Writing Sample - Airline

8/7/2019 Writing Sample - Airline

1/26

BLUE SKIES OR

BLUE NOTES?Airline Industry Challenges

For 2000 and Beyond

Christopher M. Boyle

August 9, 2000


2/26

Executive Summary

The U.S. passenger airline business reached $118.2 billion dollars in 1999 and

continues to grow faster than the economy. Since deregulation in 1978, the industry has

been cyclical, with periods of excess capacity and the accompanying pricing pressures.

In the last decade the industry has enjoyed high profitability and continued growth. A

recent jump in fuel prices in addition to continued labor concerns raise questions about

the sustainability of current profits. This report addresses the challenges currently facing

the industry along with the strategic responses of the airlines and some recommendations

of ways to address theses current challenges. Challenges or particular importance are as

follows:

Labor: Strained relations with pilots and mechanics persist, causingwork slowdowns and service interruptions. (page 12)

Technology: The internet and e-commerce are opening up new

distribution channels for airlines. (page 14)

Infrastructure: Air traffic control systems are antiquated adding toproblems at already congested airports. (page 17)

Consolidation: Several airlines have proposed mergers and relaxedregulations may pave the more global consolidation (page 7)

Regional Airlines: The regional airlines are flying where largercarriers cannot and make are making a profit. (page 7)

The airlines continue to face intense public scrutiny. Strategic responses must keep pace

with the rapid change produced by forces such as technology and strong economic

growth.

-2-


3/26

Table of Contents

Executive Summary ............................................................................................................. 2

Table of Contents .................................................................................................................3Introduction .......................................................................................................................... 4Brief History ........................................................................................................................ 4Business Challenges .............................................................................................................6Strategic Responses and Recommendations ......................................................................18Conclusion .........................................................................................................................21References ..........................................................................................................................23Endnotes .............................................................................................................................25

-3-


4/26

Introduction

This report analyzes the dynamics of the airlines industry and reports on the

challenges that those dynamics present to industry competitors. Additional coverage is

given to some of the specific strategies business is employing to overcome these

challenges and recommendation for strategy and action are provided. The report

provides a brief history of the airline industry, a survey of the business challenges to the

industry and strategic responses and recommendations.

The airline industry has many segments that serve many different markets. This

report focuses on the U.S passenger airline business. As many of the airlines that are U.S

based have international routes and are expanding overseas, international issues such as

globalization and international alliances are important to understanding the U.S. markets

and are explored herein. While operations of major carriers include freight business,

exclusive freight carriers such as Federal Express are not covered.

Brief History

In 1903 Wilbur and Orville Wright made history with the first airplane flight. By

1920, KLM was founded as one of the first commercial airlines. The 1920s also saw the

worlds first crop dusting service transformed into Delta Airlines. The competitive race

to move people through the air was off and running.

In 1978, the US commercial airline industry was deregulated, paving the way for

increased competition and a major shake up in the airline industry. As airfare and route

controls were lifted, airlines moved quickly to seize new routes and set market driven

-4-


5/26

rates. Airlines embraced a hub-and-spoke model and fought aggressively for control of

prime hubs.

Eventually, over expansion and stiff competition lead to serious financial

pressures and heavy losses for many airline companies. Many players were forced to

merge or declare bankruptcy. Prominent mergers in the mid-eighties: include Delta with

Western; Northwest with Republic Airlines; and Texas Air with Eastern and Peoples

Express.

Following the intense consolidation, three airlines were left controlling over a

third of the RPMs. United, American and Deltas combined market share of RPMs

reached 54.1% in 1998.1 Presently, the top ten U.S. airlines account for over $80 billion

in revenues representing approximately 90% of total passenger revenues.

The airline industry has seen business challenges and innovative responses in the

last quarter century. Facing increased competition, airlines developed plans to win and

retain customers. In 1980, American Airlines introduced the first frequent flier program.

Influences such as price competition and rising fuel costs due to the Gulf War resulted in

huge loses for the industry in the early 1990s.

Smaller regional have come to challenge the established major airlines. While an

extremely high number have failed, some have become successful industry participants,

including Southwest which has been profitable every year since it started flying in 1971.

High profile issues such as union conflict, terrorist bombings, government

regulation and cramped seats round out the range of challenges the faced by airlines

today.

-5-


6/26

Business Challenges

Competitive Environment

The airline industry has over 60 airlines that operate aircraft with over 60 seats

but is concentrated with over 50% of the market share held by the top three players.2 The

largest US airline based on revenues and RPMs (Revenue Passenger Miles) is United

Airlines with revenues of $18 billion in 1999. Major airlines have been able to establish

control of the majority of business at many of the countrys major airports without a

challenge from major competitors. Smaller airlines are not able to compete when a major

airline has better access to gates and prime departure times, broader flight schedule

offerings and greater financial resources. The relaxed competition under the hub and

spoke system has permitted the major airlines to enjoy a decade of high load factors and

high profit margins. Examples of the high hub fare premiums can be see in the following

chart from a DOT report:3

-6-

Fare Premiums at Dominated Hubs

64%

41%34%

45%

23%

51%

0%

20%

40%

60%

80%

Charlotte Cincinnati Minneapolis

1998

1995


7/26

The competitive position of these players and the current hub and spoke system is facing

several threats including the emergence of regional airlines, increased pressure against

premium airfares at hubs and global alliances and consolidation.

Regional Airlines Regional airlines have developed into serious competitors to

the major carriers. Though most start-up airlines end in failure, a few have managed to

survive. Vanguard and Frontier are two regional players that have become profitable in

recent years. Regional competitor, Southwest Airlines is the only large carrier that does

not use the hub and spoke system. Southwest uses Dallass Love Field for regional

flights because of competitive pressure from Dallas hub giant American Airlines.

Utilizing new smaller and less expensive jets offered by Bombardier and Embraer of

Brazil in addition to offerings from Boeing and Airbus, regional airlines are making short

haul flights more economical. Smaller jets will give the regional airlines two competitive

advantages. First, smaller jets have lower load factors, permitting regional carriers to

undercut the major airlines on low-density routes. The second advantage for the regional

carriers is the ability serve new routes not served by larger carriers.

Alliances & Consolidation Many airlines have grouped together in alliances of

varying types aimed at producing a number of benefits. Alliances allow airlines to offer a

larger selection of routes often in under served areas of the U.S or in overseas markets

while providing a source of passengers to fill up unused capacity on existing routes.

Alliances also provide their members with cost saving as a result of shared terminal

facilities, combined frequent-flier programs and joint marketing efforts.

Broadening competitive alliances provide are a step towards industry

consolidation. As regulators liberalize ownership regulations, mergers will inevitably

-7-


8/26

materialize from all the speculation in the first half of 2000. Airlines will increasingly

seek mergers as a way of cutting cost and improving airlines relatively small profit

margins.

With international markets outpacing domestic air traffic growth, airlines are

turning their attention toward this sector for expansion. As nations sign open skies

treaties we can expect to see more alliances and more transnational investments between

airlines. Globalization, coupled with the airline industrys thin margins and

concentration among suppliers, makes it ripe for intense global consolidation.

Marketing & Customer Demand

Market Size Global airline revenue was $306.5 billion in 1999.4 Total revenue

for U.S. scheduled airlines grew by 4.2% in 1999, reaching

$118.2 billion.5 Passenger revenues constitute the majority

of total revenues totaling $84.2 billion.6 Passenger revenue

miles, the standard unit measuring passenger traffic, grew

by 5.4 % to 651.6 billion in 1999.7

Leisure and Business Travel Vacationers have

used gains in the equities market in recent years to travel

more, boosting leisure travel revenue. Leisure travel represents approximately 60% of

emplanements. Recent concerns, including Y2K and the drop in the stock market, have

lead to lower than expected leisure travel in the first half of 2000. Any future events that

have a significant affect on consumer confidence will have a proportionally greater

impact on the volume of leisure travel.

-8-


9/26

Cost cutting and downsizing trends have reduced demand for air travel from the

business traveler, traditionally the most profitable segment for the industry. Additionally,

technological advances such as e-mail and teleconferencing increasingly chip away at the

demand for business travel. More recently, the broad economic prosperity in the United

States has led to an increase in business travelers purchase of premium fare tickets.

Marketing Since deregulation, marketing efforts have continually sought new

ways to attract new customers and more importantly, to build loyalty among existing

customers. American Airlines frequent flier program has been replicated by every major

airline. Subsequently, airlines have made agreements with rental car companies, credit

card issuers and long distance providers to enhance the value of the programs. Miles

earned in these programs have even become a currency that various companies use to

reward employees.

Many airlines face serious challenges to improving their public image in

light of poor on-time records, high levels of cancelled flights and cabin service that often

amounts to a bag lunch. United faces all of these challenges and more as it seeks a

merger with US Air. Selling the public and antitrust regulators on a bigger is better

strategy will be difficult given the fact that it already holds the position of largest air

carrier and yet has a steadily deteriorating service record. Some smaller airlines are able

to offer quality services which succeed in attracting customers and building loyalty.

Midwest Express offer business class seating throughout all of its planes and offers such

perks as wine with each meal and fresh baked cookies. Start-up carrier JetBlue Airways

also promises low priced fares along with high-end services.8

-9-


10/26

Operations & Financial

Expenses Employee

compensation and benefits is the

largest single expense for air carriers.

The chart to the right shows Labor

accounting for over a third of airline

costs.9 Further analysis of the

challenges presented by labor and

associated costs is presented in the next section Human Resources.

Jet fuel, the second largest cost for airlines and the most variable, has risen

dramatically in 1999 and 2000. Due to unforeseen resolve among OPEC members to

lower output, fuel prices began to rise in March of 1999. Every $.01 increase in the

price of kerosene jet fuel translates into a $34 million increase in fuel costs for the

industry.10 Airlines fuel costs are subject to forces far beyond their control including

OPEC, rogue nations and U.S foreign policy among other players in the world oil

markets. Fortunately, fuel costs as a percent of total have declined from approximately

30% in 1980 to the 10% range in recent years.11 Many airlines such as United have

implemented hedging plans that cover a substantial portion of fuel costs making costs

very predictable. Delta, which hedges up to three years on its fuel requirements, hedged

80% of its first half 2000 requirements during the first half of 1999, significantly

lowering its exposure to price fluctuations.12

Weather and air traffic control delays are other factors over which the industry

has little or no control though they often contribute to billions of dollars in expenses each

-10-


11/26

year. Tornadoes and blizzards can cause delays in the cities where they occur or they

may cause a chain reaction of delay across the country. Smaller weather issues such as

temperature and wind speed can have a large impact of fuel consumption and related

costs.

Operational Issues Equipment represents a major investment and expense item

for the air carriers. Purchasing planes outright is very expensive but cost effective for

those companies with the cash to do so. Most airplanes are leased from an intermediary

with better credit such as GE, thus reducing capital outlays while increasing operating

expenses. Additionally, substantial costs are incurred in the maintenance and servicing of

airplane equipment.

Capacity increased by 5.0% in 1999, its highest increase in recent years.

Increased capacity from smaller regional jets has been a significant contributor to overall

capacity increases. As passenger traffic grows faster than capacity, load factors continue

to increase. Load factors have increased to a high of 71.0% in 1999, indicating an overall

improvement in asset utilization. With the advent of internet distribution, we can expect

to see a continued rise in load factors as the net allows airlines and to sell empty sees at a

discount. (See the Distribution & Technology section for further discussion.)

AS Boeing and Airbus Industries are the only producers of large jets, airlines have cause

for concern with a highly concentrated supplier base. Several carriers have expressed

concerns with the Airbus Industries proposal to build a superjumbo jet will reduced its

attention to the more popular models and undermine competition with its sole competitor

Boeing.13

-11-


12/26

Human Resources

Airlines, like the rest of U.S. employers, are facing major labor shortages as

unemployment remains very low. Midwest Express expects recruitment of both skilled

and general labor to be a growing problem.14 This environment will ultimately mean

that air carriers will have to pay more to attract and retain a qualified workforce,

especially for pilots and mechanics, which are in shortest supply. Labor already accounts

for 36% of costs and this number can be expected to increase if there is not a serious

change in employment demand and associated wages.

Airlines relationships with unions representing pilots, mechanics and flight

attendants among others, have a long history of adversity and mistrust. While labor gave

many concessions in negotiations a decade ago when profitability was under pressure,

airlines are being forced to give up more now that times are good. In 1999, Delta faced

demands from pilots for a pay increase of 21% to compensate for a pay cut they took in

1996 when management argued that the airline was still experiencing financial trouble.

United Airlines confronted such difficult labor relationships that it engineered an

employee buyout in 1994, making it the largest employee owned company in the world.

Now employees own a majority share of the company, have board representation and still

have strained relationships with management. Currently, United is experiencing a work

slowdown as contract talks are underway. Mechanics slow work by fastidiously

following work procedures despite available shortcuts and efficiencies readily available.

Pilots refuse to fly overtime and taxi aircraft longer and slower than needed as a way to

influence management. The labor management relationship continues to deteriorate

while contracts are open.15

-12-


13/26

The National Railway Labor Act regulates union contracts and negotiations.

Under these regulations, the terms of a contract remain in effect after the contract expires,

giving both sides additional time, sometimes two or three years, to settle the terms of a

new agreement. While this procedure may avert a strike, it does not prevent more overt

conflict such as work slowdowns.

The challenges posed by labor relations occur not only at contract negotiation

time. Several other activities that airlines ordinarily engage in risk facing serious

opposition from labor groups.

As previously noted, there has been a shift toward using smaller aircraft for

regional flights because of improved economics. The economics of flying these small

aircraft may not be so good if the unions have their way. Most labor contracts have scope

clauses that limit the number and size of aircraft that regional affiliates may fly. These

affiliates pay lower salaries to their pilots than do the majors. By limiting the growth of

these affiliates unions are able to protect the much higher salaries paid to the majors

pilots.16

Airlines also face significant labor hurdles when attempting to acquire a

competitor. American Airlines suffered a pilots strike in 1999 because of disagreements

over seniority rights in conjunction with the Reno Air acquisition. Merging two union

workforces requires more than just establishing agreeable pay standards; it also includes

the task of melding of two seniority plans. Inevitably, progress made with seniority

rights, unravels progress made on wage parity. Presently, United faces pilot concerns

over this seniority issue with its proposed acquisition of U.S. Airways.

-13-


14/26

Distribution & Technology

Travel is an information-based business whose distribution channels are subject to

the same pressures that any information system faces as a result of technological change.

Distribution for airline tickets has traditionally had two intermediaries, travel agents and

computer reservation systems (CRSs). Travel agents have historically enjoyed

commissions of 10% of the cost of the ticket. In recent years, the airlines have stepped

up pressure on agents and their commissions have fallen to below 5%. While travel

agents still account for a huge portion of the distribution of airline tickets, the airlines are

aggressively seeking ways to eliminate that 5% to travel agents in their distribution costs.

An additional cost to airlines is the CRS such as Sabre (spun off from Americans

parent AMR) or Galileo, which allow travel agents to make reservations on airlines

around the world. These systems provide great convenience to the customer comparing

schedules and pricing but represent a cost that may range from $3.50 to $10 a ticket or

more.

Targeting these intermediaries with their associated costs and inefficiencies, the

airlines and others are looking to cut costs, speed transactions and improve efficiencies

through the use of e-commerce technologies.17 In addition to the airlines, several online

travel organizations have sprung up streamline the travel process through expanse online

offering, including the resale of airline tickets. Travelocity (recently acquired by Sabre)

and Expedia (owned by Microsoft) dominate this space with approximately 80%of all

online travel sales.

Leading U.S. Airlines, in addition to selling tickets through their own web sites,

have joined together to compete with other online travel services for the $5.8 billion in

-14-


15/26

airline tickets to be sold over the web in 200018. The new service, which is named Orbitz,

is expected to be able to search the flights of hundreds of air carriers and provide

thousands of routing options and fare quotations.

Several other efficiencies can be realized through e-commerce initiatives.

Airlines can increase load factors by marketing on interenet seats that would otherwise go

unfilled. The economics of filling the over half a million seats that fly empty each day

are very appealing to airlines as there is a large incremental profit on each of these seats

that is sold.19 Priceline.com, the highly acclaimed web commerce company, offers a

system that improves efficiencies by letting travelers bid on seats, primarily unsold

inventory.

Airlines are developing systems that put a service kiosk on site of a corporate

client. The employees of the client are then able to book reservations in accordance with

corporate travel policies, print baggage tags and then initiate an electronic transaction so

as to save on credit card fees.

Technology will also provide great opportunities in the area of customer service.

Functions such as checking in from your wireless device or automatically having a page

to a travelers spouse with flight delay information are already being implemented by

major airlines.

Customer relationship management provides perhaps a much more lucrative

opportunity for technology than some of the gee-whiz applications. These applications

will be able to store a customers flying habits and make suggestion based on previous

preferences. Recognizing that a traveler suffered a cancel flight the previous week and

then offering a free upgrade on this weeks flight, airlines can significantly improve

-15-


16/26

customer service. Additionally, these systems will be able to provide the airline with

valuable data such indicating which customers produce the most revenue.

Similar to efficiencies realized from internet sales, airlines expect to recognized

significant savings from the use of online supply exchanges. According to Henrik

Schroder, former president of Saab Aircraft of America, The aviation industrys supply

chain today is too expensive, too slow and much too inefficient. 20 Goldman Sachs

estimates that this represents a $100 billion opportunity for airlines, manufacturers and

parts suppliers, in addition cost saving of more than 10% per transaction.21 The challenge

for airlines is to capture the largest portion possible of those savings for themselves. To

meet this challenge, six major U.S. airlines have joined to form an unnamed supply-

exchange while Northwest has joined with Lufthansa and JAL to develop their own site

called AeroXchange. Challenges also exist from established start-ups AviationX and

TradeAir.com.22

Regulatory and Public Interest

Airlines have had to contend with heavy regulation and legal issues for decades.

One of their newest challenges is a result of their internet travel and supply exchange

initiatives. Orbitz, the travel service site owned by several airlines as well as the join

supply exchange will come under anti-trust scrutiny from the Department of Justice and

perhaps European and other regulatory bodies. These same anti-trust concerns will rise

from the recently proposed mergers among various large airlines. As airlines have

already come under fire from the Department of Transportation for unfair practices

relating to pricing under the hub and spoke system, it is likely that any proposed merger

activity will face rigorous scrutiny.23 Airlines will be forced to demonstrate that they are

-16-


17/26

acquiring complimentary routes and terminals, which will not increase their dominance in

already uncompetitive markets. While customers and small airlines have complained

about the problems caused by hub dominance, congress may be getting more serious

about passing legislation that changes the system, especially in light of public outcry

from United airlines ongoing service travails.

Not all anticipated regulatory activity would impose obstacles on airline activities.

The U.S. has been very aggressively signing open skies whit other countries which

makes progress toward lifting many protectionist barriers that countries have erected to

protect state run airlines. Additionally, ownership restrictions are being relaxed allowing

airlines to strengthen their alliances by taking equity position in allied companies.

One of the biggest problems confronting airlines is public infrastructure. The

volume of air traffic has increased to such a level that gates, runways and airspace are

heavily and, some would argue, dangerously overloaded. Air traffic control (ATC)

suffers from technological and systemic antiquation that simply cannot keep pace with

the volume of air traffic. United Airlines blames 21% of its recent cancellations on ATC

related issues.24

Airlines are large consumers of petroleum based fuels which means large amounts

of air polluting emissions. While the U.S has forced auto manufactures to steadily reduce

emissions, it is possible the aircraft manufacturers may see increases in such regulation

and therefore passing these cost on to the airlines. There is also reaction to other types of

air travel pollution. For example, homeowners in Seattle have formed groups to lobby

for changes in flight patterns to reduce noise over their neighborhoods. Subsequent

regulations may increase fuel costs related to compliance with new routes.

-17-


18/26

Strategic Responses and Recommendations

Competition

In response to competitive challenges, airlines are implementing strategies aimed

at cost savings and related synergies. Alliances aimed at boosting load factors and

marketing synergies foreshadowed more recent moves to consolidate through several

proposed mergers and acquisitions. While part of the industry focuses on the bigger is

better strategy, smaller players have emerged to fill the need for low cost alternatives to

the major air carriers.

Airlines must be careful to avoid many pitfalls associated with consolidation and

globalization. If mergers are approved by U.S. regulatory agencies and public opinion,

there are still foreign regulatory, accounting and cultural issues that could have a serious

detriment to the value of such a combination

Markets & Customer Demand

Airlines have taken many creative approaches to attracting and retaining

customers. The frequent flier programs have evolved into travel point programs and are

now taking on a new role with internet shopping. Airlines must continue these types of

programs and expand them into new areas to retain fickle airline passengers. Airlines

have made a significant step in adding in flight movies on personal monitors on many

international flights and first class sections. Airlines have the option of creating a total

entertainment experience for passenger, perhaps making the air travel one of the

highlights of vacation travel. Another avenue would be to sell advertising time on the

video programming. Advertisers might be willing to pay large amounts to pitch their

-18-


19/26

products to a highly captive audience that can afford to travel, as they do in with the

inflight magazines.

Another innovate industry response has been the creation of business class and

other segmentations between coach and first class. These classes provided an option for

those who want to travel more comfortably but have corporate travel budgets that

prohibit paying first class fares.

Financial & Operations

There appears to be enough market demand and prospective growth to permit

large and small airlines to compete vigorously. But airlines meager margins require that

they look to internal cost cutting measures to boost profits. Airlines are trying various

strategies such as hedging fuel costs to better manage costs and smooth earnings.

In response to extreme fluctuations in oil prices, airlines need to influence the

federal government on foreign policy as it relates to oil exporting nations. Airlines would

benefit from U.S pressure on these nations to maintain reasonable oil prices and moderate

the rate that oil prices change. Given that coercing OPEC into action when there is rarely

unity among its members, this policy faces some obstacles. Even though, the U.S.s

influence over allies such as Saudi Arabia and Kuwait may be a worthy target of

lobbying efforts.

Human Resources

The airline industry has a long history of adversarial labor relations and it seems

that there has been little change in managements approach to labor. Management has had

few successes in regards to these challenges though a few notable exceptions stand out.

-19-


20/26

Southwest Airlines has excellent employee relations and has employee productivity of

almost twice that of the industry average. Employee relations are a key element to the

organizations excellent customer service record and status as one of the most profitable

airlines. Frontier, relishing in its recent profitability also claims strategic resource

management as a cornerstone of their competitive advantage. The company seeks to

take care of the employees, so they can take care of each other, then they will take care

of the customer.25 The example set by Southwest and Frontier suggests that the major

airlines need to reconsider human resource management and adopt less adversarial

approaches to human resource strategy.

Distribution & Technology

Airlines seem be responding aggressively in order to take advantage of the

technological revolution. Airlines announcement of proprietary systems in response to

start-up travel sites and supply exchanges is a strategic move to capture a greater portion

of the cost savings brought about by technology. While airlines have the resources to

create these e-commerce programs to match those of the start-ups, they must continue to

be on the forefront of innovation in these areas or risk loosing significant competitive

advantage to Wall Street funded start-up.

Regulatory & Public Interest

The airline industry must proceed carefully with consolidations in light of

heightened anti-trust activity. Microsofts arrogance has been cited as pivotal reason for

anti-trust rulings against the company. The airlines should avoid any appearance of

arrogance or disregard of government powers.

-20-


21/26

Airlines need to begin raising public awareness of the need for improvements in

air traffic infrastructure. The problem already exists and yet public policy in this area has

yet to get much public attention. Perhaps United should consider using its disastrous

service record this year to highlight problems with the FAA and the air traffic control

system. It seems like they could not do any additional harm their public image at this

time and other airlines my pick up the issue as well. Perhaps supporting a movement to

privatize the FAA would be the best option for bringing about changes and efficiencies.

The airline industry must take care in balancing their purpose as for-profit

business with serving the good of society. While the airlines have done a very good job

of promoting public safety, as evidenced by an exceptional safety record, they have done

a poor job in fulfilling their responsibility to the public in other ways. First of all, they

have failed the community by their inability to have amicable relations with their work

force. Additionally, the airlines have exploited the hub and spoke system to obstruct

competition and charge excessive fares to air travelers.

Conclusion

The airline industry gone through many changes since its beginning early in the

twentieth century. The pace of change has accelerated at the turn of the millennium due

to forces such as technology and a strong growth in the U.S. economy. The changes

bring about several opportunities and several challenges for the airlines, but the rate of

change presents a problem in itself. Airlines must adopt to changes such ticketless travel

or risk loosing the customers who demand such conveniences.

The industry participants must also initiate change to overcome several existing

challenges. Continuing conflict with unions persists because management has not

-21-


22/26

changed its adversarial approach to dealing with labor. Challenges exist in the

competitive landscape with the growth of alliances and several proposed acquisitions.

This leads the observer to wonder if the industry will consolidate down to three or four

giant global competitors.

The formation of alliances has helped increase load factors and efficiencies for

many airlines. The airlines must continue to develop new strategies to build loyal

travelers paying premium fares while attracting other flyers to low fare seats that would

otherwise fly empty. Meanwhile, airlines must control expenses carefully through such

means as the hedging of fuel prices. Labor expenses can be kept down through improved

human resource management.

Technology has opened up new avenue for the distribution of tickets promising

great efficiencies and cost savings for the industry. Meanwhile, air traffic challenges

remain for technology to solve through improved traffic management systems and

weather forecasting capabilities.

Finally, airlines play a critical role in our society from which the traveling public

expects economical, reliable and safe air travel. The industry will continue to experience

intense public scrutiny in all of its activities and must respond with skillful management

of the challenges presented in the regulatory, public policy and ethical arenas.

-22-


23/26

References

Airline Business (2000, July) 101

Air Transport World (2000, January) Forecast: Blue Skies, Another Good Year, 37: 1

Air Transport World (2000, April)Net results, 37:4

Air Transportation Association,Annual Report 2000: Airline Industry Review, (2000),Available: http://www.air-transport.org/public/2000ap/ (2000, July 11)

Airfinance Journal (2000, January)Fuel for thought, 224

Airfinance Journal (2000,April)Net profits, 227

Carey, Susan (2000, June 5) American Explores a Deal for Northwest, The Wall StreetJournalp.A3

Carey, Susan & McCartney, Scott (2000, July 12) AMR, Northwest Talks Turn SeriousAs Pressure Rises for Decision on Merger, The Wall Street Journalp.C16

Dallas Morning News, (2000, April 28)Rival Airlines Unite to Form Supply-ExchangeWeb Site, Cut Purchasing Costs

Interavia Business & Technology (2000, May) New market, new tools, 55: 642

Johnson, Cynthia, (2000)Airline Industry [Online] Hoovers Online, Available:www.hoovers.com/industry/snapshot/0,2204,5,00.html (2000, July 19)

Michaels, Daniel (2000, July 24) Enlarged United Faces Marketing Challenges in Deal,The Wall Street Journal,p. B2

Office of the Assistant Secretary for Aviation and International Affairs, Competition inthe U.S. Domestic Airline Industry: The Need for a Policy to Prevent Unfair

Practices (1999, May)[Online] Available:http://ostpxweb.dot.gov/aviation/domav/comp_rev.pdf

Rosen, Cheryl, (2000, June 26) Transforming travel,Information Week:50

Standard & Poors, November 4, 1999, Airline Industry SurveyWhite, Erin & Kranhold, Kathryn (2000, May 25) Enlarged United Faces Marketing

Challenges in Deal, The Wall Street Journal,p. B2

-23-
http://www.hoovers.com/industry/snapshot/0,2204,5,00.htmlhttp://www.hoovers.com/industry/snapshot/0,2204,5,00.html


24/26

Williamson, Richard (2000, July 23) United they arent,Denver Rocky Mountain News,p. G1

-24-


25/26

Endnotes

-25-


26/26

1 Standard & Poors (1999)2 Standard & Poors, (1999)3 Department of Transportation (1999)4 Airline Transport World (2000a)5 Air Transportation Association (1999)6 Ibid7 Ibid8 White (2000)9 Johnson (2000)10 Air Transportation Association (1999)11 Standard & Poors, (1999)12 Airfinance Journal (2000)13 Michaels (2000)14 Airline Transport World (2000a)15 Williamson (2000)16 Interavia (2000)17 Rosen (2000)18 Airfinance Journal (2000b)19 Transforming travel20 Air Transport World (2000b)21 Ibid22 Dallas Morning News (2000)23 Department of Transportation (1999)24 Williamson (2000)25 Sam Addoms, private lecture

Writing Sample - Airline

Documents

Transcript of Writing Sample - Airline