U.S AIRLINE INDUSTRY

U.S Airline industry



U.S Airline industry

Introduction

The Aviation Industry has been one of the most innovative and influential industry that have been significantly flourishing throughout the industry. With the inception of the airplane put forth by the Wright brothers, there have been constant, continuous and iterated improvements, amendments, innovations and additions to the fast-paced and heightened development of the industry, creating web all around the world (Kemp, 2003, 635).

The current crisis in the airline industry reflects the impact of several events such as recession 2001 U.S., the terrorist attacks of September 11, 2001 and the Iraq war in 2003. This crisis has forced two of the six largest carriers to put under court protection. In this environment, low-cost carriers have captured a significant share of the market and thus forced to restructure their competitors.

Market Segmentation

Most of the aviation companies have distributed its market in three categories. These include economy class (price conscious customers), premium economy (price and quality focus customers), and upper class (for high profile quality focused people). All aircrafts in the fleet of airlines has the capacity to adjust all three classes' passengers. In order to serve the value pricing market segment, and maintain low cost fare, Aviation companies has extensively been focusing on tapping international routes with economy and premium economy class segments. Based on the class type, fares vary considerably for the same route. Airlines are usually targeted upper class customers especially on transatlantic routes based on the profit potential, market size, competition, and company objectives in tapping international routes (Hanlon, 2007, 149).

Strategic Planning

The strategic planning pertaining to the marketing allows the Airway companies with a proper logical and the methodical procedure that builds up effective strategies of marketing. This strategic planning related to the marketing has three significant and essential stages that include segmentation of the existing players of the markets for instance in the airline industry, summarization of the segments of the market and also the growth and expansion of the segment of the market pertaining to the marketing strategy. Airline industry is using Porter to improve their strategic management and corporate strategy (Hanlon, 2007, 149).

Most of the airlines sells its services at the industry average for a higher profit than the competition, win or below the industry average prices and market share. In the case of a price war, the company can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, majority of them remain profitable in some region to produce cheaper for a longer period of time.

Economic Impact of the Crisis

Despite a plan to support $15 billion provided by the U.S. government shortly after the attacks of September 2001 which was added using a $ 3 billion in 2003 to counter the impact of Iraq war, the airline industry recorded a total cumulative loss of $ 18 billion in 2001 and 2002. For 2003, losses are estimated at $ 11 ...