The Airline Industry
The Airline Industry
Annise Hawkins
Strayer University
ECO 550
Dr. Youngblood
January 28, 2012
According to First Research (2010), the main products or service in the industry is air transportation. This includes the scheduled or unscheduled transportation of passengers, mail or cargo. The bulk of the revenues in the industry (estimated by first research (2010) to be 70% of total revenues) come from the scheduled transportation of passengers. Cargo and express mail contribute up to 10% of total industry revenues, unscheduled (i.e. Charter flights) gross 4% of total industry revenues, with the balance coming from other services such as “providing maintenance, servicing, training, and reservations. Some airlines carry only cargo, using specially equipped planes” (First Research, 2010, p.1).
The US airline industry is one of the key sectors of the country’s economy. Employing over ten million people, it contributes up to half a trillion dollars in annual revenues (about 5% of the US GDP). In recent years, the industry has been faced with major challenges arising from its external environment. Some of these include rising fuel prices and the global economic recession. As a result, growth in the industry has significantly slowed down with the Air Transport Association (ATA) estimating that by the end of 2008 the industry had lost between $9 and $24 billion. With high intensity of industry rivalry, high supplier bargaining power, low threat from new entrants, low threat of substitution, and low buyer bargaining power; the industry’s attractiveness can be described as moderate.
To be successful, players in the industry must exploit the opportunities offered by the external environment while overcoming the threats extant in that environment. To do so, they must adopt the following measures, which must also be in line with their internal strengths: cost reduction initiatives, product innovation and value addition to their service,
Annise Hawkins
Strayer University
ECO 550
Dr. Youngblood
January 28, 2012
According to First Research (2010), the main products or service in the industry is air transportation. This includes the scheduled or unscheduled transportation of passengers, mail or cargo. The bulk of the revenues in the industry (estimated by first research (2010) to be 70% of total revenues) come from the scheduled transportation of passengers. Cargo and express mail contribute up to 10% of total industry revenues, unscheduled (i.e. Charter flights) gross 4% of total industry revenues, with the balance coming from other services such as “providing maintenance, servicing, training, and reservations. Some airlines carry only cargo, using specially equipped planes” (First Research, 2010, p.1).
The US airline industry is one of the key sectors of the country’s economy. Employing over ten million people, it contributes up to half a trillion dollars in annual revenues (about 5% of the US GDP). In recent years, the industry has been faced with major challenges arising from its external environment. Some of these include rising fuel prices and the global economic recession. As a result, growth in the industry has significantly slowed down with the Air Transport Association (ATA) estimating that by the end of 2008 the industry had lost between $9 and $24 billion. With high intensity of industry rivalry, high supplier bargaining power, low threat from new entrants, low threat of substitution, and low buyer bargaining power; the industry’s attractiveness can be described as moderate.
To be successful, players in the industry must exploit the opportunities offered by the external environment while overcoming the threats extant in that environment. To do so, they must adopt the following measures, which must also be in line with their internal strengths: cost reduction initiatives, product innovation and value addition to their service,
References: Air Transport Association (ATA). (n.d.). A new vision for moving America. 2009 Economic report, retrieved on 28 Jan 2012 from. Retrieved from http://www.airlines.org/NR/rdonlyres/83BC223A-6855-4257-B74C-209A43C70F65/0/2009AnnualReport.pdf Gale Encyclopedia of American Industries. (n.d.). Retrieved on 28 Jan 2010 from. Retrieved from http://www.answers.com/topic/air-transportation-scheduled International Air Transport Association (IATA). (n.d.). Retrieved on 28 Jan 2010 from. www.iata .org/NR/rdonlyres/A33BC4B3-431B-4690-BE6D-6788900C8AE3/0/IATAAnnualReport2009.pdf Research, F. (n.d.). Retrieved on 28 Jan 2012 from http://www.firstresearch.com/Industry-Research/Airlines.html. Robbins, S and Coulter, M. 2008. Strategic management. John Wiley and Sons. Smyth, M, & Pierce, B. (n.d.). Airline cost performance. IATA Economics Briefing No 5, Retrieved on 28 Jan 2012 from www.iata.org/NR/rdonlyres/52205DC1-8AE5.../CEOBriefSept2006.pdf.