry. The financial crash in 2008 led to a downward spiral for the entire economy. Airlines seen a massive decline in passenger traffic and an increased cost for labor, fuel, equipment and facilities. Due to airlines crisis years, 2001-2009, major airlines also had to cut cost. Union contracts were renegotiated, inefficient working practices were terminated, routes that were not profitable were eliminated, and employment numbers were reduced. Airlines were already losing many of their loyal customers, as a result of increasingly cut back on customer amenities. Even though there were cutbacks on customer amenities, airlines still found a way to continue providing first and business- class ticket holders with amenities like, spacious seats and intensive in-flight pampering. Leisure customers were not thrilled about the actions of these airlines. The airline industry needed to develop a strategy that would make them profit once again and gain back the loyalty of their customers. Porter Model

To help analyze the airline industry, I will use the Porter Model. The Porter Model focuses on five forces of competitive position: bargaining power of suppliers, threat of substitutes, bargaining power of buyers, threat of new entrant.

Bargaining power of suppliers help us determine how easy it is for suppliers to drive up prices. If there are fewer suppliers to choose from the company must then rely more on their current suppliers. This means the suppliers are powerful, making the profit maximizing potential of the industry high.

Threat of substitutes...
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