Nobody downloaded yet

The Airline Industry - Case Study Example

Comments (0) Cite this document
Airlines operating in the Americas. Despite a global recess in airlines industry, Southwest carried "78 million revenue passengers in a recent year, about 75 per flight, and flew 60 billion revenue passenger miles (RPM)." (Airlines: Industry overview, 2009).
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.5% of users find it useful
The Airline Industry
Read TextPreview

Extract of sample "The Airline Industry"

Download file to see previous pages (Berg, 2008).
This achievement is indeed remarkable against the backdrop of escalating fuel prices, rising operating coats and fierce competition in the airlines industry, either leaving many airline companies to close shop, or seek mergers and strategic alliances with larger airlines, to save themselves from virtual extinction.
Business strategy in terms of quick, short and multiple entry and departures from secondary airports, or short haul flights, which not only add to revenues but also cut downs operating costs and saves fuel dramatically.
Larger airlines are committed to long haul services, especially over global skies, which, economically speaking, freezes revenues and incurred large burn-out of fuel. When a comparative analysis of short flights and long hauls are made, it is seen that the former serves profits and revenues more loyally and conscientiously than the latter. It is necessary for a no frill airlines like South West to work "with new schedule planning tools and processes and fleet flexibility," so that Southwest are " well-positioned to respond to a rapidly changing environment and have the flexibility to adjust our flight schedule, as necessary, to eliminate unproductive flying." (Berg, 2008).
The Company has entered into understanding for hedging 80% of estimated fuel needs with values assigned being approx. $ 61 /barrel. Based on this, the present market value of fuel derivatives for 3Q 2008 to 2012 works out to around $4.3B, taking into account the conspicuous hike in fuel prices in recent years.
The table shown below takes into account the futures hedging transactions scripted for forecast 2008 through 2011.



Derivatives contract as percentage of fuel consumption
Aver Barrel Crude price US$
4Q. '08
80% of fuel consumption
70% of fuel consumption
40% of fuel consumption
20% of fuel consumption
20% of fuel consumption

(Berg, 2008).
The future of airlines is dependent upon American economy:
The airlines industry in the US depends heavily upon the state of economic health prevailing in the country. This is because the predominance of good economy translates into greater economic activities, which could encourage air travel for business. In the present context, the world economy, and particularly, US is in a state of flux. Privatization of airlines had its share of economic prosperity, but is not without challenges. As a result of open skies policies, many small airlines companies came into the field, and more significantly, upturned the business prospects of large, established players, whose heavy overheads, spiraling operating costs and high ticketing structure resulted in unmitigated disasters.. Smaller, leaner and low cost airlines companies, with just the minimum infrastructure necessary, provided much better service at much lower costs. Larger companies were forced to merge or close operations. Moreover, it is also seen that the airlines industry in the US are highly concentrated, with 90% of the revenues generated from just "the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“The Airline Industry Case Study Example | Topics and Well Written Essays - 1000 words”, n.d.)
The Airline Industry Case Study Example | Topics and Well Written Essays - 1000 words. Retrieved from
(The Airline Industry Case Study Example | Topics and Well Written Essays - 1000 Words)
The Airline Industry Case Study Example | Topics and Well Written Essays - 1000 Words.
“The Airline Industry Case Study Example | Topics and Well Written Essays - 1000 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Revenue Management in the Airline Industry

...?Revenue Management in the Airline Industry I. Introduction It has always been business instinct to increase profitability with the utmost efficiencylike in the way seasonal products are sold at higher prices when demand is at peak and at lower prices when there appears to be no demand for it at all. The basic idea underpinning revenue management therefore is not entirely new in the practice when it was coined three decades ago, strictly speaking. In the field of operations research, RM only evolved from a theory. It is itself a practice, a systems- and methods-based approach that optimizes revenues and attempts to reduce cost. American Airlines stated that revenue management aims to...
18 Pages(4500 words)Thesis

Alliances and the Airline Industry

...? EXTENT TO WHICH ALLIANCES HAVE BECOME A CHARACTERISTIC OF THE AIRLINE INDUSTRY Module Module Module Leader Introduction An alliance is an agreement between two or more parties, made to advance common goals and secure, common interests. Alliances make business sense motivated by cost reduction and improved services to customers among other factors. Strategic alliances are common to any industry, and their presence felt within the airline industry. An airline alliance is an agreement by at least two airlines to work on a substantial level. Deregulation of the airline industry in the United States in 1978 led to the formation of the alliance. The deregulation was the most notable event that brought about the radical changes within... the...
6 Pages(1500 words)Essay

Budgeting: A Focus on the Airline Industry

... Budgeting: A Focus on the Airline Industry Introduction Over the past few years, the significant increase of crude oil has had a tremendous change in the airline industry. The price of crude oil has increased from $38.27 a barrel in 2004 to $70-85 a barrel in August 2005. In December 2005, the price fell slightly, but it still regained its upward trend in the early months of 2006, particularly in the month of April when it exceeded $70 a barrel. The rise continued to be the order of the day, and reached $100 a barrel and $140 a barrel in the months of December 2007 and July 2008 respectively. Such fluctuations in crude oil have caused macro-economic distortions,...
11 Pages(2250 words)Research Paper

Economic of the Airline Industry

...Economic Report of the Airline Industry By: December, 2008 0 Introduction Today, the business environment has increasingly become more turbulent, chaotic and challenging than ever before and to survive, it is vital that a firm understands the strategies underpinning the success of rival firms and try to emulate, or do something better than the rivals. Transaction costs economics and the new institutional economics have provided ways in which traditional economics model (On the assumptions of maximising behaviour by individuals) can be used in understanding the relationship between institutions and the reform process (Craciunesco 2006). Changes in investment activity, employment, and prices may be a...
8 Pages(2000 words)Essay

Strategic Alliances in the Airline Industry

... Supervisor Strategic Alliances in the Airline Industry: An analysis of the effects on Human Resource Management(HRM) and the benefits of allying. Research Proposal. By: November, 2008 TABLE OF CONTENTS 1.1 Introduction 1.1.1 Background Problem Statement and Research Questions 1.1.2 Research Purpose and Objectives 1.1.3 Importance and Rational of Study 1.1.4 Work structure 2.0 Summary of Literature 3.0 Research Methods 4.0 Timetable and Resources 1.1 Introduction The coming together of companies to gain synergistic effects has been seen in recent times as the most profitable way of investment. We often hear of this or that company merging with another or taking over another... country...
10 Pages(2500 words)Essay

Managerial Economics and the Airline Industry

...Managerial Economics and the Airline Industry Introduction Back in 2003, the price of oil per barrel is US$25. (William, 2008) In June 2008, the price of crude oil per barrel has already reached $142.99. (Frei, 2008) Because of the oil price hike in the global market, air fares started to increase. In line with the slow economic growth caused by the terrorist attacks in 2001 and the tight competition in the world market, the recent national unemployment rate rose up to 5.5% in May as compared to 5.0% in April this year. (U.S. Department of Labor, 2008) This happened since some of the medium-scale and multi-national companies were forced to lower down their operational costs through massive lay-offs. ...
2 Pages(500 words)Essay

Risk Management In The Airline Industry

...industry could include aspects such as the single loss of aircraft or a collision between two aircraft and insurers need to plan for such events. This is done through risk assessments carried out in-house by insurance firms or by Lloyds of London.(Elkasaby et al, 2003). For example, the Company carries out risk assessments by drawing up Realistic Disaster Scenarios, which specifically discuss the risks associated with aviation. Assumptions may be made, such as the assumption of a collision between two 747s occurring over a major U.S. city, the assumption of liability losses in amounts such as $1 billion US dollars per airline, which has recently been increased to a total of $4 billion. The scenario then...
4 Pages(1000 words)Essay

Oil on the Airline Industry

...Impact of Oil on Airline Industry Section 0 Issue The Airline industry is suffering from a number of issues ranging from economic recession, low tourism and increasing competition among the growing number of airlines to increased fuel costs. The impact of oil price increase on Air Carriers is seen to be in two ways – 1. Increase on the operational cost which is an obvious impact. 2. Increase in fuel costs leads to overall economic recession and hence a spiraling impact on airlines as recession reduces both cargo as well as passenger traffic for the airlines. Another issue that impacts the...
4 Pages(1000 words)Research Paper

The Airline Industry

...UK AIRLINE INDUSTRY By 14th, November, UK Airline Industry The airline industry in the UK is one of the largest in the world. The airline industry employs more than 113,000 people directly and a further 276,000 indirectly where the company has a turnover of more than $19 billion (Bajawa, & Woodall 2006). The UK airline industry is composed of several airline industries such as British aero systems, which is the world’s second largest defense contractor, Rolls-Royce, which is the world’s second largest aircraft engine maker, among others....
6 Pages(1500 words)Essay

The airline industry in the US

...The market share concentration in the airline industry is medium. In the top four airline companies held a market share of more than 68.8%. In comparison with 2010 the market share of the top for airlines increased by 5.5%. One of the primary reasons for the increase is consolidation. A good example for consolidation is the merger between US airways and American Airlines. The consolidation maximizes profits of the merged companies. Synergies helped the company achieve economies of scale under the name of an American brand. It also can be more profitable than operate it separately. Coach customers, first and business class customers, business, and freight are the four types of customers that make up the major markets. The private... ...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic The Airline Industry for FREE!

Contact Us