Airline industry involves the business of transporting people and goods by air along the scheduled routes typically by aircrafts. In the united states of america, the public interest on air travel increased after Lindbergh’s transatlantic flight in the year 1927. Lockheed and Boeing designed aircrafts that were capable of carrying passangers and thus the number of interested passanger grew to 16.7 million by the year 1949 which has kept increasing upto date. In the united states, there are about ten largest carriers which controls about 96 percent of its market (Airline Industry). The examples of the carriers include american and delta airlines.
Delta airline was founded in the year 1924 as Huff Daland Duster a crop dusting corporation. Its mission statement is “Making the Delta,carrir of choice for customers through operational excellence,”second mile”service and building emotional connections with the disability community”. The location of the firm was based at Monore Louisaian and during winter period it did crop dusting at Peru.Huff Daland Manufacturing who was the airlines owner sold its crop dusting subsidairy to a Monroe businessman who later named the firm Delta Air.In the year 1934 Delta won its first air mail contract and 1941 moved its offices from Monroe to Atlanta.In 1953 Delta together with Chicago and Southern airlines merged.By the year 1972 it aquireed Northeast Airlines and in 1987 Western Airlines was aquireed by it.The year1991 Delta acquired many of the assets of bankrupt Pan American.The firm tried by the beginning of the 21st century to compete with low cost carriers.In September 2005 due to high prices of fuel made Delta to run into bankrupcy (The Delta Heritage Museum).The market share of the firm for the last five years was 15.18% in 2006, 13.60% in 2007, 13.10% in 2008, 13.99% in 2009 and 11.80% in 2010. Delta’s profits for the last 5 years are; $6.2 billion loss in 2006, $625million profit in 2007, $160 million profit in 2008, $1.2billion loss in 2009 and $363million profit in 2010.
The American airlines was founded from a group of small independent firms which were mainly carrying mail.main example of the aircraft which originates from is Robertson Aircraft of Missouri which begun his flight in 1921.In the year 1933 American airlines ordered its first curtis condors and on june 25,1936 it flew the worlds first commercial DC -3 trip from Chicago to New York.By the year 1941 American Airlines begun serving Mexico and in 1953 it started non-stop transcontinental flights using DC-7’s.American was the first airline to start coast to coast jet services by using Boeing 707’s on January 25,1959 and in 1979 it moved its headquarters from New York to Dallas/Ft Worth.The year 1981 American’s 707 fleet stopped and begun the introduction of the AA advantage program,Americans frequent flyer project.Its market share for the last five years is;2006 was13.50%,2007 was 9.64%,2008 was 9.36%,2009 was 8.65% and 2010 was 13.50%. The profits for the last five years are; $231million profit in 2006, $504million profit in 2007, $2.07 billion loss in 2008, $1.5 billion loss in 2009 and $4714 million loss in 2010.
The proposed mission statement for the american airline is “AMR Corporation is commited to provioding every citizen of the world with the highest quality air travel to the widest selection of destinations possible. AMR will continue to mordenize its fleet while maintaining its position asthe largest air carrier in the world, with a goal of becoming the most profitable airline. AMR is the airline that treats everyone with equal care and respect, which is reflected in the way each AMR employee is respected. AMR recognizes that its emoployees are the key top the airlines’ success and invests in the futires and lives of its employees. By investing in tomorrow’s technology and by following a strict adherence towards environmental regulations, AMR demonstrates its commitments to the world envronment.” (Kakuk A, Theriault B & Bourgoin J).
Challenges and solutions of United States airline industry
Firstly, the United States passenger airlines industry faces major challenges of safety and security.For instant the event of September 11,2001 have created about a very controversial issue regarding what is more important to privacy,society or securityof United States.The two turbojet airliners crashing into the twin World Trade Center buildings in Newyork,combined with the fires started by another jet at the Pentagon, and the crashed jet liner in Pennsylvania all creates a major security problems in United States (Prison M and Johnston D). Secondly, the industry faces high fuel costs. Since the year 2006 fuel has emerged as the single largest industry expense leading to surpassing labor costs. As the fuel prices keep on increasing the airline operating costs also increases. On the other hand the airline industry has little pricing power in the fuel, and there is often a substantial log in ticket price increases when the industry tries to recoup increasing fuel costs. In the middle of 2009 the airline industry increased ticket prices in lockstep with rising fuel costs, and the substantial cost reduction the industry underwent (Global Airline Industry program). Lastly, the industry faces high labor costs. For instance, it is only a few technical specialists who have approved new contracts out of about 50,000 workers that are represented by the American workers unions.
There have been prolonged negotiations with the pilots while other workers such as the ground workers, mechanics and flight attendants are been involved in contract talks. In order to overcome these challenges, Delta airlines outsources its European finance. Its ten year agreement is directed towards cost saving and improved processes that allow the airline to have better finance management and development of high performance insights (Accenture). In addition, Delta airline and Northwest airline Corp have been having merger talks to decide important issues that will lead to the reduction of some challenges facing the industry. For instance, they need a combined carrier flying under the Delta name and based in Atlanta (Yousfi J). On the other hand, the American airline is in a process of acquiring new tools and processes that are capable of supporting the regular improvement in customer experience and operational efficiency. For instance, the firm has implemented the NICE SmartCenter Interaction Management, Interaction Analytics and Quality Management to support these processes. This also allows the firm to re-examine the existing quality program and make considerable improvements in efficiency and effectiveness (American Airlines). Due to the aviation safety and security since 9/11 there have been moves to improve airport passenger and explosives screening.
Metrics of airline industry
The metrics of the airline industry are used as ideal ways of monitoring the airline trends that relates to the domestic capacity, demand, finances, performance and air services. In addition, they provide the industry’s decision makers with the past, present and future indicators of the service levels and also the general state of the industry. Some of the metrics include the available seat miles (ASM) which is the number of paid seats that are available to the passengers times the number of miles that those seats are flown, Cost per available seat mile (CASM) which refers to the operating expenses divided by the available seats, Revenue per available seat mile (RASM) which is the total passenger revenue divided by available seat miles and Break-even load factor which is the percentage of the aircraft seats that must be used in order for the expenses to match the revenue (Beyer T). This metrics can be incorporated in the comprehensive reports that are represented to the shareholders and investors. The Break-even load factor metric is determined depending on the individual situations. For instance, some flights can make money by having enough cargo and no passengers. The data on other variables such as maintenance costs, crew salaries, fuel costs, cargo profiles and passenger demographics are important.
In conclusion, the future of the delta airline appears to be hopeful. Although there has been a lot of turbulence within the airline industry for the last decade, Delta has managed to overcome the difficult situations with the most success relative to other competitors especially the American airlines. To substantiate this, the delta airline has used its bankruptcy events to take a clearer look within the organization with regards to their strategy and other business practices. Despite the limited ability to control the fuel costs, labor costs and other market factors, Delta airline appears to be capable of differentiating itself to the flying public by carrying on with the legacy of better customer service comparably. Also the annual profit margins for Delta airline are high as compared to the American airlines and hence the investors should consider investing in this airline. Due to the better performance of the Delta airline, other industries and the government can consider investing in it. For instance, XYZ should invest in Delta airlines due to its better performance. On the other hand, the investors should take caution that as much as they want to invest in the airline industry, the industry seems to be headed for a rough ride.