MSG Team's other articles

11263 The Shock of Gray and Its Implications for the Healthcare Sector

What is meant by the Shock of Gray and its Implications? The Shock of Gray is a term used to describe the ageing of the populations in the West with the retirement of the Baby Boomer generation and the resultant “graying” of the western societies. This phenomenon has several economic implications mainly related to the […]

12748 The Chinese Internet Story

Chinese firms were seldom thought of being anything apart from copies of their western counterparts. The snobbish inhabitants of Silicon Valley never thought that these companies would amount to much. However, the reality has become very different. China today has about 25% of the world’s unicorns i.e. tech startups with a valuation greater than $1 […]

10726 The Argument for Privatization of Airports

Privatization of airports is not a new idea. Many politicians have implemented it as an important economic policy. Margaret Thatcher was one of the first politicians to use privatization as an important policy measure. Her government privatized essential entities like the British Airways as well as the Heathrow airport in the 1970’s. Donald Trump has […]

11972 Why Facebook must be Prevented from being used to Interfere in Elections Worldwide

How Facebook can be used to Influence and Interfere in Elections Worldwide It is a known fact that social media, while easing communications and connecting Billions of people worldwide, can also be used by political parties, unscrupulous and malevolent actors, and even businesses and corporate entities to manipulate public opinion and to influence the outcomes […]

12579 Business Process Improvement – A Perspective

Development of Global Business Organizations, Multi National Corporations and the Corporate has always found a lot of academicians as well as the think tanks and Management Experts taking interest in analyzing the past, the present trends and prophesying the future trends. The study of growth of trade, the industries and the Organizations and the various […]

Search with tags

  • No tags available.

The Global Airline Industry and its Travails

It is an open secret that airlines all over the world are bleeding due to various reasons. They range from overcapacity and the intense competition or fare wars and price cuts by lower cost airlines to the fact that operational expenses have gone up so much that profits are hard to come by. Added to these factors is the very real aspect of the global economic slowdown taking a toll on the airline industry, which never really recovered from the post 9/11 knock down of its profitability.

The point here is that though the appearances of the airlines and their marketing campaigns seem to suggest that they are doing rather well, the reality is otherwise.

Consider the example of many top-notch airlines like United Airlines, American Airlines, and Air India that have either become bankrupt or had to be rescued by the governments because of humungous losses.

Further, as the case of many airlines like Singapore Airlines shows, the survival strategy is one of trying to scrape through with enough profits so as to not tank into the red.

Apart from this, there are many airlines like Kingfisher and Jet Airways in India that are teetering on the edge and either are entering into alliances with foreign partners or are in the process of liquidation.

Some Examples of the Airlines that are Faltering

The global airline industry has also been hit because of the high price of ATF or Aviation Turbine Fuel. The increase in the price of the oil and its derivative, the ATF has especially hit hard those airlines in Asia and Africa that are dependent on imports paid for in hard currency or dollars.

Of course, the situation in Asia Pacific is no different as airlines like Qantas are struggling with high employee costs and an inability to radically downsize owing to opposition from the government.

Even in the case of European Airlines like Air France, Lufthansa, and KLM, they have been forced to curtail their routes and enter into code share agreements with local airlines wherever possible so that they do not lose landing and flying rights to destinations.

Apart from this, the fact that there has been tremendous overcapacity in the airline sector without corresponding growth in passenger traffic is another reason why the global airline industry is faltering.

The point here is that in anticipation of growth in passenger traffic, demand that was thought would materialize, many airlines added extra capacity, and concomitant with this, there was an expansion of many international airports. When the expected demand did not materialize, the result was that the global airlines were saddled with overcapacity and underutilization of its fleet of aircraft.

The Death Spiral of the Global Airline Industry

The other aspect about the falling fortunes of the global airline industry is that the deliveries of next generation aircraft from manufacturers like Boeing and Airbus are being delayed because of factors that are interlinked to each other. This means that the next evolutionary step for Airlines is not happening in terms of next generation airline travel that was supposed to have revolutionized international business travel.

Further, with most revenues coming from Business Class and First Class passengers, the global airlines are concentrating their energies on providing these passengers with as many benefits as possible and neglecting the economy class passengers which has further eroded the overall demand.

Finally, the airline industry is also beset with several nonperforming partner relationships that were primarily drawn up and entered into as a means of cost cutting.

In other words, the dense and intricate network of relationships between airlines and aviation maintenance companies as well as the suppliers and the other outsourcing partners are not delivering as much value to the airlines as expected. This is another reason why the global airline industry is in what is known as a “death spiral” in industry circles.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Cultural Aspects of Cross Border Mergers and Acquisitions

MSG Team

Cross Border Mergers and Acquisitions and Some Recent Trends in this Field

MSG Team

Understanding the China-North Korea Trade Equation

MSG Team