Transportation Management - Air Carriers PDF

Transportation Management Air Carriers Transportation Management TYPES OF CARRIERS  Transportation Management TYPES OF CARRIERS For-hire – Provides services to the public & charges a fee for the service – Types of service offered includes: all-cargo, air taxi,...

Transportation Management Air Carriers Transportation Management TYPES OF CARRIERS  Transportation Management TYPES OF CARRIERS For-hire – Provides services to the public & charges a fee for the service – Types of service offered includes: all-cargo, air taxi, commuter, charter and international – In terms of revenue there are classified as majors, nationals and regionals.  Transportation Management TYPES OF CARRIERS For-hire – In the United States the annual revenues classification is frequently based on operating revenue, and the categories are as follows: Majors – more than $1 billion Nationals – $75 million to $1 billion Regionals – less than $75 million  Transportation Management TYPES OF CARRIERS Private Carriers – Is a firm that transports company personnel or freight in planes to support its primary business – The preponderance of private air transportation is used transport company personnel , although emergency freight is  Transportation Management TYPES OF CARRIERS Private Carriers – sometimes carried on private airlines as well – Rarely, however, is a private air carrier established to routinely carry freight – The private carrier is subject to the federal safety regulations administered by the Federal Aviation Administration (FAA) Transportation Management NUMBER OF CARRIERS Transportation Management NUMBER OF CARRIERS The airlines industry consists of a small number of large carriers This is so because of the large capital outlays which acts as a barriers to entry. Transportation Management MARKET STRUCTURE (commodities hauled) Transportation Management Commodities Hauled The majority of freight using air services is high-value and or emergency shipment -For emergency shipments the cost of air transportation is inconsequential compared to the cost of delaying the goods. -Air freight cost is a small portion of the emergency value. Transportation Management Commodities Hauled -Examples of commodities that move via air carriers includes: --mail, clothing, communication products and parts, photography equipment, mushrooms, fresh flowers, high-priced livestock, racehorse -Industrial machines, expensive automobiles, jewelry Transportation Management Commodities Hauled Normally basic raw materials such as coal, lumber, iron ore, or steel are not moved by air carriage. The high value of these products provides a cost-savings trade off. In terms of freight air carriers move low-volume, high-value, emergency goods. Transportation Management COMPETITION Transportation Management COMPETITION Intermodal – due to their unique service, air carriers face limited competition from other modes for both passengers and freight Air carriers have an advantage in providing time- sensitive, long distance movement of people or freight Transportation Management COMPETITION Airlines compete to some extent with motor carriers for the movement of higher-valued manufactured goods They face competition from automobiles for the movements of passengers, and to a limited extent from train and buses Transportation Management COMPETITION Intramodal – competition in rates and service among the air carriers is very intense, even though the number of carriers is small. Competition in the airline service takes many forms, but the primary service competition is the frequency and timing of flights on a route Transportation Management GENERAL SERVICE CHARACTERISTICS Transportation Management Passenger transport accounts for 73% of revenues Freight transportation accounts for about 10% Remainder from emergency shipments Typically transport high-value, perishable, or emergency cargo Transportation Management Speed – The major service advantage of air transportation is speed – Terminal-to-terminal time via air transportation is lower than any other modes Capacity – normally small shipments that are time- sensitive are moved by air carriers Transportation Management COST STRUCTURE Transportation Management Cost Structure High variable, low fixed cost structure 80% variable; 20% fixed Governments own & operate air carriers’ terminals Use of facilities paid with landing fees (variable) Transportation Management Cost Structure Labour - represents over 1/3rd of total operating expenses Fuel - roughly about 10% of operating costs  Transportation Management QUESTIONS & ANSWERS  Transportation Management Source: Management of Transportation by Bardi, Coyle & Novack