Air Transportation Industry PDF

TH2105 THE AIR TRANSPORTATION INDUSTRY Introduction Air transportation has been essential in economic growth and is a vital element for the world’s transpo...

TH2105 THE AIR TRANSPORTATION INDUSTRY Introduction Air transportation has been essential in economic growth and is a vital element for the world’s transportation infrastructure. It is one of the fastest developing transportation sectors as the global economy continued to be more connected (Beers, 2020). Air transportation also plays a vital role in tourism, especially in developing countries. It provides 87.7 million jobs worldwide and generates employment opportunities within airline companies, air navigation services providers, and airport operators. Many suppliers support air travel, which is not known to many. It consists of an intricate network of airports, air traffic control centers, food services, maintenance departments, airport hotels, shuttle vans, industry associations, aircraft manufacturers, and security teams (Mancini, 2013). The Airline Industry Commercial, general, and military are the three (3) structured components of the airline industry. Flights used for personal, business, executive, and flight instruction are under general aviation. The government uses military airlines for both transport or warfare. Commercial airlines operate according to a schedule and fly with regular routes with pre-booked tickets (Vault, n.d.). Airlines are defined as air transport services providers for passengers or freight that may exist in different shapes and sizes worldwide. According to the article published by Zippia (a career data collector) on March 16, 2021, two (2) of the largest commercial airlines, in terms of revenue in 2019, were Delta Air Lines and American Airlines. There are about over 5,000 airlines worldwide based on the number of listed International Civil Aviation Organization (ICAO) or International Air Transport Association (IATA) airline codes. Still, only more than 700 commercial airlines operate globally. Classifications of Airlines Airlines can be divided into two (2) major classifications: Local/Domestic Carriers – These are airlines that only offer services within a country or travel within the national boundaries. Examples are PAL Express and Cebgo. International/Foreign Carriers – These airlines offer services among multiple countries or travel to local and international territories. Examples are American Airlines, Delta Airlines, All Nippon Airways, Cathay Pacific, and Philippine Airlines. Other countries have more classifications of airlines due to the presence of interstates, cities, and regions. These are the following: Major Airlines – These are large carriers that fly direct routes between major cities and long-haul and international routes. They generate more than 1 billion dollars in revenue annually and are considered the largest employers among airlines. National Airlines – These are airlines that cater to services within the national boundary. They generate between 100 million to 1 billion dollars as annual operating revenues. Regional Airlines – These airlines maintain schedules within the country only, operating long and short- haul routes. They are divided into three (3) subgroups: o Large Regionals – These airlines have annual revenue of 20 to 100 million dollars with more than 60 seats. o Medium Regionals – These airlines have operating revenue of under 20 million dollars and use small aircraft with an average of 40-60 seats. o Small Regionals – These airlines are usually referred to as “commuter airlines” and use small 01 Handout 1 *Property of STI  [email protected] Page 1 of 5  TH2105 aircraft with less than 40 seats. Airlines may also be classified based on their operations, as follows: Scheduled Airlines – These airlines operate based on a schedule and regular routes. Non-scheduled Airlines – These are also called charter airlines. These airlines do not fly based on schedule and usually operate during off-peak hours, and are flexible in terms of choice of airport, flight times, and load factors. Airline Routes and Flight Length An airline route refers to a designated route for aircraft flying from a specific airport to another at specified minimum altitudes. Flight length refers to the distance of a flight from the point of origin to the destination. Flight length can be divided into four (4) categories: Short-haul – It is a form of travel by air for less than three (3) to four (4) hours. Examples are Manila – Japan; Singapore – Maldives. Medium-haul – It is a form of travel by air for about four (4) to eight (8) hours. Examples are Manila – Dubai; Qatar – Morocco. Long-haul – It is a form of travel by air that takes up to 13 hours. Examples are Manila – San Francisco; Manila – Copenhagen; Singapore – Norway. Ultra-long-haul – It is a form of travel by air that is beyond 13 hours. Examples are Manila – New York/Toronto; Qatar – Sao Paulo; London – Sydney. Types of Flights The types of flights vary according to the number of stops between travel from one airport to another. The following are the types of flights: Nonstop Flight – This is where a traveler goes from Point A to Point B on the same aircraft, having no stop in between. For example, an American Airlines flight taking off from LAX (Los Angeles International Airport, California) to JFK (John F. Kennedy International Airport, New York City) with no stop in between. Direct Flight – This is where a traveler goes from Point A to Point B on the same aircraft but will have to stop at another airport in between. The reasons for the stop may include unloading and picking up passengers and performing technical matters such as maintenance or refueling. For example, Manila- Taipei-Osaka, where a passenger has one (1) flight number all the way, but the aircraft has to stop in Taipei, Taiwan, to unload and pick up passengers going to Osaka, Japan. It is sometimes called a continuing or one-stop flight. Connecting Flight – This is where a traveler must change planes with different flight numbers once or more to get to his/her destination. For example, the Los Angeles-Dallas-New York flight. A flight of American Airlines goes from Los Angeles and stops in Dallas, Texas, where the passengers are transferred to another aircraft with a different flight number to bring them to New York City. Essential Characteristics of the Airline Industry As the airline industry continues to progress, several essential characteristics have become evident along the way. These characteristics are the following (Bilig & Cook, 2017): The demand for air travel is based on passengers’ wants and needs – Business and leisure travelers choose to fly to get to their destination fast and not enjoy the flight. The air travel demand is closely tied to the general economy, especially for businesses where travel follows the business cycle. 01 Handout 1 *Property of STI  [email protected] Page 2 of 5  TH2105 The domestic coach seat has become a commodity – This happens when travelers perceive seats from different airlines to be equal or the same. Leisure travelers choose among airlines based on the price with low brand loyalty and little product differentiation. Business travelers practice loyalty to the brand they are accustomed to. The critical element in airline success is harmonious labor relations – The industry is strongly united that employee groups can shut down an airline. There can be problems in the operation of the employees who are not satisfied with the airline management. The airline product is fully perishable – Once the airline product is produced, it is also consumed at a certain time. This is different from manufactured products that can be stored until purchased. The operation costs are fixed once the flight schedule is finalized – Regardless of whether the flight is full or not, the operation cost will still be the same. Unsold seats will still render the exact cost to operate a certain flight. Issues in the Airline Industry Major issues among airlines have direct significance to the passengers and the cabin crew members. The following are some of the problems in the airline industry:  Total Operating Cost o Fuel and labor costs affect airfare. 14-16% of an airline’s total operating cost is fuel, and about 40% is labor cost. Some airlines buy contracts with a fuel company to have a fixed expense if ever fuel price increases. Other airlines lay off and/or reduce the pay or benefits of workers to reduce labor costs. o 44% of the total operating cost is left to the airline management. This percentage covers other expenses such as maintenance, technology upgrades, airport fees, taxes, marketing and promotions, and prices to lease or buy physical aircraft.  Airport Capacity – With the demand for air travel set to increase by 50% by 2035, airport capacity is one of the most pressing issues for the industry. Studies show that building infrastructures are not enough to solve airport capacity issues; thus, maximizing new technologies will help resolve it coupled with proper airport management.  Health Safety and Security – Air travel is prone to possible acts of terrorism and a medium to transmit viral diseases such as MERS-Co Virus, Severe Acute Respiratory Syndrome (SARS), Ebola, and flu. In 2020, the COVID-19 pandemic happened and greatly affected the global economy, especially the air transportation industry. It is described as “the worst year in the history of air travel demand.” The international passenger demand has dropped to 75.6 percent, and the domestic passenger demand dropped to 48.8 percent, based on the International Air Transport Association (IATA). 01 Handout 1 *Property of STI  [email protected] Page 3 of 5  TH2105 Figure 1: Global Air Passenger Traffic (revenue passenger kilometers) as Percentage of 2019 Traffic Source: https://www.statista.com/chart/24107/global-air-passenger-traffic/ Figure 1 indicates the possible growth in air passenger traffic according to IATA. It predicts that it may reach a 51.3% passenger demand by 2021 in an optimistic scenario, or it can also be a 38.4% passenger demand if the COVID-19 pandemic continues. These were the issues caused by the COVID-19 pandemic to the airline industry:  The number of passengers rapidly declined at the same time as the closing of borders around the world. People were not allowed to leave and are asked to stay at home as part of the safety protocols, and many feared to travel.  Airline employee counts were reduced due to the decline of travel demand. Most airline employees, if not all, have lost their jobs because of the pandemic. Airline companies considered having fewer operation costs to sustain the business.  Adapting to the new normal has been a challenge for most airlines since protocols continue to change overnight. There have been flights that are lenient with wearing masks once on board, while other flights request passengers to keep their masks on for the whole duration of the flight.  Cargo missions that usually carry medical supplies and vaccines had replaced most passenger flights. This helped airline companies to utilize their idle passenger planes in support of the global pandemic. With these challenges, the air transportation industry faces ongoing efforts in technology, training, and sustainability give hope for a bright future. The industry has now fully embraced the digitization of services and facilities to recover. References Beers, B. (2020, October 7). Which major expenses affect airline companies? Retrieved May 27, 2021, from Investopedia: https://www.investopedia.com/ask/answers/040715/what-are-major-expenses-affect- companies-airline-industry.asp Bilig, B., & Cook, G. (2017). Airline operations and management. Routledge. 01 Handout 1 *Property of STI  [email protected] Page 4 of 5  TH2105 Bonsor, K. (n.d.). How airlines work. Retrieved May 21, 2021, from HowStuffWorks: https://science.howstuffworks.com/transport /flight/modern/airline1.htm Dileep, M. (2019). Tourism, transport, and travel management. Routledge. Kolmar, C. (2021, March 16). 15 Largest airlines in the world. Retrieved June 2, 2021, from Zippia: https://www.zippia.com/advice/largest-airlines/ Mancini, M. (2013). Access: Introduction to travel and tourism (2nd ed.). Cengage Learning. Mazareanu, E. (2021, January 11). Air transportation - statistics & facts. Retrieved May 21, 2021, from statista: https:// www.statista.com/topics/1707/air-transportation/#dossierSummary Page, S. (2016). Transport and tourism: Global perspectives. Pearson. Ritcher, F. (2021, February 5). Pandemic causes historic decline in air passenger traffic. Retrieved May 21, 2021, from statista: https://www.statista.com/chart/24107/global-air-passenger-traffic/ Rodrigue, J. (2020). The geography of transport systems (5th ed.). Routledge. Schreiber, E. (2021, February 9). Aviation industry trends for 2021. Retrieved May 21, 2021, from ARGS: Airline Routes & Ground Services: https://airlinergs.com/aviation-industry-trends-for-2021/ Segan, S. (n.d.). 10 Great small airlines. Retrieved July 19, 2021, from https://www.frommers.com/slideshows/820525-10-great-small-airlines Vault. (n.d.). Airlines. Retrieved June 28, 2021, from https://www.vault.com/industries- professions/industries/airlines 01 Handout 1 *Property of STI  [email protected] Page 5 of 5