The international airline industry provides service to virtually every corner of the globe, and has been an integral part of the creation of a global economy. The airline industry itself is a major economic force, both in terms of its own operations and its impacts on related industries such as aircraft manufacturing and tourism, to name but two.
This sector had its share of heightened challenges during the global financial crisis of 2000-2005 and 2008-09. The airline industry lost billions of dollars and some airlines struggled to remain in business.
Today, the global airline industry consists of over 2000 airlines operating more than 23,000 aircraft, providing service to ...view middle of the document...
After the world airline industry posted 4 consecutive years of losses totaling over $22 billion from 1990 to 1993, as a result of the Gulf War and subsequent economic recession, it returned to record profitability in the late 1990s, with total net profits in excess of $25 billion being reported by world airlines from 1995 to 1999. Even more dramatic was the industry’s plunge into record operating losses and a financial crisis between 2000 and 2005, with cumulative net losses of $40 billion.
Here we contrast two airlines; one which remained profitable during the financial melt- down of 2008-09 and another which suffered losses.
Source: (Global Airline Industry Program)
Key challenges for aviation industry in 21st century
(Challenges For The Aviation Industry Engineering Essay, 2013)
Top 3 Costs
1. Fuel / Energy
3. Aircraft Maintenance
Top 4 Frustrations in Aviation
1. Fuel price fluctuations
3. Personnel cutbacks
4. Recurring safety lapses
Sources: IATA Industry Outlook Dec 2007 and Air France press office-may 2008
Fuel / Energy
The cost of powering those aircraft with jet fuel, the current source of aviation energy, will rise as reserves reduce. Fuel is currently 25% or more of an airline’s operating cost and we can now fly almost twice as far on each kilo of fuel than 40 years ago. However, we’re now flying ten times further than we were in the ‘70s.
Driving down the real costs (monetary and environmental) of Aviation will be achieved by continuing to improve the efficiency of new aircraft, make better use of resources and improve business performance all round.
Source: (Airbus, 2011)
There is clearly a shortage of trained and skilled manpower in the aviation sector as a consequence of which there is cut-throat competition for employees which, in turn, is driving wages to unsustainable levels. Moreover, the industry is unable to retain talented employees.
Source: (Challenges For The Aviation Industry Engineering Essay, 2013)
Global aviation strategies in 21st Century
Following are some of the important strategic moves airlines have taken to adapt to the dynamic business environment in a highly competitive industry.
• Understand reality of change and become “flexible”
• Revitalize strategy
• Low cost, LC/HV, “Virtual” carriers
• Customer focus (ask what they want)
• Eliminate duplication
• Organizational accountability
• Staff relations into strength
• Updating of airline systems
• Build partnerships (alliances, interactive marketing)
• Act decisively
• Diversify the business (core and non-core)
• Airlines “inventing” new ways to reduce future costs and spending of capital
• Increased efficiency
• Dependent upon aviation (links local, national and international economies)
• Airlines must take control of business issues and work in partnership...