Chaos in the skies - Airlines Pre and Post 9/11 Business environment

Essay by lisaocUniversity, Bachelor'sA-, August 2006

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Chaos in the skies - Airlines Pre and Post 9/11 Week 5

Q1. Analyse the business environment pre 9/11 and post 9/11 - how have the opportunities

and threats changed?

Analysis of business environment pre 9/11


* Ageing population (retirees). Capture the ageing market

* Technology (bigger jet engines and aircraft allowed for more long haul flights and more passengers)

* As a result of deregulation the Open Markets policy (removed barriers to entry, freedom of routes and airlines could set prices inline with market demand. FSC carriers merged to remain competitive)

* A rise in GDP (more disposable income)

* Leisure (55% of air travel was for leisure)

* Differentiation (restrictive ticket conditions i.e. time of travel, limited travel times and limiting travel agents)

* Hub-and-spoke networks (a hub with lots of spokes could offer a one-stop service. These could be serviced with fewer planes, fewer staff and more frequent flights)

* Airlines forged alliances (used strategies such as code sharing, block spacing and franchising)


* Technology (as bigger engines and air crafts increased airlines were forced to compete on cost)

* A rise in GDP (labour cost rose)

* Deregulation (decline in real value of airline yields in US as measured by average revenue per passenger kilometre RPKs.

Increases in competition had eroded the bottom line profitability. This forced airlines to cut costs to maintain margins)

* Economies of scale and ability to attract a higher share of business travel (forced FSCs that lacked capital out of most routes)

* FSCs (new entrants Low cost carriers LCCs)

* Fragmentation (constraint of national and international regulations and public ownership restricted landing rights)

* Hub-and-spoke (led to domination by US Airways/United Airlines causing a monopoly)

Analysis of airlines post 9/11


* United Airlines and US Airways (filled...