US Airways Group - At the Back of the Pack - Essay Example

Ever since the industry was deregulated in 1978 intense competition and price gauging has made profitability increasingly difficult for the airline industry in general. After the stock market crash of 2008 and the economic recession that followed coupled with rising fuel costs were the direct cause of several airlines having to file for bankruptcy protection (Plunkett Research, 2010). The airline companies that survived the onslaught were presented with a volatile and fluctuating operating environment of rising fuel and energy costs, coupled with a decreased demand for passenger travel in general and negative impact on revenues mainly as a direct result of the economic downturn.

The rising costs have cut the margins in the industry so much that current the average net margin in the airline industry is two percent. The period of 2008 and 2009 remained a very challenging period for all the airlines with most of them struggling to remain profitable. For 2010 with the slow economic recovery businesses as well as private travel has increased significantly in volume, so occupancy rates in general for the airline industry have been full. When airlines are able to fill the seats of their airplanes to full capacity the company is optimizing the productivity of the operation.

When the latter occurs and companies have idle capacity issues airlines have to take drastic measures to fill those seats which includes price deductions to spur the demand for air travel. After the previous years of consecutive losses the airline industry in general returned to profitability. U.S. Airways just like any other domestic airline is subject to a complicated array of laws and regulations that limit their operations as well dramatically increasing their operating costs. With the advent of the Aviation and Transportation security Act of 2001 which mandated the standardization and federalization of airport security and mandated additional security procedures which increased operational costs tremendously airlines had to absorb the costs and imposed a per passenger tax on ticket sales in order to fund the additional security measures.

The Federal Aviation Administration is the federal agency responsible for regulating the airline industry operations, procedures and their operational safety, including aircraft maintenance. The FAA will regularly issue new directives and changes in maintenance schedules and procedures which create mandated operational costs that are also a factor in increasing airline operational expenses. Other proposals to address airport congestion in certain airports in the U.S. involve increasing pricing to take into account congestion or placing a tax on certain particularly congested airports.

This could potentially affect the airline industry in the near future by further increasing the costs of passengers to travel if these changes or suggestions are placed into law (Datamonitor, 2010). Further regulations and government legislation concerning pollution, climate change and aircraft emissions also post a significant operational threat to the airline industry as a whole. In the list of Fortune 1,000 : Most admired companies 2006, U.S. Airways Group was consistently ranked lowest in all the eight key attributes that were taken into account. U.S.

Airways Group achieved an overall score of 3.25 placing it as the least admired airline out of all the major competitors. For this survey U.S. Airways was ranked last in the industry in four of the eight