Transcription of Airline Industry Overview - Columbia University
1 Airline Industry Overview Framework Market Product Customer Compe;;on Companies Economics Revenues Cost Externals Global Market 2000 airlines opera;ng more than 23,000 aircraG, providing service to over 3700 airports. In 2006, there were 28 million scheduled flight departures and carried over 2 billion passengers Growth of world air travel has averaged approximately 5% per year over the past 30 years Annual growth in air travel has been about twice the annual growth in GDP Expected to double over next 10 15 years US Market 100 cer;ficated passenger airlines operate over 11 million flight departures per year Carry over one third of the world s total air traffic 745 million passengers in 2006 $160 billion in total revenues 545,000 employees and over 8,000 aircraG opera.
2 Ng 31,000 flights per day Commercial avia;on contributes 8 percent of the US Gross Domes;c Product, according to recent es;mates Market US Commercial Cost Safety Growth Consolida;on Con;nental United (2010) Largest Airline Delta Northwest (2009) 2nd Southwest AirTran Products The Good, the Bad, and the Ugly Other Adver;sing Airport Gains Credit Cards? (Good) First Class Emirates Private Room Emirates Shower Fees Fees (Bad) RyanAir (Ugly) Customer Business Time Ameni;es Pleasure Cost Low Switching Cost No Loyalty Why miles exist Compe;;on 1937 1978: Civil Aeronau;cs Board regulates Air Travel as Public U;lity 1978 Present: Airline Deregula;on Act Cost per passenger is 30% less in 1990 vs.
3 1976 (accoun;ng for infla;on) 9 airlines went bankrupt from 78 01, and American today Low Cost airlines Hub & Spoke Low Cost airlines Hub & Spoke Compe;;on Cost cugng to maximize seats Product of high fixed vs. variable cost Excess capacity due to compe;;on Changing with recession Barriers to Entry are less than expected Subs;tutes are generally comparable in cost Trains, Buses Excep;on: E Mee;ng Companies Consolida;on Service Image David Neeleman Economics (Profits) Economics Bankruptcy 2001 2011 US Air United Delta Northwest American American airlines Improvements Addi;on of Fees Baggage Food Internet Cost Cugng Food Pillows Externals Unions Pay & Benefits Regula.
4 On Government Support Weather Terrorism Fuel Fuel Hedge Efficiency New 787 Alterna;ves virgin biofuel
