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Current structure of the airline industry
The economic implications of airline deregulation in the united states essay
The economic implications of airline deregulation in the united states essay
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From the congested seats of the economy cabin, where the constant crinkling of peanut wrappers, snores of sleepy sightseers, and tears of testy toddlers are all to be heard, to the leisurely lounge chairs of first class, air travel has changed in more ways than one since the first passenger bearing flight in 1919 (Grant 132). The air travel industry has experienced considerable changes; the majority of which occurred between the mid-1950s and today. Every aspect of commercial aviation has been changing over the last fifty years. The largest transformations can be seen in a few areas: the price of flying, the security and safety of flying, and the quality of the flight experience for passengers. Up until 1978 air fares were regulated by the government. This means that the cost of flying was determined by the federal government and kept the same for all airlines; if a trip from Los Angeles, California to Seattle, Washington was one hundred dollars for one airline it was one hundred dollars for every other airline as well (“The Jet Age:1958-Today”). Because regulation restricted airlines from competing by offering lower fares, many airlines focused on drawing in customers with exceptional service and hiring attractive young women as stewardesses to please businessmen (Hickel). In 1978, The Airline Deregulation Act was passed, lifting any restrictions on routes and pricing for airlines across America (“The Jet Age:1958-Today”). The passage of this act greatly changed the airline industry. Had these changes not been created, travelers today would not enjoy the relatively low fares and extensive travel routes that are offered to them. Deregulation had another significant benefit, it triggered a boost in the popularity of ... ... middle of paper ... ...and Space Museum, 2007. Web. 07 May 2014. Kille, Leighton Walter. “U.S. Transportation Safety Over Time: Cars, Planes, Trains, Walking, Cycling.” Journalists Resource. Harvard Kennedy School’s Shorenstein Center, 05 Oct. 2013. Web. 16 May 2014. Lufthansa. “Airline Meal Costs?” Civil Aviation. Demand Media, 05 May 2009. Web. 10 May 2014. Martínez, Andrés. “Adjust Your Seat Back, Tray Tables…and Attitudes.” Zócalo Public Square, 08 Mar. 2011. Web. 14 May 2014. Perry, Mark J. “The Cost of Air Travel in the U.S. Has Been Remarkably Stable for the Last Decade, and 17% Cheaper than 20 Years Ago.” “Smoke-free Transportation Chronology.” Americans for the Nonsmokers’ Rights. American Nonsmokers’ Rights Foundation, 01 Jun 2005. Web. 17 May 2014. “Low Fares to Washington D.C.” United Airlines. United Airlines Inc., 16 May 2014. Web. 16 May 2014.
Many people have issues with flying. Some are nervous that the plane might not make it to its destination while others think of flying as an overpriced, uncomfortable, and unpleasant experience. Than there are those who can afford to make their flight experience much more luxurious which are the passengers flying in business class or in first class. These are passengers that get the champagne in the plastic glasses and the chairs that stretch all the way out. David Sedaris is able to paint this picture of entitlement and lack of comfort throughout his article “Journey into Night.”
Spirit makes our fares so low because they know that draws in the attention of the consumer. Once they have your attention you’re shocked at the price so you go for the deal, oblivious to the fact that you walked into their trap. Southwest’s symbol for shareholders is LUV while Spirit’s is SAVE. They are not the only companies to start to enter into these paths. Hotels, rental cars and cruises are all faced with the same choice to embrace the LUV or the thriftiness with SAVE (Elliot
of price versus service in the airline industry as a whole, as well as, the
The airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B. Because the reasons can differ greatly in the motivations for a customer wanting to fly, it can be difficult to divide the market into discrete segments, that is, there is always going to be overlap in the preferences and characteristics of any given segment. With that in mind, the commonalities that are shared between the clientele that make up the respective classes can easily withstand analysis.
In 1978, deregulation removed government control over fares and domestic routes. A slew of new entrants entered the market, but within 10 years, all but one airline (America West), had failed and ceased to exist. With long-term growth estimates of 4 percent for air travel, it's attractive for new firms to service the demand. It was as simple as having enough capital to lease a plane and passengers willing to pay for a seat on the plane. In recent news, the story about an 18-yr British...
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
After September 11th, 2001, the airline industry experienced a significant drop in travel. The reasons for the airline industry downfalls also included a weak U.S and global economy, a tremendous increase in fuel costs, fears of terrorist's attacks, and a decrease in both business and vacation travel.
The results of airline deregulation speak for themselves. Since the government got out of the airline business, not only has there been a drop in prices and an increase in routes, there has also been a remarkable increase in airline service and safety. Airline deregulation should be seen as the crowning jewel of a federal de-regulatory emphasis. Prices are down: Airline ticket prices have fallen 40% since 1978. Flights are up: The number of annual departures is up from 5 million in 1978 to 8.2 million in 1997. Flights are safer: Before deregulation, there was one fatal accident per 830,000 flights, now the rate is one per 1.4 million flights. So what's the problem?
According to the International Air Transport Association, 2001 was only the second year in the history of civil aviation in which international traffic declined. Overall, it is believed that the IATA membership of airlines collectively lost more than US$12 billion during this time (Dixon, 2002).
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
The main opportunities that the scheduled air transportation will have in the next five years are the possible decrease of TSA agents at airports, technology increasing the safety and comfort of the flights for the passengers and ...
Flight fee is one of the biggest nightmares of the passenger. In this regard, such an initiative is a win-win situation for the Asiana airlines. The establishment of extensive cabin retrofits is also a great improvement to the customer service delivery. The airline also boosts customer experience in a bid to achieve the airline’s sustainability through the provision of lie-flat seats. The seats boost comfort for the passengers aboard; hence, reduction of exhaustion. According to Asian Development Bank (2009), the airline provides the passengers with a sizeable monitor, especially for the business class passengers. The practical productivity of team relies on upon its hypothetical planning, information of an aeronautical building, and tenets of its operation, including exceptional circumstances, and propensities for utilization of this learning, furthermore on order and determination of pilot-in-charge of aircraft and group individuals. The administration productivity air movement, the associations of flight action and a wide range of upkeep of aircraft in the greatest degree is controlled by the proficiency of the action association in the modern undertakings, cognizance of initiators, and the moral obligation of leaders of all positions for action concerning security control of
Air travel has grown in the past decade. Travel grew strongly for both leisure and business purposes. India will have nearly 800 to 1000 airplanes by 2023, it was estimated by Airbus. In spite of growth between 30 to 50 per cent in Indian aviation industry, losses of approximately 2200 crore is estimated for the current year.
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.
In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?