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    Atrn 314 First Topic

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    This document discusses the airline industry and the impact of the COVID-19 pandemic. It covers topics like the financial condition of airlines, industry consolidation, and the evolving nature of the industry since deregulation. Specifically, it notes that deregulation in 1978 led to instability as competition increased but also opportunities for some carriers. The pandemic has caused the worst downturn in aviation history, though underlying issues predated COVID-19 like rising costs and overcapacity. Airline mergers aim to reduce costs and harmonize networks but face challenges integrating cultures and satisfying stakeholders.

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    Atrn 314 First Topic

    Uploaded by

    Dump Me
    27 views22 pages
    This document discusses the airline industry and the impact of the COVID-19 pandemic. It covers topics like the financial condition of airlines, industry consolidation, and the evolving nature of the industry since deregulation. Specifically, it notes that deregulation in 1978 led to instability as competition increased but also opportunities for some carriers. The pandemic has caused the worst downturn in aviation history, though underlying issues predated COVID-19 like rising costs and overcapacity. Airline mergers aim to reduce costs and harmonize networks but face challenges integrating cultures and satisfying stakeholders.

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    ATRN 314 FIRST TOPIC

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    This document discusses the airline industry and the impact of the COVID-19 pandemic. It covers topics like the financial condition of airlines, industry consolidation, and the evolving nature of the industry since deregulation. Specifically, it notes that deregulation in 1978 led to instability as competition increased but also opportunities for some carriers. The pandemic has caused the worst downturn in aviation history, though underlying issues predated COVID-19 like rising costs and overcapacity. Airline mergers aim to reduce costs and harmonize networks but face challenges integrating cultures and satisfying stakeholders.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    27 views22 pages

    Atrn 314 First Topic

    Uploaded by

    Dump Me
    This document discusses the airline industry and the impact of the COVID-19 pandemic. It covers topics like the financial condition of airlines, industry consolidation, and the evolving nature of the industry since deregulation. Specifically, it notes that deregulation in 1978 led to instability as competition increased but also opportunities for some carriers. The pandemic has caused the worst downturn in aviation history, though underlying issues predated COVID-19 like rising costs and overcapacity. Airline mergers aim to reduce costs and harmonize networks but face challenges integrating cultures and satisfying stakeholders.

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    of 22

    ATRN 314

    Air Transport
    Economics
    ► TOPICS:

    ► THE AIRLINE INDUSTRY


    ► THE FINANCIAL CONDITION OF THE AIRLINE
    INDUSTRY
    ► AIRLINE INDUSTRY CONSOLIDATION
    ► IMPACT OF PANDEMIC IN THE AVIATION
    INDUSTRY.
    OBJECTIVES

    ► To be able the students to describe the


    evolution of air transport industry.
    ► To be able the students to understand the
    impact of pandemic in the aviation
    industry.
    The Evolving Air Transport
    Industry
    ► THE AIRLINE INDUSTRY
    ► Since the US Airline Deregulation Act of
    1978, the US airline industry (and, to a
    certain
    ► extent, the global airline industry) has
    been characterized by volatility.
    THE AIRLINE INDUSTRY
    ► Periods of high revenues are followed by
    periods of economic drought.
    ► The most recent economic "trough"
    followed the 11 September terrorist
    attacks in 2001.
    ►Prior to deregulation,
    Airline industry was:

    ► Stable
    ► With minimal losses
    ► Healthy profits
    DEREGULATION
    ► 1.It caused financial losses to airlines when it was
    introduced.

    What is the reason?

    ► 2. Opened up the opportunity for some airlines, such


    as Southwest Airlines and Ryanair
    ► to post some of the greatest profits in the history of the
    industry.
    THE FINANCIAL CONDITION OF THE
    AIRLINE INDUSTRY.
    ► The US Airline Deregulation Act of 1978
    dramatically changed the global financial
    ► condition of the airline industry as other
    countries began to follow suit and
    deregulate
    ► their own industries.
    ► The post-deregulation era the industry took on the more
    cyclical
    ► nature of a competitive industry, in which periods of robust
    financial profitability could
    ► be followed by periods of severe economic distress.
    ► As in other competitive industries,
    ► the financial condition of the airline industry is highly related to
    economic growth, so it is
    ► not surprising that it suffered when the economy stalled.
    EARLY 1980
    ► 1. Shortly after US deregulation, the airline industry
    suffered a minor
    ► crisis as the economy slowed and competition soared.
    ► 2. The US domestic industry experienced overcapacity
    as the many new airlines that were formed as a result
    ► of deregulation either went bankrupt or merged with
    other carriers.
    ► 3. A similar situation occurred in the early 1990s as the
    economy once again experienced a
    ► downturn, but this downturn was aggravated by
    political uncertainty from the first Gulf
    ► War and increased fuel costs.
    TOOLS IN CONTROLLING COSTS/
    AND OR INCREASE REVENUE
    ► 1.Revenue management
    ► 2. Frequent-flyer program
    ► 3. Simpler cockpit design
    ► 4. Better engine designs
    ► 5. E-ticketing
    ► The post-deregulation airline profitability cycle
    continued into the twenty-first century,
    ► with the global industry experiencing its worst
    downturn in the history of commercial
    ► Aviation.
    ► Although the 9/11 terrorist attacks were the proximate
    cause of the global
    ► airline industry's financial problems, the root cause
    was a slowing economy that reduced
    ► passenger yields
    ► Added to this were rising jet fuel costs,
    increased airline operating
    ► costs stemming from overcapacity in domestic
    markets, and increased security costs at
    ► commercial airports
    ► (NOTE: the airline industry was in trouble before
    the 9/11 disaster,
    ► with many airlines losing money and with no
    significant initiatives to reduce costs and
    ► increase productivity)
    AIRLINE INDUSTRY CONSOLIDATION

    ► The definition of merger can be
    explained as two companies
    combine to form a single company. It
    is similar to an acquisition or takeover,
    but it also mean that stockholders
    from both companies retain a shared
    interest in the new corporation 
    ► Historically, mergers have not been very successful in
    the aviation industry.
    ► Many
    ► mergers do not realize the benefits envisioned when
    planned, and one-off merger
    ► costs, such as aircraft painting and IT harmonization,
    end up being far more costly than
    ► planned.
    ► Airline mergers also bring difficulties in
    dealing with labor groups, especially
    ► with regard to such issues as merging
    seniority lists.
    ► Corporate culture can also be a much
    underestimated barrier to successful
    mergers as different companies' cultures
    may
    ► impede merger success
    ► Finally, one of the greatest challenges a
    merger faces is managing
    ► multiple and powerful stakeholders; these
    can include, but are not limited to,
    politicians,
    ► regulators, labor leaders, and consumers.
    MAJOR BENEFIT OF MERGER

    1. COST RATIONALIZATION

    2. NETWORK HARMONIZATION

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