Airline Industry

• • • Is this a profitable industry? How do Five Forces account for profits? How do airlines compete?

Major Players • • • • • • • Delta US Airways United American Northwest Continental TWA • • • • • Southwest Alaskan Midwest ComAir ASA .

Differentiators/Niche Players? • JetBlue – “Low cost” Business-class only • Virgin – Sleeping space – Showers – Pick-up Service – Back massage .

Airline Industry Profitability 8 6 4 2 0 -2 -4 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 ROS .

800 Capacity Utilization Capacity Utilization Break Even Available Seat-Miles (in millions) 700 600 500 400 300 200 19 82 19 78 19 80 19 84 19 86 19 88 19 90 19 92 .

Keys to Profitability? • Increase total utilization rate: – Which business-level strategies? – Retire excess capacity? • Decrease break-even utilization rate – Efficiency (quick turnaround. new planes) – High-load routes – No-frills service – Secondary airports .

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