Chaos In The Skies – The Airline Industry Pre And Post 9/11

1252 words - 5 pages

Chaos in the skies - the airline industry pre and post 9/11
Case Study
Chaos in the skies- the airline industry pre and post 9/11
1. Introduction
The terrorist attack on the New York World Trade Center and the Pentagon
on September 11, 2001, when civilian planes were turned into guided missiles
flown by suicide bombers driven by religious fundamentalism and hatred for
the United States not only seared themselves into the consciousness of the
American people, but into the economic and business fabric of the country,
and as a result, of the world.
While the United States economy was slowing in the months before this tragic
event, the aftermath of the bombings led the economy into a depression.
The airline and travel industry were the worst hit of all industries. This is a
review of the situation before and after 9/11 on industry of these attacks and
an overview of responses both by government and on industry to the event.
2. Situation before 9/11 STEP
2.1 Social Factors
increasing world trade and investment liberalization of markets. Between 1990
and 2000 airlines benefited from an increasing number of tourist passengers
from 450 million up to 700 million. The main reasons for people to fly were
leisure and business trips. Travelling by plane was also a symbol of wealth
and success.

2.2 Technological Factors
There has been made huge steps in airline technology, with the invention of
more efficient engines the demand for long-distance flight could be satisfied.
The internet opened a whole new and cheaper distribution channel for
airlines. Furthermore airlines could improve their non-core services to get
competitive advantages towards other airlines for example TV screens in the
seats or faster boarding with new boarding systems.
2.3 Economical Factors
There was an increasing of US passengers travelling with planes of 160%
between 1978 and 2000 (almost 660 million passengers) Through the year
2000 the operating costs for airlines went up constantly caused by higher fuel
prices and rising labour costs furthermore the widening of the non-core
services of airlines caused immense costs. Airlines reacted on that with
reducing labour and cutting costs. Furthermore many airlines started out-
sourcing their non-core services and activities in order to get back to the core-
service and to save costs.
2.3.1 Competitive situation
A basic impact on the competitive situation in the airline industry was 1978 US
open markets policy which enabled competitors to enter the industry. In the
further development of the industry several airlines merged in order to benefit
from economies of scale. In 1984, 15 airlines had 90% of the US market in
1990 there were 8 airlines with a market share of 90%. The increasing
competition among the airlines lowered the flight prices and airlines had to
reduce costs. By the introduction of Hub and Spoke systems fix costs for
airlines could be reduced and efficiency could be increased, also customers
benefited from these networks. The...

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