CASE STUDY

US Airline Industry Case Analysis The US airline industry has gone through many turbulent times. The woes of the US Airline industry during the 21st century were typically attributed to the triple-whammy of the September 11, 201 terrorist attacks, the high price of crude oil, and the 2008 financial crash. Certainly, each of these was a powerful force in boosting costs and depressing demand. Yet the financial problems of the US airline business was little better. The IATA, the worldwide association of airlines, showed that the global airline industry had consistently failed to earn returns that covered its cost of capital. (Grant) In the US airline industry, approximately 100 certificated passenger airlines operate over 11 million flight departures per year, and carry over one-third of the world’s total air traffic – US airlines enplaned 745 million passengers in 2006. US airlines reported over $160 billion in total revenues, with approximately 545,000 employees and over 8,000 aircraft operating 31,000 flights per day. The economic impacts of the airline industry range from its direct effects on airline employment, company profitability and net worth to the less direct but very important effects on the aircraft manufacturing industry, airports, and tourism industries, not to mention the economic impact on virtually every other industry that the ability to travel by air generates. Commercial aviation contributes 8 percent of the US Gross Domestic Product, according to recent estimates. The economic importance of the airline industry and, in turn, its repercussions for aircraft manufacturers, makes the volatility of airline profits and their dependence on good economic conditions a serious concern for both industries. This concern has grown dramatically since airline deregulation, as stable profits and/or government assistance were the rule rather than the exception for most international airlines prior to the 1980s. As shown in Figure 1, the total net profits

References: Grant, R. M. CONTEMPORARY STRATEGY ANALYSIS TEXT AND CASES. West Sussex, United Kingodm: John WIley & Sons. MIT. http://web.mit.edu/airlines/analysis/analysis_airline_industry.html. CAMBRIDGE, MA. Unknown. The Airline Industry.