Chapter 1

The Airline Industry

GROUP 2
Ballesteros, Bea Lyn
Geraldo, Rosiebel
Ramirez, Mary-Jo
 AIR SAFETY

The Air Mail Acts of 1925 or also known as

,
Kelly Act introduced the first federal
legislation dealing with air safety.
 AIR SAFETY
In 1958 the Federal Aviation Act delegated
air safety to the Federal Aviation Agency.
Today the Federal Aviation Agency exists
as the Federal Aviation Administration
(FAA),which is an operating body of the
Department of Transportation.
 UNIONIZATION
Labor relations are obviously a significant
factor in the administration of an airline,since
the existence of several unions per carrier
means that contract negotiations are
constantly in progress.
 UNIONIZATION
Airline industry employee unions are,
governed by the Railway Labor Act which
permits Congress to intervene in the
negotiation or settlement of strikes that
create a national emergency by threatening
to cripple the transportation industry.
 AIRCRAFT INVESTMENT
 The airline industry is characterized by
substantial aircraft investment. The demand
for air transportation generated by the
economies of scale introduced by the jet
engine is predominantly responsible for the
increase in such investment since 1950.
 AIRCRAFT INVESTMENT
For example, the jet aircraft introduced in the late
1950s cost approximately $5 million while 1980
jets may cost as much as $50 million.
Investment costs have also increased as a result of
technological advances and the inflationary trends
of the late 1960s and 1970s.
 CAPITAL INFUSION
The rapidity of technological advances and
the substantial plant and equipment
investment needs have created large capital
requirements, which cannot be met by
internal funding alone.
 MAINTENANCE REQUIREMENTS
Maintenance requirements are dictated by the
highly sophisticated nature of the industry's
equipment. Airworthiness used to be determined
by flight-hour time constraints, but individual
carriers now use studies based on actual
experience to demonstrate air worthiness to the
FAA.
 TERMINAL FACILITIES
Local governments play a major role in air
transportation by financing, owning, and operating
terminal facilities necessary for air travel.
Generally, the cost of landing and terminal
facilities and their maintenance is reimbursed by
the air carriers through landing fees and charges
for terminal facility rentals.
 AIRLINE ORGANIZATION

Division of Responsibility
 Airlines can be organized under several major
divisions. The number of divisions and their
specific responsibilities vary from airline to airline,
depending on the size of the airline and
management's objectives.
The following are examples of divisions and their
responsibilities:
 REGULATIONS AND REPORTING
Air carrier accounting information is controlled
by a Uniform
, System of Accounts and Reports
(USAR) issued by the CAB,which all certificated
air carriers must follow. The USAR consists of a
list of titles and account numbers to be used,
together with instructions for the use of individual
accounts.
 REGULATIONS AND REPORTING

For reporting purposes,the financial statement

presentation of an airline organization is similar to
that of other commercial enterprises.
 REGULATIONS AND REPORTING

The 3 Functional Classifications for Revenues

1. Transport revenues
2. Public service revenue
3. Transport- related revenues
 REGULATIONS AND REPORTING

The 8 Functional Classifications for Operating

Expenses:
1. Flying operations
2. Maintenance
3. Passenger services
4. Aircraft and traffic servicing
5. Reservations,sales,and advertising
6. General and administrative
7. Depreciation and amortization
8. Transport-related
THANK YOU!