Airline Industry Overview Quiz

Course Overview

• The course covers the aviation industry, with specific focus on international aviation.
• Topics include: Introduction, International Aviation, The Airline Business, The Airport, Aircraft Manufacturers, Air Freight, Aviation and the Environment, and Future Issues.

Content

• The lecture notes cover the historical perspective, from regulation towards deregulation (open skies).
• This includes freedoms of the air and international organisations.

The History Perspective

• 1918-1938: The formative period, primarily focused on air mail routes in the US, initially handled by the Postal Service. Contract airmail routes were established, connecting cities and facilitating transcontinental travel. The Air Mail Act of 1920 granted contracts to both airlines and aircraft manufacturers.
• 1938-1958: The growth years. Jets arrived.
• 1958-1978: Maturity, with the arrival of jets.
• 1978-1991: Liberalisation. Airlines suffered due to regulations on; entry to market, Traditional Air Service Agreement (ASA), exclusive rights to designated airlines, nationality clause, schedule of routes, determination of passenger fares and cargo tariffs, capacity controls in air transport, and insufficient capacity led to higher fares.
• 1992 onwards: Towards "Open Skies". An international policy to liberalize rules and regulations of the international aviation industry, create a free-market.
• The 1918 to 1938 Period: There were shorter feeder routes connecting to transcontinental Columbia routes. Air Mail Act of 1934. Resulting from the act was more even distribution of mail business, lower mail rates, and forced companies and manufacturers to pay more attention to passenger air transport. Led to separation of airlines from manufacturers.

1918-1938: Formative Period (ctd)

• Air Mail Act of 1934. US government transferred mail service to the private sector, creating a more competitive bidding environment for one-year contracts.
• The result was a more equitable distribution of mail business and lower mail rates, necessitating a stronger focus on passenger air transport development.
• There was a separation of airlines from aircraft manufacturers.
• Boeing 247 and DC-1 (Donald Douglas) made their first flights in 1933. Airlines started large aircraft purchases. The first airway traffic control center was formed in Newark, New Jersey, in 1935.

1938-1958: The Growth Years

• Civil Aeronautics Act of 1938 led to certifying flight personnel (navigators, engineers, and radio operators), focusing on safety,
• This oversaw passenger, freight, and mail rates, schedules, and regulations for financial arrangements of airlines.
• Technology advanced rapidly (high-performance, longer-range aircraft, e.g., DC-4).
• Air freight became a viable industry with independent freight airlines.

1958-1978: Maturity

• Jet era (e.g., B-707, DC-9). Air traffic control became mandatory, leading to further improvements. Short-range B737-100 was certified in 1967.
• Boeing B747-100 certification in 1969, enabled low-cost mass travel, twin-aisle, mixed-class layouts, and introduced the concept of "wide-body" commercial aircraft.
• Improvements in technology include flight recorders, weather radar, and terrain-avoidance systems, leading to safer air travel.

1978-1991: Liberalization (ctd)

• Before 1978, regulations restricted airlines, limiting the number of airlines operating between nations.

1978-1991: Liberalization (ctd) (more details)

• US deregulation efforts led to reductions in regulatory controls, aiming to achieve competitive pricing, eliminate restrictions on capacity, frequency and route operating rights. This included elimination of unfair competitive practices and allowing more US cities to be international gateways. Increased air cargo competition was also sought.
• Deregulation was accomplished by re-negotiating bilateral ASAs to achieve these objectives.

1978-1991: Liberalization (ctd) (even more specifics).

• Regulations before 1978 restricted airlines' entry into new markets, particularly through Traditional Air Service Agreements (ASA) which granted exclusive rights to designated airlines based on nationality clause, schedule of routes limitations, and determination of fares and cargo tariffs. Airlines suffered due to these limitations, despite the growth in traffic. There also were capacity control issues affecting markets.

1992 Towards "Open Skies"

• Open Skies is an international policy aiming to liberalize rules and regulations of international commercial aviation, creating a free-market environment for the airline industry.
• Open Skies policies are closely linked to global airline globalization by allowing unrestricted market access for carriers.
• In September 1992, the Dutch and US governments signed the first "Open Skies" agreement. This agreement, among others, led to increased service from US airlines to Heathrow, demonstrating benefits from the Open Skies policy.

1992-2000: Towards Open Skies

• The EU's creation of a single market led to the liberalization of intra-EU air travel, enabling unlimited passenger rights between EU countries.
• In Europe, this resulted in more intra-European traffic, free mobility, competition, lower fares, and more connections and destinations.
• The deregulation effort reduced fares and stimulated air traffic.

Future of the Skies

• After deregulation and liberalization of the US and Europe, ASEAN countries are aiming for full liberalization, similar to what was accomplished in the US and EU which opened up markets for numerous new services. This is currently being done for the ASEAN region.

Freedoms of the Air

• The Chicago Convention of 1944 laid out the fundamental rules of air transportation regulation (Freedoms of the Air). These are widely considered as building blocks for the international flight networks.
• There are 5 basic freedoms. Some are more recognized than others. Additionally, there are two that are widely regulated, and two that are hardly accepted.

Freedoms of the Air (details)

• 1st Freedom: Allowing flights OVER a country's territory without landing.
• 2nd Freedom: Allowing a carrier to land within a foreign nation for non-traffic-related purposes (e.g., technical stops for refueling or crew changes).
• 3rd Freedom: Allowing a carrier to drop off passengers and cargo from its home country to a different nation.
• 4th Freedom: Allowing a carrier to pick up passengers and cargo from a foreign nation and transport them back to the home country.
• 5th Freedom: Allowing a carrier to land in a foreign country, pick up passengers, and fly onward to a third country.
• 6th Freedom: Permitting a carrier to carry commercial traffic through its home country to a third country.
• 7th Freedom: Allowing a carrier to transport passengers and cargo from one country to another without transiting through the carrier's home country. This freedom is rarely used for commercial airlines.
• 8th Freedom: Allows cabotage, the right for a carrier to pick up or drop off passengers in another country's territory as part of a service from its home country.
• 9th Freedom: Provides for standalone cabotage, enabling a carrier of one country to exclusively service flights and traffic within a foreign country.

International Organizations

• ICAO (International Civil Aviation Organization) is involved in the global forum for civil aviation. It's a specialized UN agency comprising 193 contracting states, with a governing council of 36 member states. It codifies the principles, promotes planning, and ensures safe and orderly development of international air transport. Safety, security, environmental protection, efficiency, and rule of law are ICAO strategic objectives.
• IATA (International Air Transport Association) is an international association of airlines, headquartered in Havana, Cuba, with over 290 members representing 82% of the world's air traffic from more than 120 countries. It is focused on representing airline interests, leading industry-wide programs, and improving the global airline network and smoother passenger and cargo movement.
• ACI (Airport Council International) acts as a global trade representative representing the interests of the world's airports, focusing on safety, security, environment, efficiency, customer service, and economic development. Created in 1991, it has 5 regions: Africa, Asia-Pacific, Europe, Latin America-Caribbean, and North America.

Exercises

• There were exercises related to finding flight routes based on numbers (SQ 26, KL 888, U2 5777, U2 1192 and VA 218), and related them to air freedoms.

Test your knowledge on the significant events and policies affecting the airline industry with this comprehensive quiz. From deregulation to governmental acts, explore crucial topics that shaped aviation. Ideal for students and professionals interested in airline business strategies.