What is air transportation industry

 Any aviation activity or asset other than military aviation and military assets.

 Area of commerce that uses aircraft to transport:

 People

 Cargo

 Mail

Challenging and a complex Industry

It is always dynamic and full of surprises:

 Fluctuating fuel prices

 Market volatility

 Threat of terrorism

 Epidemics & Pandemics

 Storms and other natural disasters

 Cyclical passenger gluts and droughts

 Labor issues

 AccidentsGovernment intrusión

Commercial Aviation: An Economic Enabler

Commercial aviation contributes: Circa $1 trillion/year to U.S.

8.4% of jobs in U.S. is attributable to commercial aviation

Commercial aviation globally (ATAG, 2018)

 Economic impact is $2.7 trillion (directly, indirectly, and induced effects).

 Supports 65.5 million jobs worldwide

 Accounts for 3.6% of global gross domestic product (GDP)

 Worldwide passenger figures have increased by 7.5% in 2018 compared to 2017

Major Players of the Industry

 Passenger airlines  Manufacturers

 Cargo airlines  Suppliers

 General aviation companies  Unions

 Regulators and NGOs  Governments

 Airports  Related industries

Regional airlines are a type of airline service that is intended to feed a larger airline or larger
aircraft.

It also describes air service between small communities that are not able to support larger aircraft.
These services usually operate under Essential Air Service (EAS) program. Some examples are:
Horizonair, Mesa, Republic, Skywest, Air Wisconsin.

Airline Categories according to business plan

 Network Airlines: Also known as full-service carriers (FSC), legacy or flag carrier. Their
characteristics are hub-spoke model, relatively large network of operations, bundled
services, rich amenities, narrow and wide-body operations conventionally.

 Low-cost carriers (LCC): Also known as budget, no-frills or ultra low cost. Their
characteristics are point to point services, relatively limited network of operations, de-
bundled services, less amenities, and predominantly narrow-body operations.

 Hybrid carriers: Rare cases in the world. Characteristics are operated as LCC domestically
and FSC internationally. Good examples are Aer Lingus from Ireland or Air Berlin (bankrupt
couple of years ago).

General aviation: refers to all civil aviation except that carried outby the commercial airlines.

1. Business aviation
2. Corporate aviati
3. Personal flying
4. Instructional flying
5. Commercial and industrial aviation
 GA is the largest segment of aviation based on number of aircraft,pilots, and number of
airports and communities served.

 More than 166,000,000 passengers a year

 More than 220,000 GA aircraft

 More than 5,200 airports are being used exclusively by the GAaircraft

 It is a $40 Billion industry that generates over $100 Billion annually ineconomic activity.

The Aircraft market in medium-long range

 There are two major manufacturers: BOEING and AIRBUS.

 There are four major engine manufacturers supporting Boeing and Airbus: GE, P&W, R&R,
and SNECMA

 An aircraft manufacturer only manufactures and sells the airframe. This is called “green
aircraft”.

 The airline itself decides for the engines, avionics, and cabin arrangements.

 The aircraft in this market are divided into two categories: narrow body (single aisle) and
wide-body (twin aisle).

The Aircraft Market for regional aircraft

 There are more manufacturers in regional aircraft market than big aircraft market.

 Almost all the manufacturers are foreign based companies: EMBRAER, DASA,
BOMBARDIER, SAAB,BAE, ATR, FOKKER.

 The American manufacturer in this market only play a minor role and limited to 18-20 seat
production (BE-1900D)

AIRLINES BEFORE DEREGULATION

 The airline industry took off after WW II with the emergence of huge excess supply of four
engine long range military transport airplanes in commercial use such as DC-4, DC-6, L-
1049 etc.

 The industry became the main mode of transportation over 500 miles distances with the
introduction of first jet airliner B-707 in 1958.

 Finally it became the main intercontinental mode of transportation with the introduction
of first wide body commercial jet B-747 in 1969.
  Along came the first signals of new management concerns such as demand-capacity,
profitability, revenue management, marketing challenges, in-flight entertainment, new
ground equipment, etc.

The World’s top airports with passenger volumen

 Atlanta (1)107,394 Million passengers

 Los Angeles (4) 87,534 Mill.

 Chicago (6) 83,400 Mill.

 Dallas/Fort Worth (15) 69,113 Mill.

 Denver (20) 64,495 Mill.

 New York JFK (22) 61,909 Mill.

 San Francisco (25) 57,793 Mill.

 Seattle (29) 49,850 Mill.

 Las Vegas (30) 49,717

Regional Split-Top 100 Airports in 2018

 North America 1.27 bn.

 South America 0.19 bn.

 Middle East 0.19 bn.

 Asia-Pacific 1.71bn

 Europe 1.17bn

9 / 11’s EFFECTS

 Since airlines were in recovery process for a long time aggressive cost cutting and
reduction and consolidation of flights causes them to spread the overhead costs over a
smaller fleet. The buzzwords of the industry nowadays are: capacity discipline and
efficiency.

 New security equipment and personnel requirements brings extra financial load to
 New security screenings in terminals requires more time, longer lines, and carry-on
restrictions.
LCC PHENOMENON
 Low cost carriers became a major threat to network carriers with their low fares
and point to point operations.
 Crisis and struggles of network airlines also contributed to low cost airlines growth
and getting more market share.
 Due to their size and agility LCC s react faster during crisis.
 Southwest’s success for the last four decades has led to the establishment of new
successful LCC s like Jet Blue and to the transformation of former charter carriers
or small jet providers to low cost like ATA and Independence Air.
 The first two carriers that recovered the service decline five months after 9/11
were Southwest and ATA.
 Airports that are served by LCC’s managed the effects of 9/11 better.

CURRENT & FUTURE TRENDS

 Increase in airline alliances worldwide including low cost airlines.

 Change in ownership rules.

 Increase in cost control and cost management. Stronger emphasis on efficiency, capacity
and cost discipline.

 Increase in use of emerging new technologies, especially in E-Commerce and IT fields.

 Security challenges due to the new world changes.

 Increasing airport revenues by more effective concession planning

 Since security procedures changed the passenger flow, passengers are spending more
time at the airports now. Thus, there is a greater demand for richer eating and shopping
experiences.

 Maximizing value to passengers with a rich variety of products and service styles can bring
substantial economic returns.

 Planning future expansions according to customer needs and market contingencies.