General Environment Analysis of the Airline Industry

The U.S. airline industry has been in a chaotic state for a number of years. In 1993, a U.S. government report indicated that the industry had â€Å"Lost huge amounts of money in the past three years, and it has never made a sustained, substantial return on investment†¦Ã¢â‚¬  According to the Air Transport Association, the airline industry trade association, the loss from 1990 through 1994 was about $13 billion, while from 1995 through 2000, the airlines earned about $23 billion and then lost about $35 billion from 2001 through 2005. Early in 2006 the association expected about a $10 billion loss in 2005. In 1903, the Wright brothers first successful flight in Kitty Hawk, North Carolina marked the beginning of the aviation industry. In the early†¦show more content†¦Through these agreements, airlines can share facilities and operational costs (e.g., maintenance facilities, sales offices) and negotiate volume discounts on large purchases. Passengers benefit from lower prices (due to lower expenses) as well as optimized routes and pooled loyalty rewards, especially in regards to international travel. Since the deregulation of the airline industry began, airline ownership has been limited to companies and individuals of the operating country. Consolidation is beneficial in two ways for airline companies, as it typically reduces redundant operating costs and raises revenues through higher fares. The airline industry can be separated into four categories by the U.S. Department of Transportation: †¢International 130+ seat planes that have the ability to take passengers just about anywhere in the world. Companies in this category typically have annual revenue of $1 billion or more. †¢National Usually these airlines seat 100-150 people and have revenues between $100 million and $1 billion. †¢Regional Companies with revenues less than $100 million that focus on short-haul flights. †¢Cargo These are airlines generally transport goods. Michael Porter’s Five Force †¢ Rivalry Among Competing Firms The most powerful of the five competitive forces, the strategies pursued by one firm can be successful only to the extent that they provide competitiveShow MoreRelatedLufthansa External Environment Analysis893 Words   |  4 Pagespast and manage any such Crisis in future.? GENERAL ENVIRONMENT ANALYSIS The general environment analysis will focus on trends in the four segments of General Environment. The following table shows the changes in the general environment that are affecting airline Business on an ongoing basis. B. 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