Opportunities and Threats facing the U.S Airline Industry Essay

Opportunities and Threats facing the U.S Airline Industry The wellness of the overall U.S airline industry is still tenuous in-spite of the passenger avocation volumes returning to pre-9/11 levels. A survey estimated that from 2001 through 2003, the US airline industry reported to have lost $23.2 billion dollars, compounded by an additional $1.6 billion in the first quarter of 2004. This $24.8 billion deficit exceeds the total profits earned over the entire six-year period 1995-2000 forceful changes in the Economic, Political/legal and technological segment of airlines external environment contributed to some of the major looses seen by the industry. The key factors that heavy contributed to the loses includeEconomic slow down in the country coarse decline in business travelSARS epidemic add in competition Availability of substitutes for air travelsoaring discharge pricesWeak dollarIn response to the industrys fiscal crisis, Congress made available several forms of succour that amounted to over $20billion. This relief includes the payment of upto $5billion in pretax cash assistance to reimburse air careers for losings incurred as a direct result of the 4-day government shut-down of air vocation after 9/11. However, relief measures were not enough to bring the airline industry out of hot water. Most of the airlines have accumulated big amounts of debt which brought them on the verge of bankruptcy. The list includes Atlas/Polar Cargo, Midway, National, Sun Country, TWA, join and US Airways. American and Delta airlines narrowly avoided bankruptcy but have warned more or less such possibility. An average carrier is now well over 90% leveraged (net debt to equity ratio) compared to 60-70 percent historically. This means most airlines are now only leveraged and unable to obtain capital. This has added to significant debt service salutes and will organize the industry even more vulnerable to any future frugal downturns. With industry debt well over $100 billion, much of it due in the next 24 month. 11 of 12 airlines are rated junk bonds by S&P. Only Southwest remains at an investment grade. close all airlines are faced with the same challenges and threats in the external environment like rising fuel cost, weak travel demand and so forth Some airlines like Southwest, JetBlue and AirTran whi... ...work and take necessary action to adapt and obligate its competitive posture. Southwest employs integrated low-cost and differentiated schema which enables the whole toAdapt cursorily to environment changesLearns and implement new skills and technology quicklyEffectively utilize its core competency while competing against rivals.To sustain a competitive advantage and to seek above average returns, Southwest implements this strategy to produce relatively differentiated service at lower cost compared to its rivals. Yes this strategy is appropriate to offset the forces in the industry. Southwest should grow internationally as the demand fo r air-line travel has substantially declined domestically in the in the end couple of years and will continue to decline further in some segments like business or corporate travel. The major solid ground I feel is the growth in communication technology alter people to work remotely without the need to be present in the office. Voice and data over IP, Live meeting and communication go have substantially reduced the need for corporate executive and divisional managers to travel thus lowering the demand further.