Industry Analysis for the Airline Industry
An Industry in which I have a potential future interest for an entrepreneurial venture is the ever changing airline industry. Although facing tough numbers after the 9/11 attacks, I have always held an interest for this industry. There are several basic economic characteristics for this industry. There are many opportunities, there are also many threats. The airline industry was heavily regulated by the Civil Aeronautics Board (CAB) for close to 40 years. Eventually, Congress abandoned airline price and service regulation and disbanded the CAB.
Since deregulation the airline industry has becoming increasingly competitive. This industry is also very large and important to the travel and tourism industry. This industry is also very important in developing new business strategies amongst different industries. Before working with any industry, you should take steps to analyze it. The two basic types of aviation are commercial aviation and general aviation. General aviation deals with operating you aircraft more for internal purposes. Commercial deals more with carrying passengers or cargo for hire.
The scheduled airline industry is more of commercial aviation. The first scheduled airline service started in the 1920’s. There have been a lot of eventful history in this industry including periods of rapid growth and prosperity, rapid technological change, federal regulation of prices and routes, entry and exits of firms, bankruptcies, rivalries, financial losses, and problems in safety and security. However, the industry had become one of the most important factors of today’s transportation infrastructure.
The table below displays how much the industry has grown over the years. Table 7. 1: Annual U. S. Passenger Enplanements by Scheduled Airlines, 1930-2004 (millions of persons) Source: Air Transport Association, Annual Operations, Traffic and Capacity, www. airlines. org/econ/d. aspx? nid=1032 There are many rivalries in the air line industry. The Federal Aviation Administration (FAA) divides the firms in the airline industry into three categories. Group 3 consists of airlines that gain at least $1 billion in annual revenue.
National, or Group 2, are those who gain between $100 million and $1 billion in annual revenue. The last group is Regional, or Group 1, which gains less than $100 million in annual revenue. In Group 3, United, American, and Delta holds the top 3 spots in revenue, revenue passenger miles, and available seat miles. Porter’s five forces is by far the most influential in business strategy. It analyzes business segments and developing entry/exit/investment plans. Below is a model of Porter’s five forces for American Airlines, one of the most dominant companies of the airline industry.
