Title: The US Airline Industry in 2007
After years of losses the Us Airline industry is finally beginning to rebound from the 9/11 tragedy which saw negative profits at an all time high. The US airline industry is coming off a profitable 2006 and is determining what strategy is best to sustain such profits. With the industry’s abysmal past, companies need to make 2006 a fresh start and not slip back into past performance. Since profits in the industry have not been seen over the long haul, determining if it is even possible is a critical issue. In order to sustain these profits companies within the industry need to focus on key items that they can directly control such as turnaround time, and capacity utilization. Proper adjustments in these categories can greatly reduce operating expenses and increase profitability for the industry as a whole. Currently the industry is in good shape when compared to previous years. Companies have put a halt on adding capacity and are now more focused on filling the empty seats. This strategy is working out well as load capacity is up. This is even further enhanced by the strong growth in demand, which is a good sign for the industry as a whole. Throughout the industry there are many different strategies being implemented, from ones focused on price, to others focused on regional flights. One of the companies that has been able to utilize these differentiations to form a competitive advantage is Southwest, which has built a model around a low cost structure and a high degree of capacity utilization. Current external factors threaten the profitability of the industry. Being amidst a recession where we are likely to see depressed income levels and a rise in unemployment, the growth in demand for Airline services will likely peak off. With people having less discretionary income, vacations are likely to decrease and alternative methods of travel are likely to be used in efforts to save money. In addition the...
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