case study analysis

The US airlines industry in 2002

Assess the financial performance of the us airline industry during the past 20 years

The elimination of restrictions over domestic routes and schedules and over domestic fares resulted in a way of new entrants - by 1980 , 20 new carriers including People Express , Air Florida , and Midway had set up - and an outbreak of price competition

Deregulation was quickly followed by the oil shock of 1979 , the onset of worldwide recession , and the air traffic controllers ' strike of 1981 During 1978-82 , the industry incurred massive

loses , and the outcome was a widespread bankruptcy (between 1978 and 1988 over 150 carriers went bust ) and a wave of mergers and acquisitions . By 1982 , expansion had resumed and during the 1980s and into the 1990s mileage flown grew at a trend rate of 4 percent per annum . At the same time , competition and the quest for efficency resulted in a continuous decline in real prices

For most of the first half of 2002 , US airlines were still reeling from the aftermath of the terrorist attacks of September 11 , 2001 . Despite a recovery of passenger numbers and the US economy more generally , the industry 's financial results for the first quarter of 2002 were due Compared to the first quarter of 2001 , revenues were down by over 20 percent and a net profit of 2 billion in 2000 was transformed into a loss of over 7 billion for 2001

mera\stepen .welichina ) can the industry 's low profitability be attributed pripisano to the structure of the industry ? which of the Porter 's 5 forces has had the biggest impact on depressing industry profitability

There have been two major phases in the development of the US airliner industry : the period of regulation up until 1978 , and the period of deregulation since then and of cause , this fact has had a great influence on the situation in the airlines industry

The US civil airline industry began in 1920s , when scheduled services began , primarily for carrying mail rather than passengers . As the result , the postmaster-general exercised regulatory control over the industry , so , in 1930s the industry was controlled only by three airlines . New entry and growing competition led to the threat of instability in the industry , and in 1938 Congress responded with the civil Aeronautics Act . The Civil Aeronautics Board (CAB ) was established by legislation . The CAB established safety guidelines priorities , and strict rules for passengers fares , airmail rates , route entry and exit mergers and inter-firm agreements . Fares were set by the CAB on the basis of cost plus a reasonable rate of return , as a result of which was that cost increases could be passed on to customer . All this facts led to the industry structure 's ossification - despite more than 80 applications from firms seeking to operate scheduled domestic flights not a single new carrier was approved between 1938 and 1978

During the 1970s , two factors created the impetus for reform - the oil shock of 1974 , which led to rapidly rising...