Analysis Of The Commercial Airline Industry

I. Introduction

The commercial airline industry is both highly complex and remarkably interwoven into the everyday lives of consumers. Despite increasing demand for safe and affordable flights, the industry has suffered major losses in recent years, resulting in various strategies to increase economies of scale. Through mergers, vertical integration, global alliances, and cost-cutting techniques, the airline industry now operates in an oligopoly market, with a few major airlines dominating the U.S. mar-ket. Through examining the role of governmental regulation, forces of supply and demand, and the market structure of the industry, the following paper presents the degree to which commercial air-lines are concentrated in the hands of a few, and whether or not that bodes well for the future. The industry is composed of suppliers, manufacturers, sellers (airlines and third party sites), and consumers, all of which present varying motivations in the market. In terms of defining the mar-ket, the airline industry is an oligopoly, with major legacy carriers merging in recent years to achieve vertical integration and extensive networks. Despite major losses in the airline industry over the last forty years, the size and scope of its operations remain both extensive and interconnected with many facets of the U.S. economy. By analyzing

LCAs typi-cally make up about 35% of the aerospace industry in the U.S., largely due to military aircraft sales being above 50% . LCAs are primarily produced either through Boeing (U.S.) or Airbus (E.U.), which dominate the global market by selling to either airlines or leasing companies. These leasing companies rely on capital financing to lease aircrafts to airlines so that airlines can more easily re-place their supply in order to remain