Airline Industry

Essay by cr112701College, UndergraduateA, May 2008

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�PAGE � �PAGE �1� Airline Industry

   The airline business has been in existence for over 75 years. There have been many ups and downs in this particular industry's economy. While history has shown that over 140 airlines have declared Chapter 11; only a few airlines have truly emerged. At Present, the U.S. airline industry is facing a financial crisis and the outlook is bleak. The airline industry crisis was dramatically accelerated by the September 11th attacks; the high and escalating prices of gasoline and recently the shortage that was caused by Hurricane Katrina in late August of the year 2005.  Each of these was world shaking events and in relations to the micro and macro economics presented a ripple effect that to this day is still being felt.   These events sent shock waves through an industry that was already troubled. The severe impact it had on world travel exacerbated existing problems.
Consolidation in airlines and markets, labor troubles and increasing gas prices are some of the most glaring issues impacting the industry.
    The slowdown had already reduced business travel by 30%. Labor costs were increasing by nearly 10%, gas prices were increasing, and business decisions needed serious attention. Only a few airlines were proactive in restructuring their business plan to react to the failing economy. Those airline carriers who chose to do nothing have will or have to either filed chapter 11 or are very close to doing so. The industry is at a major turning point. There could be major restructuring, bankruptcy, liquidations, or consolidations of major network carriers. Some airline carriers have done very well to just break even over the course of existence. 
   Southwest Airlines is the only major carrier that has shown a profit over the past four years and in the same timeframe, the other...