There
is a common topic in our classes about the rest of the aviation world “catching
up” to the United States. Mostly with a focus on the regions of the Middle East
and Asia Pacific, there has been the implication that our country has become stagnant
in terms of progress compared to these newer markets. Along with a general
economic downturn of the entire country, the aviation industry is frequently
mentioned to have been less profitable since the events of 9/11. Even with ties
back to the deregulation of the industry, I believe our country is simply
feeling the effects of an established system with no room for expansion but
simply a need for a change in structure to remain economically viable. Whereas
these newer, government backed, foreign flag carriers are seeing great gains
because of population growth and simply newer jobs that were not there before.
There have already been indications of a struggling U.S. commercial aviation industry
and they will be further discussed.
Mergers have been one of the easiest
recognizable changes in the past years. With “only four carriers—American,
Delta, Southwest, and United—controlling what some analysts estimate is nearly
85 percent of U.S. air traffic”, compared to just “over a decade ago, ten large
airlines offered frequent service around the country” (Peterson 2013) there has
been much consolidation within the industry. This has been a result of lower
profits and airlines trying to gain enough economic stability to not be
bankrupted by technology investments (avionics upgrades/new plane orders),
natural disasters, labor strikes, or any other events detrimental to business.
Fuel prices are a main cause for
concern as well. According to Rogers “the volatility of jet fuel costs have
heavily impacted the industry. In 2001, fuel only accounted for 10% of
operating costs - these days it’s 35%, the largest single expense on an
airline’s balance sheet”. Because of their rising cost, funding to other departments
within the airline itself has been cut and profits were effected. So in order
to maintain any sort of profitability there needed to be certain changes to the
fleets and structure.
Newer, bigger, and more fuel
efficient planes have been needed to maintain this profitability. But because of
the high cost to fully upgrade an entire fleet, airlines have been holding off
as long as possible to do so. Until then, there has been an effort to make
current planes more efficient, by adding winglets or implementing fuel
efficient operating procedures. This ties back in to the constant urge in the
airlines to merge. According to Peterson, “United says that the economic
benefits of its merger with Continental allowed it to make much-needed
upgrades, such as modernizing airport baggage systems and replacing its aging
757 fleet with new jets with better bin space and in-flight entertainment”.
Route restructuring and higher ticket
prices are the most likely outcome of all these issues. According to CAPA, “There
will be increasing route abandonment as costs outpace any revenues to be had
from local communities. More 50-seaters will be retired prompting such
abandonment”. So smaller destinations away from major hubs, such as Memphis and
Cincinnati will see much higher fares and ultimately less service.
As to how I feel on all of this
change within the industry, I feel it may bring a better airline experience to customers.
But the only downside will be higher ticket prices than the ones they have
become accustomed to over the past years. This I think is a result of such a
fixation on low ticket prices being the only reason a person may choose a
particular airline, instead of quality service. As for me in the job market, I
think it will be hard to tell whether these changes will be a benefit or not.
On one hand, higher ticket prices can equal out into higher pay. As well as
emerging markets meaning job opportunities overseas. On the other hand,
smaller, more consolidated fleets in the United States reliant on bigger
aircraft can result in less of a need for newer pilots with low experience.
Either way, I think there will be a place for me somewhere in the mix.
References
Anderson,
R. (2012, April). Future of the aviation industry. , Washington, D.C.
Retrieved from
http://www.airlines.org/Pages/Future-of-the-Aviation-Industry.aspx
CAPA
Centre for Aviation. (2012, January 3). 2012 marks beginning of next chapter
in us airline industry. Retrieved from
http://centreforaviation.com/analysis/2012-marks-beginning-of-next-chapter-in-us-airline-industry-65485
Peterson,
B. S. (2013, July). Fewer flights and higher fares: Is this the future of
air travel?. Retrieved from
http://www.cntraveler.com/features/2013/07/airline-industry-changes
Rogers,
A. (2012, October 8). The state of the airline industry. Retrieved from
http://www.foxbusiness.com/travel/2012/10/08/state-airline-industry/
Excellent post! I like to point out the first paragraph, you hit the nail on the head. The way the the infrastructure of the aviation industry in the US, it is becoming increasingly difficult for these airlines to expand. With the ever-rising gas prices as well as a sluggish economy, it may be time to rethink and restructure the airlines industry. You pointed out the now there is only four major airlines and are 85% of the traffic, where as a decade ago you had at least ten major carriers to choose from. This is a daunting reality of just how much the competition has be shrinking over the past decade and if nothing is done, what will the airlines or airline look like?
ReplyDeleteI think your last paragraph kind of relates to what we talked about in class last week. With new aircraft and a more enjoyable flight experience comes a higher price tag for the customers. The goal will be to sell the higher fees to customers buy making them understand the increased comfort and safety they will be acquiring with the new advancements in technology.
ReplyDeleteThe new fuel efficient planes and the mergers have been helping the profitability of the airlines, but it’s not helping fast enough. First off, like you pointed out, the airlines do not have full fleets of the new planes, and even with the upgrades to old planes they are still not as fuel efficient. Second the mergers may be helping, but if more mergers happen there will be less competition between airlines. I fear at one point ticket prices will be uncontrollable. Finally even with more efficient planes, fuel prices keep increasing at the same time. It may get to the point where fuel prices increase faster than we can make planes. Eventually we will need to find other ways to power planes than kerosene based jet fuel.
ReplyDeleteI agree that fuel is the biggest cost in an airline and the fact that fuel prices are not going down does not help them out. Yes they will try to cut costs in all other places including pilot pay. I think they dont even realize how bad their own employees have it sometimes. There is a common misconception that all pilots make a bunch of money which in some cases is true. But that only accounts for the most senior captains in the industry, the fact that I would be excited to get $25,000 for a salary my first year is ridiculous. The cost of flight training is astronomical and the pay is just too low, they don't even realize that they are killing their own business by keeping pilot pay down.
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