Air Transportation: ATA Airlines - Case Study Example

Air Transportation: ATA Airlines The American airline industry is a vital segment of the national economy which helps to shape the entire economy. Airlines are crucial part of America’s transportation and the nation’s financial security. This essay explains various aspects of current operations and challenges faced by the commercial airlines after the terrorist activity of 9/11. This also gives a brief history of American Trans Air (ATA). This essay also looks into the quality of its service and delays through the reviews of passengers who used this airline. The future trend is positive and the demand for air transportation is going to rise enormously and to handle such huge demand modernization of ATCs and airports are vital. Further, challenges due to the rising jet fuel price also to be solved. Air Transportation: ATA Airlines American Trans Air was founded in August 1973 to supply aircrafts to Ambassadair travel club and its first aricraft was a Boeing 720 named as ‘Miss Indy’. A second Boeing 720 (Spirit of Indiana)was added to it in 1978. In March 1981 ATA acquired the common-air carrier certificate. ATA started its functioning as a charter carrier in 1981, with eight Boeing 707s stationed at Indianapolis, Indiana. The first DC-10 was added to American Trans Air in 1983 and another one of its type was introduced in 1984. The airline substituted the 707s with Boeing 727-100s in 1984, and inducted Lockheed L-1011s in 1985, and Boeing 757-200s in 1989. ATA started its scheduled operations in 1986 between Indianapolis, Indiana and Fort Myers, Florida. ATA started scheduled flights service from New york Kennedy Airport to Belfast, Riga, and Lavita in 1990 by using Boeing 757-200 aircraft. During the Gulf War in 1991 ATA carried out several sorties carrying military personnel and equipments. In 1993 the Boeing 727-100s were replaced by Boeing 727-200s in 1993. The ATA offered scheduled services from Chicago Midway International Airport to all major airports throughout United States, in addition to flights to Hawaii and also provided extensive military air charter services. ATA decided to expand its fleet in 2000, by inducting 39 new Boeing 737-800 aircraft and 12 Boeing 757-300 aircraft to operate from Chicago Midway International Airport. In the same year the airline also started scheduled flights to Mexico and was titled as a major air carrier by the United States Department of Transportation. A new logo was introduced on these new aircrafts giving more importance on ATA as a ‘business airline’. The names American Trans Air and Air tran Airways caused confusion in general public and customers. American Trans Air was known as ATA since beginning of its history. In 2002 the name of holding company was changed to ATA Holding Corp, and in 2003 the name again was changed as ATA Airlines, Inc. In 2005, ATA radically braught down flights centered at its Indianapolis to three destinations and focussed scheduled flights at Chicago Midway International Airport for the purpose of promoting Southwest Airlines codeshare flights. Because of this new codesharing agreement revenues went up approximately by 20%. In order to reduce the operating costs, ATA downsized its fleet in March 2005, by giving back twenty Boeing 737-800 and eight Boeing 757-300 and many Boeing 757-200 aircraft to the lessor, the Boeing. Further ATA outsourced all its maintenance work to overseas and domestic contractors. ATA announced its third round of downsizing by suspending flights from Chicago Midway International Airport to San Francisco, Orlando, and Fort Mayers in April 2006. ATA became a private company in January 2006 when Mr. Matlin Patterson invested $100 million over ATA and in February 2006 it came out from bankruptcy protection(Wikipedia, 2007). In order to maintain the quality of an air line it is very important to keep up the scheduled timings and provide a high quality services to passengers. A passenger who traveled in American Trans Airlines from Illinois to Las Vegas in April 2000 explains his experience with its service and maintenance of scheduled timings. The specialty of ATA is that they have non stop flights and they offer hotel package deals at lower rate comparing to other major airlines. Passengers were told to reach airport an hour and a half before the flight. Even though the check in took only 5 minutes, checking of baggage was time consuming. The plane arrived on time but departure was delayed by 10 minutes because of late arrival of some people and the airline had to load their luggage too. The flight back was a different story. Even though the passengers were asked to reach airport 2 hours early, due to some mechanical errors the flight was delayed by 3 hours and there was no alternative flight arrangement made for the passengers. Exactly after 3 hours delay the flight took off back to the destination. The seats were cozy but were small and close to each other and not enough for large person to get accommodated. The flight attendants were very professional, quick and efficient and did their job well. On board services were good. There was movie and the movie screen was placed in front of the section. The food served was good and tasty. The flight up and down were very smooth and comfortable. Except the 3 hours delay of the flight back and tight seating the flights were considerably good and the price for it was matchless. However, this reviewer has given a three star product rating (Epinions.com, 2000). Another user of American Trans Air in January 2003 criticized that ATA did not have any listing of flight information monitoring system displayed even though they claim that their website has up-to-date flight information. He had experience with ATA flights four times and he found it were unpleasing except the lower rates of flight charges. The flights are manageable for shorter destination like Boston to Chicago, but not for long distance destinations like Boston to Los Angeles. The seating were most uncomfortable and extremely narrow and one has to keep his elbows tucked in through out the flight in order, not to disturb the person sitting at the next seat. ATA claims that its new aircrafts have comfortable leather seats, but the non-breathable upholstery leather seats made it still worse. One good thing was that new aircraft had neat head rest with sides on them so that one would not fall on to the neighbor. ATA did not serve good meals and they are stringy on entertainment. But they serve some soft drinks, coffee and tea free. The nice part of his flying experience was seeing the sunrise over Lake Michigan. He explains that his flight from Chicago to Boston was the best of the four because of the sunrise, the view of Boston from the harbor, and the fact that he was alone in an entire row. Where as the other three flights were crowded. However, he did not recommend ATA flights to public and his product ratings were two stars (Epinions.com, 2003). As per the review made by another person who used American Trans Air in November 2005, explains his experience of the journey from Washington, D.C. to Chicago. In recent times ATA not only increased their scheduled flights but also replaced the old DC-10’s with new Boeing 737-400s. They are new, but not specious. One of the major credibility of ATA is that it has one of the best safety maintenance records in the industry with no crashes or fatal incidents reported. This was a Boeing 737-800 aircraft. The seats were leather but not wide enough to accommodate persons little over size and leg room were small. The food service on short flight was little or not available at all. In longer flights they offer food packets such as salads and sandwiches for which one has to pay. Alcoholic drinks were priced $5 and if one need to have soft drinks second time he has to ask for it. For entertainment there were TV screen placed every after six seats or so and separate music channels but the audio quality was not so good. The staffs at the airport were friendly and helpful and in the aircraft the cabin crews also were helpful and quite cooperative. ATA flights fares are very cheap comparing to other air lines especially for one who takes the flight to leisure destinations. Even though the on-time record of ATA is poorest in the industry, the safety record of this airline is one of the best. The reviewer has given a product rating of three stars (Epinions.com, 2005). From the above reviews it is very clear that there is a lot of improvement needed to update the operating quality of the airline. But there are various other reasons for the industry to run in huge loss. According to the Statement of James C. May President and CEO Air Transport Association of America, Inc. in March 2003, explains that the airline industry is in critical condition. There was heavy loss for two major air lines which represent more than 20% of the industry and are in bankruptcy. Passenger airlines have accounted over $10 billion in 2002 net losses. There is an increase in debt while market capitalization continues to decline. The reasons for this worse condition of the industry are obvious. The high fuel prices, rising security and insurance costs and increasing labor expenses, and in particular the after effects of 9/11 vengeance caused the industry’s economy to worsen. The operating cost has been cut for the top six network airlines in 2002. All other capital expenditure has been cut by almost 50 percent from 2000 levels. Also to lessen operating expenses, staffing has been reduced throughout the industry. Even after these measures, the industry faced loss of billions in 2003. Considering all these points The President and CEO of Air Transport Association of America suggests on the Reauthorization of the Federal Aviation Administration to conduct the business on a healthy functioning of air traffic control system and airports and without these it is impossible to accomplish progress in the airline industry (May, 2003a). Read C. Van de Water, Assistant Secretary of Transportation for Aviation and International Affairs, stated that during the previous years the industry has proved to be flexible and there is a hope because despite huge losses for the industry as a whole the low-fare airlines were profitable and were expanding their operations. Individual network airlines were also improving on their costs control. The fundamental reason for the surfacing of the low-fare airlines was the low costs which permitted the new carriers to charge such low fares that could gainfully provide the required sector that was usually under served by the large network airlines. The success of this approach has become a serious warning to the ongoing capability of the larger airlines that they too have to reduce the costs. Both these types of operation are essential mechanism of the nation’s airlines management. Low-cost airlines are an important aspect of the commercial air travel system. This could help price sensitive passengers who are otherwise faced with significantly higher prices (Van de Water, R.C., 2003). According to the FAA Aerospace Forecast Fiscal Years 2007–2020 (Review - 2006) indicate the commercial aviation differences of the year 2006. The high jet fuel prices impacts on the U.S. airlines compared to the rest of the world was different. The U.S. airlines increased fares, cut flights in domestic markets and raised their international flights. In the U.S., in spite of the higher fares and capacity reduction, on a net basis, the industry lost money for successive years. But out side U.S. the other world airlines made an estimated $3.2 billion profit. As per the data collected by the International Civil Aviation Organization (ICAO), world air carriers airlifted 2.2 billion passengers, in the year 2005. Even though global traffic results are not available for full year 2006, the demand for world aviation services sustained to grow in 2006. According to the financial data collected by ICAO, world air carriers, including U.S. airlines, accounted operating revenue of $4.3 billion in 2005. From the year 2000, world airlines have made operating earnings of $100 million but net losses of $36.9 billion. Air carrier monetary results in 2006 negatively impacted because of higher fuel prices. Since last five years three distinct trends have occurred which helped to shape today’s U.S. commercial airlines industry: major restructuring and downsizing among the major network airlines; rapid development among low-cost airlines, mainly in nontraditional long-distance transcontinental markets; and outstanding expansion among regional airlines. Since the year 2000, the domestic capacity has improved by 1.9 percent. Network airlines reduced their domestic service by 20.6 percent but low-cost airlines have increased their service by 57.0 percent and regional airlines have increased capacity to an enormous 141.3 percent. U.S. air carriers recorded a third successive year of strong gains in global capacity and traffic in 2006. International Revenue Passenger Miles (RPMs) and passenger enplaning were up 5.6 and 6.0 percent, respectively, in 2006 with rapid growth reported in the second half of the year. The U.S. commercial airline industry improved its financial results in 2006, regardless of high oil prices, even though differences continued between passenger and cargo carriers, and between domestic and international markets. In fiscal year 2006, U.S. commercial airlines recorded a profit of $5.5 billion and a net loss of $200 million, the least since 2000. Passenger airlines recorded an operating profit of $2.9 billion and a net loss of $1.8 billion in 2006. Since 2000, for the first time, passenger airlines improved its operating profit by $1.5 billion in domestic markets and global operations continued to be profitable. Though in general financial outcome for passenger airlines bettered in 2006, there were visible disparity between the carrier groups. The low-cost airlines recorded joint operating and net profits of $911.6 million and $1.5 billion, respectively, in 2006. But, these outcomes were twisted by the surfacing of American Trans Air from bankruptcy protection during the year. Not including the American Trans Air’s financial positions, the low-cost carriers made operating and net profits of $822.9 and $46.9 million, respectively. Tough competition from the network carriers and high fuel prices hurt the low-cost carriers’ profits. On the other hand, the cut in capacity, joined with fairly strong demand, made a sharp increase in domestic passenger outcome. Low-cost carriers’ passenger earnings improved 10.3 percent in 2006 while network carriers passenger earnings improved by 8.7 percent. The airlines industry’s monetary losses were mainly from the seven network carriers’ domestic operations. These airlines estimated for 59.8 percent of domestic capacity and conveyed 49.7 percent of all domestic passengers in 2006. From 2000, the domestic operations of the network carriers recorded joint operating and net losses of $27.9 and $36.2 billion, respectively. The network carriers’ domestic operations sustained operating and net losses, in 2006 alone, of $141.5 million and $4.0 billion, respectively (FAA, 2006). From the above explanations it is clear that aviation has overcome the instability created by 9/11 and its aftereffects. During these periods the industry saw four network carriers enter bankruptcy and now came out of it. The FAA’s aviation forecast for 2007-2020 indicates that this trend will go on. Aviation is growing, and it has done so with retribution. Demand is increasing more than ever. Commercial aviation is expected to reach a billion passengers by 2015. It is expected a growth in passengers of 3.5 percent and the capacity to grow 4.3 percent. The load aspect is expected to rise by 80 percent. Air Traffic Tower operations have to grow at least two percent. It is expected constant increased passenger demand among low-cost airlines and smaller regional airlines and also continued growth in larger regional jets flying more point-to-point routes. The airline operations are projected to come back to traditional levels at most airports. However, the high cost of fuel continued to concern airline operations and the airlines flew fewer aircraft, which reduced the capacity. But low cost and regional carriers continued to make profit. One can be hopeful about the sustained improvement of aviation and the industry has shown itself to be extremely resilient (FAA, 2006). In order to face the future trend in aviation, one of most important challenge is that how to solve the aviation fuel price crisis. Airlines industries are doing a lot to save fuel. The airlines have insisted upon the high fuel-efficient aircraft and instructed the airframe and engine designers to produce fuel efficient aircrafts. Present aircrafts are almost three times more fuel-efficient than the previous aircrafts. This is accomplished by Changes in cruise speed, use of flight simulators, sophisticated flight planning systems, increasing load factors and the introduction of modern aerodynamic aircraft designs combined with modern engine technology. Airlines continue to further improve fuel efficiency through measures like taxiing on one engine, delaying startup and push back, removing all optional weight, and using ground power instead of on-board auxiliary power units. But, as of today choice for further improvements are limited (May, 2003b). James C. May, president and CEO of the Air Transport Association (ATA), emphasized the critical need to execute and fund a 21st century national air traffic control (ATC) system. He stated that an efficient and justifiably funded ATC system will assist safety and capacity enhancement that would benefit all sectors of the society. He explained that 21st century satellite-based technology, rather than the existing 1950s technology, would improve all system users – general aviation, corporate aviation, commercial airlines and the military. Such modern system, the U.S. airline industry would continue to develop its ability to move people and goods swiftly and cheaply. May emphasized that the ATC system must be funded such that income keeps the nation’s air trade lively and opens to consumer needs and can be provided fairly and predictably (ATA News Release, 2007). The present ATC system cannot serve effectively for the future demand. It has basic structural limitations, mainly attributable to the system’s dependence on ground-based navigation, radar and communications facilities which is not scalable and cannot handle future demand. It is not the system to meet the future growth of civil aviation. If the ATC system is not modernized, the result is that, delays estimated to increase in 2014 by 62 percent over 2004 levels. Those levels of delays are not tolerable. The Joint Planning and Development Office have anticipated that the cost of not meeting future airspace demand could come close to $40 billion annually by 2020. A satellite-based air traffic control system can reduce delays and jamming that if not, will happen. The benefits of a technologically modernized ATC system that is fairly funded will be wide and will be broadly spread throughout the user community. A modernized air-traffic system would reduce delays, restrict fuel related emissions, minimize fuel consumption and reduce travel times (May, 2007). References ATA News Release, (2007) ATA News Release: ATA Says Modernized and Equitably Funded ATC System Is Key to Meeting Needs of Travelers and Shippers in 21st Century, Air Transport Association of America, Inc., Retrived April 1, 2007 from http://www.airlines.org/news/releases/2007/news_3-21-07.htm Epinions.com, (2000). American Trans Air - Good Price, long Delays, Shopping.com, Inc. Retrived March 31, 2007 from http://www.epinions.com/trvl-review-62F5-1041AB13-38F23600-prod2 Epinions.com. (2003). ATA: Cheap, Loud, Hot, and Turbulent (Just Like Me!) Shopping.com, Inc. Retrived March 31, 2007 from http://www.epinions.com/content_87810543236 Epinions.com, (2005) ATA...American Trans Air.....(Not So) Fashionably Late Shopping.com, Inc. Retrived March 31, 2007 from http://www.epinions.com/content_161757630084 FAA, (2006) FAA Aerospace Forecast Fiscal Years 2007–2020. Retrived April 1, 2007 from http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2007-2020/media/FORECAST%20BOOK%20SM.pdf May, J. C. (2003a). ATA Testimony - FAA Reauthorization, March 12, 2003, Air Transport Association of America, Inc. Retrived March 31, 2007 from http://www.airlines.org/government/testimony/ATA+Testimony+-+Statement+from+ATA+President+and+CEO+James+C+May+on+FAA+Reauthorization.htm May, J. C. (2003b). Oil Supply and Prices  Statement of James C. May, Before The Committee On Energy and Natural Resources U.S. Senate Hearing on Oil Supply and Prices, February 13, 2003. Air Transport Association of America, Inc., Retrived April 1, 2007 from http://www.airlines.org/government/testimony/ATA+Testimony+-+Statement+from+ATA+President+and+CEO+Jim+May+on+Oil+Supply+and+Prices.htm May, J.C. (2007) Statement of James C. May, Before The Aviation Subcommittee of The Senate Committee on Commerce, Science and Transportation Concerning FAA Reauthorization Legislation, March 8, 2007, Air Transport Association of America, Inc., Retrived April 1, 2007 from http://www.airlines.org/government/testimony/ATA+Testimony+-+ATA+President+and+CEO+Jim+May+Testimony+on+FAA+Reauthorization.htm Van de Water, R.C., (2003). Remarks of Read C. Van de Water, Assistant Secretary of Transportation for Aviation and International Affairs before the 2nd Annual MIT Airline Industry Conference Washington, DC, April 8, 2003 Retrived March 31, 2007 from http://ostpxweb.dot.gov/aviation/Speeches/MITspeech4-8-03.pdf Wikipedia, (2007). ATA Airlines, 29 March 2007, Wikimedia Foundation, Inc., Retrived March 31, 2007 from http://en.wikipedia.org/wiki/ATA_Airlines Read More