Us Airline Industry Analysis

Executive Summary

The main focus of this analysis is to observe the U.S. Airline industry as a whole, which would reveal the top and bottom preforming firms within the industry. To do so we created categories that we believe drive profitability within the industry and factors that measure performance inside a firm. After careful investigation we established a list of the factors we believe to be the most relevant and important to success within the industry. These factors for success are, the ability to meet: customer expectations, efficiently manage the fleet, attract customers, create alternate sources of revenue, and adapt to technological advances. To decipher which firms are the top and bottom performers in the industry, we created measurement criteria that correlate to the factors mentioned above. To measure a firm's ability to meet customer expectations we used the number of customer complaints and the number of mishandled bags. As for efficiently managing the fleet, we used load factor, percent of on-time flights, and maintenance. To measure a firm's ability to attract customers we simply used the number of customers carried in a year. In regards to creating alternate sources of revenue we used the profit earned from those sources. Finally to measure a firm's ability to adapt to technological advances we used the number of new planes purchased. Using these elements, we evaluated the performance of five firms in the U.S. airline industry. The airlines we analyzed are: Southwest, American Eagle, Delta, JetBlue, and U.S. Airways. After detailed comparisons we came to the conclusion that Southwest Airlines is currently the top performer in the industry while American Eagle is the bottom. Next we came up with a list of recommendations to help improve American Eagle's ranking in the industry.

Industry Analysis

The airline industry is providing air transportation for customers or freight to every possible route around the globe. There are two types of airlines services. We will focus our analysis on the national service, an airline service that is providing air transportation to reach regional destination using medium to smaller aircrafts and jets to support the network carrier's hub. Sometimes, national airlines also travel abroad to the nearest neighboring country such as Canada, Mexico and some parts of Europe. Airline services are not limited to transport passengers and cargo but also airmail. Unfortunately, the U.S. airline industry has been experiencing up and down performance in recent years. There are several factors that contribute to this problem. One problem is the price war among the flight services. Another problem is the increase in the fuel price, which creates significant losses for most airlines in the industry. Furthermore, the economic recession has caused a slowdown in the demand for domestic flights.

There have been numerous mergers and acquisitions in the industry within the last decade. An example is the merger between United Airlines Corporation and Continental Airlines. These mergers are due to the problematic times as well as the difficulty it takes to maintain a competitive advantage. Customer preferences have changed and they are no longer looking for a service that provides them with luxury, due to the high prices. The airlines companies that are surviving this economic situation are those that provide a low cost fare for their customers. Nowadays, luxury is no longer at the top of the list of requirements for passengers. Despite brutal battles between aircraft carriers there are signs that show the potential for growth in the industry.

There are many key factors that drive the performance in the domestic airline industry. However, we chose to analyze the most important factors affecting the overall success of the industry. The five factors we chose are the ability to meet customer expectations, manage the fleet, attract customers, create alternate sources of revenues and adapt to technological advances.

Meet Customer Expectation

Customer expectations are an essential factor contributing to the overall performance in the U.S. airline industry. Failing to meet customer expectations can obviously hurt a firm from a financial perspective. The U.S. airline industry is based on the service business and thus; they have to maintain the expectations of customers. The U.S. airline industry often interprets customer expectations in a certain way. At times they focus primarily on the high quality of service. However, that is only one part of overall customer satisfaction. This performance measurement is focusing on the wide range of customer expectations. These factors are not limited to service simplicity in regards to online flight booking, baggage claiming as well as making changes to your flight, but also rewards for customer loyalty like frequent flyer miles, the availability of "in air" services such as entertainment, seat comfort and food are little examples of how this factor is essential in evaluating the overall success of a firm in the U.S. airline industry. In addition, the ability to meet the customer expectations such as low fare tickets will drastically change the U.S. airline industry's performance.

Fleet Management

The ability to manage the fleet is an important factor that enhances the overall performance in the U.S. airline industry. This factor evaluates how a firm maintains extremely effective operations. It is maintaining the efficient and on-time use of aircraft operations that is crucial to the success of the U.S. airline industry. The faster an airline can get its aircrafts back into revenue service, the more profitable it will be. Maximizing revenue is also extremely important in keeping shareholders happy and in turn is essential to determining the performance of a firm. In the analysis of the U.S. airline industry, an asset of performance profitability is determined by how well a firm manages its fleet.

Attract Customers

Advertising plays an important role in the ability to attract customers. Attracting customers can generate revenue and cause planes to fill with passengers. That is what makes the ability to attract customers important for performance profitability in the U.S. airline industry. This factor is significant in helping the airlines in the industry differentiate themselves among competitors. Unlike other types of services where customers have many options, the airline industry is the main choice for long distance travel. This industry relies heavily on customer loyalty. As a result, this factor is evaluating all aspects in regards to how the U.S. airline industry attracts customers to use their services. In addition, by having marketing campaigns,