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Airline Industry Case Study

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Airline Industry Case Study
I. Economy
The economy plays a very large part in the airline industry. Recessions are known to cause less demand for air travel for both business and leisure travelers. The financial crisis in 2008 had an extremely negative impact on the industry. The companies saw sharp declines in both passenger traffic and profit margins. While the industries are still in a sensitive spot, the US airlines managed to make a small profit in 2009. Thanks to the efforts of combating the dwindling demand by shrinking capacity, US companies were able to enjoy a small victory.
II. Technology
Recent advances in technology have made the airline industry more competitive than ever before. Websites like Expedia and Orbitz have caused companies to be extremely cost-conscious since customers can effortlessly compare prices. The rise of telecommunications has allowed business professionals to hold meetings in the comfort of their own homes. This has had a negative impact on the airlines, since business travel was a very profitable market for them.
III. Socio-Cultural
Ever since the tragic incident that occurred on September 11, 2001, the airline industry has never been the same. The fear of planes being hijacked has customers thinking twice about taking that flight to visit family, or go on vacation. Customer safety has been a double-edged sword for the airlines, as increased security has been incredibly scrutinized. A customer wants to feel safe while on a plane, but at the same time they do not want to be subjected to a thorough pat down by airport security.
IV. Political/Legal
Government deregulation on the airlines can be largely contributed to the current state of the industry. The option for companies to file for Chapter 11 bankruptcy allows the firms to seek protection from their creditors and existing contracts. This practice became quite the issue as successful companies couldn’t compete with bankrupt airlines and the artificial costs that were low.
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