The American Airline Industry Essay -- Business Management Studies Air

The American Airline IndustryThe Airline Industry is a highly competitory industry with companiesoperating in domestic and/or international markets. Many airlines arestilled owned by their respective countries and have treaties betweencountries to allow airlines to convey there. The industry has beentaking a relatively shaky course as costs are rising and profits havebeen decreasing. This was further intensified with the novelterrorist attacks on US soil, which lead to higher costs as the needfor more security arose. Recent financial statements of major airlinesshowing major losses reflect the problems that the industry is having.Yet amidst the storm, some regional airlines such as Jet Blue Airlineshave managed to focus on specific markets and maintained or increasedtheir profits. It is no doubt that Porters 5 forces of competitionare at play in this industry. These forces are the Threat ofSubstitutes, Threat of cutting Entrants, Competitive Rivalry, BargainingPower of Buyers an d Bargaining Power of Suppliers.Threat of SubstitutesThe airline industry has been plagued by rising costs resulting inpoor profits. The recession adversely affected the industry during thefirst half of 2001. This was intensified by the September 11thattacks, when two airlines were crashed into the Twin Towers in NewYork City by terrorists cleansing everyone on board and demolishing thebuildings. This lead to an immediate reduction in air choke ascustomers did not feel safe about dissolute and an increase in the use ofother forms of transportation. Amtrak, a railway company, reported anincrease in passenger volume in the days following the attacks. thoughthis has leveled off as things returned to normal, rail travel is asubstitute for air travel that will be utilized by customers if theyare looking for cheaper travel and if they are looking for a leisuretrip that would not be too time consuming. Automobiles are also a formof travel that is a substitute for air travel. This is esp ecially thecase when a family is traveling as the costs are minimized andschedules coordinated on the travelers timetable.Threat of New EntrantsHistorically, entrance into the market has been relatively easy forairline companies. When the economy was booming, people traveled morefor leisure and companies used this opportunity to enter th... ...aken from Hoovers Online)Revenues (in Millions) Sept 2002 Sept 2001US Airways 1903.0 2493.0American 4494.0 4816.0 south-west 1391.2 1335.1Net Income (in Millions) Sept 2002 Sept 2001US Airways (248.0) (24.0)American (924.0) (414.0)Southwest 74.9 151.0 score Assets (in Millions) Sept 2002 Sept 2001US Airways 7705.0 9564.0American 31502.0 31840.0Southwest 8954.3 7994.9Total Debt (in Millions) Sept 2002 Sept 2001US Airways 10808.0 10106.0American 28991.0 25609.0Southwest 4631.6 4045.3EPS (in dollars) Sept 2002 Sept 2001US Airways (3.64) (.36)American (5.93) (2.68)Southwest .09 .19Revenue Passenger Miles Oct 2002 Oct 2001US Airways 2,965,753 2,802,967American 3,048,000 2,851,000Southwest 3,258,017 2,590,610Load Factor (%) Oct 2002 Oct 2001US Airways 66.9 61.7American 63.2 57.8Southwest 56.8 53.4