Topic 19 : Airline Industry

The airline industry is highly competitive, is characterized by low profit margins and high fixed costs, and we may be unable to compete effectively against other airlines with greater financial resources or lower operating costs.

        The airline industry is characterized generally by low profit margins and high fixed costs, primarily for personnel, aircraft fuel, debt service and aircraft lease rentals. The expenses of an aircraft flight do not vary significantly with the number of passengers carried and, as a result, a relatively small change in the number of passengers or in pricing could have a disproportionate effect on an airline's operating and financial results. Accordingly, a minor shortfall in expected revenue levels could harm our business.

        In addition, the airline industry is highly competitive and is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats. Although we do not currently face nonstop competition on many of our route competing airlines provide connecting service on many of our routes or serve nearby airports. In addition, we have faced other competing services in the past, and we cannot assure you other airlines will not begin to provide nonstop service in the future on the routes we serve. Many of these competing airlines are larger and have significantly greater financial resources and name recognition. We may, therefore, be unable to compete effectively against other airlines that introduce service or discounted fares in the markets we serve.

    The airline industry began its development in the early part of 20^th century, and its growth influenced  to a great extent iniatially by government interest and policy. airlines are unique in they face limited intermodal competition , but intramodal competition is very keen in term of pricing and service and has been exarcerbated by unused capacity. The higher cost of airline service can be trade off gain lower inventory and warehousing costs, as well as another logistic related savings.

    Airlines usually provide service for small shipments where value is high and the product may be perishable. Speed  also the major advantage of airlines service can for both passenger and freight , but the airlines speed of service has been offset recently by congestion and fewer flights. Major and national airlines use a hub approach to their service , which contributes to operating efficiency but often adds travel time.