Challenges To Airline Industry

Airline business is one of the business that is most susceptible to external influences. The recent event of the volcano ash cloud from Iceland had halted air traffic across Europe. Anything that induce fear, like the case of H1N1 or the terrorist attack will undoubtedly, affect the airline.


As an industry, it is one of the few industry that has been having accumulated loss continuously for the last decade. Please check the data at IATA.   For 2010, the financial forecast is, the airlines will loss around US5.6 billions globally. It is a colossal figure. It is the most significant challenge.


The other is of course security, the fear of 911, is still being felt by many, even though the real damage or loss is nothing compared that of the Iraq war.


I quote the words of  

Raymond Benjamin, Secretary General, ICAO: 
“I have joined ICAO as Secretary General at what can arguably be described as the most challenging period in the history of the air transport industry.”

On 15 September, IATA announced losses for airlines of $11 billion for 2009, revised figures for losses in 2008 of $16.8 billion and projections of $3.8 billion in losses for 2010, pushing recovery into 2011 at the earliest. Moreover, the aviation industry is being called upon to respond to pressure relating to the impact of aviation on climate change, the real possibility of Influenza A (H1N1) virus pandemics this year, the shortage of skilled aviation personnel, the unpredictability of oil prices and the inevitability of further ups and downs in the economy.

reference:http://www.iata.org/pressroom/airlines-international/october-2009/Pages/2009-10-09.aspx

The Airlines and Its Products

The airlines jobs are created to produce the products for the customers. Without the desired products, there will not be customers and without customers, there will not be the airline. Then let us review the two interrelated questions:

1. What are the customers needs and wants that the airline intends to satisfy?
2. What is the products, and how does the airlines meet the needs and wants of the customers?

Question 1: Customers needs and want.
There are differences between needs and wants. We will not discuss that here. The customers have the need to travel and to transport goods and products to another destination fast. Then if we ask further, why do people have to travel?. There may be a number of possibilities:

People travel because:
   a. To meet their customers for business or to meet the partner to discuss businesses.
   b. To visit friends and family.
   c. To study or perform religious activities.
   d. holidays and adventure

You notice that these needs have create the demand to travel. That mean travelling is NOT the real needs but it is derived or caused by other needs. These is called Derived Demand.

2. Question 2: How does an airline meets the demands.
 So an airline needs to provide the travelling facilities for the customers. It is  the seat of a flight forms the products of an airline.

to be continued............

Airport Operations and Services

Depending on how the airline structure itself, one of the areas that has to be manned is the airport operation and services.Just think of an aircraft coming to load off passengers and pickup passengers at an airport. These are the areas to be covered:
Passenger Handling (Traffic) and Baggage
1. Handle the check in of the passengers.
2. Handle the movement of the passengers until they get into the aircraft.
3. Manage the documentations.

Aircraft Handling
4. Handle the arrival and departure of the aircraft.
5. Handling the engineering and technical defects
6. Water and Toilet Servicing
7. Fuel the aircraft.

Food and Beverage
1. Remove the used trays and food from the aircrft
2. Replenish with new supplies of food and beverage

Cargo
1. Offload Cargo and Load new cargo.

All these activities create job opportunities. In the next postings we will identify  the job classification in airline.


 

Airline Structure

One of the characteristic of the products and services that we uses today is... they are produced by organisations or by group of peoples. Gone were the days of craftsmen and tradesmen, where individuals work to produce the goods to be sold directly to the buyers.

Running an airline will require multiple resources and expertise. To make is easier and more effective, these resources and expertise are arranged and organised in a specified way... known as airline structure. So airline structure is the specific ways an individual airline organised itself to produce the required products and earn some money.

Factors Shaping The Structure.
There are basically two broad categories of factors affecting the structure of an airline, the external factors and internal factors.
The external includes: the government bodies, the competitors, and customers
The internal factors would include: the airline vision and mission, staff and business model.

The internal factors.
The management of the airline would decide the business model the airline is going to operate, either a full service carrier or low cost operator. The decision will have to made on how the selected functions of the company will be carried out. For example:
   a. You can have a low cost carrier, operating with a specified type of aircraft and the maintenance of the aircraft is carried out by another organisation. The function of managing and getting the customers are rarely contracted out. This is because the function is the life line of an organisation and formed the core that determine the future success of an organisation.

to be continued...  

Alliances

Alliances is one of the methods used by airlines to increase their potential and strength. It is based on the concept of economic of scale, and collaboration would increase the network coverage. With the problem faced by Japan Airlines, one of the member of Oneworld, the concept has to be reexamined.

Oneworld is one of the three big players in the global airline alliances. It was founded by the group consist of American Airlines, British Airways, Canadian Airlines, Cathay Pacific and Qantas Airways in 1999. The alliance slogan is "oneworld revolves around you" and its vision statement is "To generate more value for customers, shareholders and employees than any airline can achieve by itself."

In 2007, the alliance expanded by admitting Japan Airlines, Malévand Royal Jordanian joined as full members. Cathay Pacific's subsidiary Dragonair, four subsidiaries of Japan Airlines and two subsidiaries of LAN joined as affiliate members. In 2009, Oneworld celebrated its 10th anniversary with the introduction of a new standard Oneworld livery, that all of its member airlines adopted on a proportion of their fleets; and a special version of its logo.

By November 2009, Oneworld and its members elect, reached over 720 destinations in 142 countries. It operates over 8,300 daily flights, carrying 328 million passengers on a combined fleet of over 2,200 aircraft. It is the only alliance that has members based in every continent, and has extensive networks in Australia, South America and Asia'sMiddle East with Qantas, LAN and Royal Jordanian, respectively. Since late 2002, Oneworld member airlines have developed common specifications across their engineering and maintenance activities, reducing costs through bulk buying and parts sharing. It was also the first airline alliance to introduce interline e-ticketing across all member airlines' network.

Oneworld was voted the world's Best Airline Alliance in the year of 2002, 2004 and 2005.  Business Traveller Awards and named the World's Leading Airline Alliance for the seventh consecutive year at the 2009 World Travel Awards

ICAO

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Associations IATA

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Deregulation

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Regulatory Bodies