Orlando International Airport
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Table of Contents
Hexagon of Competitive Identity
Orlando International Airport
Since May 2008, Orlando International Airport has increasingly used higher fees to recover some of the expenses lost in their bulging fuel bills. This trend continued as revenue was hit by low passenger numbers. Additional charges have forced passengers to pay more to check in additional baggage, which can cost $50 or more each way, leading to a lack of pricing transparency in the Orlando International Airport. Airfares are quoted online without including these additional costs, and passengers are lured into purchasing seats by comparing airline airfares rather than the total costs. In contrast to Orlando International Airport, some airlines have introduced additional fees for bringing small pets onboard, attempting to expand the services they offer at a higher cost to the passenger. For most of the major players, revenue from additional fees and charges increased during 2009, compared with falling revenue from passenger tickets and cargo. Orlando International Airport made about $2.5 billion from additional fees in 2012. Some of these trends, however, have shown signs of reversing slightly. In the second quarter of 2013, airline passengers paid less in fees for carry-on and checked bags, compared with the same period of 2012 (Hendery, 2013).
Crippling Oil Prices and Fluctuating Profit
Before the global downturn in air travel crippled the industry, the movement of world oil prices significantly affected Orlando International Airport. The Air Transport Association estimates that for every dollar increase in the price of jet fuel (a derivative product of crude oil), the US airlines industry (domestic and international) incurs an additional $445.0 million in fuel expenses. The consequences of these prices have been severe for the Orlando International Airport. In 2008, a number of airlines ceased operations, struggling airlines merged (e.g. Delta Air Lines Inc. and Northwest Airlines Corp.) and Orlando International Airport increased code-sharing arrangements to reduce costs.. The mergers of some airline provided significant cost advantages for the operation of both airlines as one company; however, they needed approval from many different regulatory bodies and also needed to pass an antitrust review from the Department of Justice (Horn, 2012). Orlando International Airport have fared better than others during the crisis, particularly those with strong fuel-hedging strategies. The volatility in the price of oil forced airlines to hedge their fuel requirements more actively than may have previously been the case. Oil prices have been a constant headache for airline profit. Profit growth has been curbed by rising fuel prices (since they increase Orlando Airport’s expenses), so the transition back into the positive has been a relief after two years of major losses. In 2010, Orlando International Airport made it back into the black, with airport profit averaging about 3.8%. Amid rising fuel and ticket prices, Orlando International Airport profit has struggled to gain traction, but is expected to grow to 5.2% in 2013.
Over the five years to 2013, Orlando International Airport has experienced bankruptcies, consolidation and downsizing. The overall result has been a decline in participation, with fewer firms servicing the airline. The total number of enterprises is expected to decline at an average 0.5% per year to 173 from 2008 to 2013. The total number of employees in Orlando International Airport is expected to decline at an annualized rate of 2.5% over the five years to 2013 to 167,461, due to companies exiting, consolidating or cost cutting. On average, it is estimated that there...
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