AirlineIndustryOverview

Framework
Market
Product
Customer
Compe;;on
Companies
Economics
Revenues
Cost
Externals
 GlobalMarket
2000Airlinesopera;ngmorethan23,000
aircraG,providingservicetoover3700airports.
In2006,therewere28millionscheduledight
departuresandcarriedover2billionpassengers
Growthofworldairtravelhasaveraged
approximately5%peryearoverthepast30years
Annualgrowthinairtravelhasbeenabouttwice
theannualgrowthinGDP
Expectedtodoubleovernext1015years
 USMarket
100cer;catedpassengerairlinesoperateover
11millionightdeparturesperyear
Carryoveronethirdoftheworldstotalairtrac
745millionpassengersin2006
$160billionintotalrevenues
545,000employeesandover8,000aircraG
opera;ng31,000ightsperday
Commercialavia;oncontributes8percentofthe
USGrossDomes;cProduct,accordingtorecent
es;mates
 Market
USCommercial
CostSafetyGrowth
Consolida;on
Con;nentalUnited(2010)LargestAirline
DeltaNorthwest(2009)2nd
SouthwestAirTran
 Products
TheGood,theBad,andtheUgly
Other
Adver;sing
AirportGains
CreditCards?
(Good)FirstClass
EmiratesPrivateRoom
EmiratesShower
Fees(Bad)

Fees
RyanAir(Ugly)
 Customer
Business
Time
Ameni;es
Pleasure
Cost
LowSwitchingCost
NoLoyaltyWhymilesexist
 Compe;;on
19371978:CivilAeronau;csBoardregulates
AirTravelasPublicU;lity
1978Present:AirlineDeregula;onAct
Costperpassengeris30%lessin1990vs.1976
(accoun;ngforina;on)
9airlineswentbankruptfrom7801,and
Americantoday
LowCostAirlines
Hub&Spoke
LowCostAirlines
Hub&Spoke
 Compe;;on
Costcugngtomaximizeseats
Productofhighxedvs.variablecost
Excesscapacityduetocompe;;on
Changingwithrecession
BarrierstoEntryarelessthanexpected
Subs;tutesaregenerallycomparableincost
Trains,Buses
Excep;on:EMee;ng
 Companies
Consolida;on
Service
Image

DavidNeeleman
Economics(Prots)
Economics
 Bankruptcy
20012011
USAir
United
Delta
Northwest
American
AmericanAirlines
 Improvements
Addi;onofFees
Baggage
Food
Internet
CostCugng
Food
Pillows
 Externals
Unions
Pay&Benets

Regula;on
GovernmentSupport
Weather
Terrorism
 Fuel

Fuel
Hedge
Eciency
New787
Alterna;vesvirgin
biofuel