Airlines Eric Henckels
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Airline Industry Overview
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Airline Industry OverviewGlobal Market• 2000 Airlines opera;ng more than 23,000aircraG, providing service to over 3700 airports.• In 2006, there were 28 million scheduled flightdepartures and carried over 2 billion passengers• Growth of world air travel has averagedapproximately 5% per year over the past 30 years• Annual growth in air travel has been about twicethe annual growth in GDP• Expected to double over next 10 – 15 years
Transcript of Airlines Eric Henckels
AirlineIndustryOverview
Framework
• Market• Product• Customer• Compe;;on• Companies• Economics– Revenues– Cost
• Externals
GlobalMarket
• 2000Airlinesopera;ngmorethan23,000aircraG,providingservicetoover3700airports.
• In2006,therewere28millionscheduledflightdeparturesandcarriedover2billionpassengers
• Growthofworldairtravelhasaveragedapproximately5%peryearoverthepast30years
• AnnualgrowthinairtravelhasbeenabouttwicetheannualgrowthinGDP
• Expectedtodoubleovernext10–15years
USMarket
• 100cer;ficatedpassengerairlinesoperateover11millionflightdeparturesperyear
• Carryoverone‐thirdoftheworld’stotalairtraffic• 745millionpassengersin2006• $160billionintotalrevenues• 545,000employeesandover8,000aircraGopera;ng31,000flightsperday
• Commercialavia;oncontributes8percentoftheUSGrossDomes;cProduct,accordingtorecentes;mates
Market
• USCommercial• Cost–Safety–Growth• Consolida;on– Con;nental–United(2010)–LargestAirline– Delta–Northwest(2009)–2nd– Southwest–AirTran
Products
• TheGood,theBad,andtheUgly• Other– Adver;sing– AirportGains– CreditCards?
(Good)FirstClass
EmiratesPrivateRoom
EmiratesShower
Fees
Fees(Bad)
RyanAir(Ugly)
Customer
• Business– Time
– Ameni;es
• Pleasure– Cost
• LowSwitchingCost– NoLoyalty–Whymilesexist
Compe;;on
• 1937–1978:CivilAeronau;csBoardregulatesAirTravelasPublicU;lity
• 1978–Present:AirlineDeregula;onAct– Costperpassengeris30%lessin1990vs.1976(accoun;ngforinfla;on)
– 9airlineswentbankruptfrom78–01,andAmericantoday
– LowCostAirlines– Hub&Spoke
LowCostAirlines
Hub&Spoke
Compe;;on
• Costcugngtomaximizeseats– Productofhighfixedvs.variablecost
• Excesscapacityduetocompe;;on– Changingwithrecession
• BarrierstoEntryarelessthanexpected• Subs;tutesaregenerallycomparableincost– Trains,Buses– Excep;on:E‐Mee;ng
Companies
• Consolida;on• Service• Image
DavidNeeleman
Economics(Profits)
Economics
Bankruptcy
• 2001–2011– USAir– United– Delta– Northwest– American
AmericanAirlines
Improvements
• Addi;onofFees– Baggage– Food– Internet
• CostCugng– Food– Pillows
Externals
• Unions– Pay&Benefits
• Regula;on• GovernmentSupport• Weather• Terrorism
Fuel
Fuel• Hedge• Efficiency–New787• Alterna;ves–virgin
biofuel
