Competitive Analsis Of Airline Industry - Essay Example

Competitive Analysis of Airline Industry Contents Discuss changes in market structure 3 Describe the quantity and skill level of the labor supply 4Reference 5 Competitive Structure and Resources Discuss changes in market structure The US airline industry has entered the mature phase of its life cycle, but with low future growth prospects. The changes took place three years ago. Industry forecast remains at the constant rate as it have been growing at 5% per year (CAPA, 2011). There are various factors which have helped the US airline in its transformation.

Firstly, the growth of low cost carrier has been marked as one of the significant trends in the airline industry. Secondly, changes in the services of air transportation. The pricing, network and the services structure are likely to change if some of the major airlines either reinvent or fall and the LCC evolve. The US have developed an assumption that inexpensive but high quality services are expected to be available around the nation (MIT, n.d). In case of Southwest Airlines, it has reported a profit in its third quarter end.

The airline has gained entry to Atlanta which was scheduled to start from April 2011. The carrier has also upgraded its aircrafts and planned to buy 208 Boeing 737 which included 150 of 737 MAX aircrafts with new engines. The airline enjoyed a profit of $125 million as compared with $131 million in the previous year. The share price of Southwest airline also rose to 2.9% (Jacobs, 2012). Delta Airways is regarded as the second largest passenger airline and is facing a stiff competition from the low cost carrier such as Southwest Airlines.

It has recorded a growth in revenue 13.15% in 2010 as compared to 2009 and net income grew from 1.23 million dollars loss to a profit of 593 million dollars. Delta has invested about $2 billion in airport facilities and global products, technology and services for 2013. Delta has planned to double its presence in New York. The company has entered into code share agreement with some of the prominent airlines worldwide (Delta Airlines Inc, 2010, p. 2). Describe the quantity and skill level of the labor supply The aviation sector requires a huge amount of labor for its maintenance and services.

The recent restructuring of labor cost in the competitive airline industry has proved to be substantial. There has been a decrease in the labor cost by the airline to improve its financial prospect. According to the US department of transportation, by 2011 there were only 159,051 full time employees in airline industry as compared to 2001. The workers live under a constant threat of layoffs, mergers downsizing. The labor relation in the airline industry has been characterized by distrust. The bankruptcies of airlines, such as Delta and Northwest, has led to a strained relationship between the labor and management.

It has been reported that there has been a shortage of skilled labors in the industry (Hirsch, 2006, p.33). The agreement of Aviation labor group is one of the important milestones as it enables the industry to meet the skill shortage of aircraft maintenance engineers (Aviation Labor Group, 2012). The skill required for labor in airline industry is ranged from a low level to engineers. Pilots and attendants are the occupations that come to mind first, but about 44% of employees work in office, which also forms an essential part of airline industry (BLS, 2009).

Reference Aviation Labor Group. (2012). Aviation Labor Group secures government deal. Retrieved on January 20, 2012 from http://www.aviationlabour.com/news/aviation-labour-group-secures-government-deal. BLS. (2009). Air Transportation. Retrieved on January 20, 2012 from http://www.bls.gov/oco/cg/cgs016.htm. CAPA. (2011). How consolidation has changed the US airline industry; more to come - US Airways Doug Parker. Retrieved on January 20, 2012 from http://www.centreforaviation.com/analysis/how-consolidation-has-changed-the-us-airline-industry-more-to-come---us-airways-doug-parker-49538.

Delta Airline Inc. (2010). FORM 10-K. Retrieved on January 20, 2012 from http://images.delta.com.edgesuite.net/delta/pdfs/annual_reports/2010_10K.pdf. Hirsch, B. T. (2006). Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints. Retrieved on January 20, 2012 from http://ftp.iza.org/dp2384.pdf. Jacobs, K. (2012). Southwest Airlines Co (LUV.N) reported a quarterly profit that topped estimates as higher airfares helped blunt rising fuel costs, and its shares rose nearly 3 percent on Thursday.

Retrieved on January 20, 2012 from http://www.reuters.com/article/2012/01/19/us-southwest-idUSTRE80I0XN20120119. MIT. (No Date). Global Airline Industry Program. Retrieved on January 20, 2012 from http://web.mit.edu/airlines/about_us/about_us_research_themes/about_us_research_theme_2.html.