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

ROS

6
4
2
0
-2
-4
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999

Available Seat-Miles (in millions)

Capacity Utilization
800
700
600
500
400
300
200

Capacity
Utilization
Break Even

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