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Airline Industry

Description of the operation:

Air travel remains a large and growing industry. It facilitates economic growth, world trade,
international investment and tourism and is therefore central to the globalization taking place in
many other industries.
In the past decade, air travel has grown by 7% per year. Travel for both business and leisure
purposes grew strongly worldwide. Scheduled airlines carried 1.5 billion passengers last year. In
the leisure market, the availability of large aircraft such as the Boeing 747 made it convenient
and affordable for people to travel further to new and exotic destinations. Governments in
developing countries realized the benefits of tourism to their national economies and spurred the
development of resorts and infrastructure to lure tourists from the prosperous countries. As the
economies of developing countries grow, their own citizens are already becoming the new
international tourists of the future.
Business travel has also grown as companies become increasingly international in terms of their
investments, their supply and production chains and their customers. The rapid growth of world
trade in goods and services and international direct investment have also contributed to growth in
business travel.
To meet the requirements of their increasingly discerning customers, some airlines are having to
invest heavily in the quality of service that they offer, both on the ground and in the air.
Ticketless travel, new interactive entertainment systems, and more comfortable seating are just
some of the product enhancements being introduced to attract and retain customers.
Least of job duties as a manager:
• Analyze in detail the evolving low cost carrier business model, its strengths and weaknesses
• Examine the evolution of the industry, and gain an insight into the future airline business model
• Study lessons learned from successfully adapting airlines - see how they have managed to
compete in the new marketplace, through examination of their models and strategies
• Work through synergies between your business and the leading practices of other successful
carriers to identify where the opportunities lie
• Focus on cost management, revenue generation strategies and competitive techniques which
have proven successful in today’s marketplace
• Explore new opportunities for innovation
Enjoy most in:
Managing Finances
Because the last of the four areas is financial management, for which six factors are used. Unit
revenue and unit cost are important by themselves, but their relationship is also important.
Therefore, we have compared unit revenue and unit cost as well as the unit margins among the
airlines. A measure of capacity to normalize these factors is used since the airlines fly all their
available seats, not just those that are occupied. Better unit revenue may not be an advantage for
an airline whose unit costs are out of line.

Enjoy least in:

Managing the Fleet
In the area of fleet management, the same factors are used for this analysis as in the earlier study.
Airplane utilization in hours per day deals with how well the companies' major assets (airplanes)
are used as a group. The load factor relative to the industry average indicates how well the
average individual airplane is used. Simply stated, the load factor is that proportion of an
airplane's seats that are sold and actually filled at departure.
Familiar with: Geographical differences and considerations in the evolving airline model.
Challenges as the new manager:
➢ New opportunities of high tech innovations.
➢ Making a good and competitive technique.
➢ Choose the right employer for the right place.
➢ Study in detail the evolving low cost carrier business model.
Greatest challenge and why:
Managing People
We use two factors with respect to how well the airline manages its people. Productivity, in
airline capacity per employee, is a measure of how effectively the employees work together in
providing the physical service of getting passengers from one place to another. Morale is a
measure of how committed employees are to providing good service to the airline's customers.
As in the original study, productivity is measured in available seat miles per employee. Morale is
measured using proxies since the original morale model is complex and requires information not
currently available for the airlines being examined. In this case, lost bags per 1000 passengers
and complaints per 100,000 enplanements derived from the Air Travel Consumer Report are used
as indicators of how committed airline employees are to serving their customers. The activities
that result in lost bags or in poor enough treatment of passengers that they file complaints are
indicative of the morale of the airline employees. Labor-management relations (including strikes
and threatened strikes) are one example of a driver of these effects.
(Airline Industry)

Submitted By:
Krizia Mae M. Cabalatungan