Industry - The nature of the service

The Airline Industry is a service industry but due to all the equipment and facilities involved in transportation, it is easy to lose sight of that fact. Airlines perform a service for their customers-transporting them and their belongings (or their products, in the case of cargo customers) from one given point to another for an agreed price. The objective is to provide a service at a price that people are willing to pay and to keep costs below that price so that a profit can be made.

Industry - Information about Customers and Channels of Distribution

There are several types of airlines, defined by the type of service they offer, annual revenues and the type of aircraft they use. All federal safety requirements are pegged to aircraft size.

Major Airlines earning revenues of $1 billion or more annually in scheduled service. They generally provide nationwide and in some cases worldwide service. There were 12 major U.S. airlines in 1997:

Delta, United, American U.S. Airways, Southwest, Northwest, Continental, Trans World, American West, Alaska, Simmons, and Reno.

National carriers are scheduled airlines with annual rev

A more recent development has been the marriage of frequent-flyer programs with promotions in other industries, the credit card industry in particular. It is now possible to build up frequent-flyer points by purchasing things other than airline tickets, and in some cases to exchange miles for other goods and services, like hotel rooms.

Rivalry among competing sellers has to be strong. Competition is focused on price, customer service, and financial stability. The market attempts of companies in other industries to win customers over to another industry is not as likely as to win them over to another airline.

Major airlines have more leverage with sellers than smaller airlines or new entrants with less leveraging power. Airlines are major users of fuel, airplane parts, soft drinks, etc.

International markets hold the greatest potential for growth, in part because of the expansion of world trade and the rapid economic growth occurring in many foreign countries, in part because more and more people have the time and money needed for international travel and relatively few people have visited other countries.

Industry - Pricing actions/trends (How do Competitors use Price as a CompetitiveWeapon?, Etc.)

Another important development following deregulation was the advent of computer reservation systems (CRSs). These systems help airlines and travel agents keep track of fare and service changes, which occur much more rapidly today than they did when the government controlled such things. The systems also enable airlines and travel agents to efficiently process the millions of passengers who fly each day.

Sales and Marketing encompasses such activities as pricing, scheduling, advertising, ticket and cargo sales, reservations, and customer service, including food service. While all of them are important, pricing and scheduling in particular can make or break an airline, and both have become more complicated since deregulation. Airline prices change daily in response to supply and demand and to changes in the prices of competitors. Schedules change less often, but far more often than they used to when the government regulated the industry. Airlines use sophisticated computer reservation systems to advertise their own fares and schedules to travel agents and to keep track of the fares and schedules of competitors. Travel agents, who sell approximately 85% of all airline tickets, use the same systems to book reservations and print tickets for travelers.

General trends in the U.S. air transport industry included airline deregulation, mergers of airlines, and fluctuating air fares and so-called price wars. As a result of the 1978 law deregulating the air transport industry in the United States, many airlines dropped less profitable service to smaller cities and competed intensely in high-density passenger markets.

Industry - Cost Drivers (Describe the major cost drivers or identify what contributes to the price a Co. must charge for its product; e.g., labor, material, manufacturing.) Give %'s of other data if available

High Cash Flow : Because large airlines own large fleets of expensive aircraft which depreciate in value over time, they typically generate a

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Approximate Word count = 2345
Approximate Pages = 9 (250 words per page double spaced)