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Introduction to Airline Industry

The airline industry involves transporting people and cargo by air on a global scale. It encompasses aircraft manufacturers, airports, airlines, cargo companies, travel agents, and other support industries. Major types include scheduled passenger carriers, cargo carriers, and general aviation. Key metrics used to evaluate airlines include revenue passenger kilometers (RPK), available seat kilometers (ASK), passenger load factor, unit cost, and average unit revenue. Major events were the 1944 Chicago Convention establishing international standards, and airline deregulation in the 1970s-80s allowing more competition. The industry is characterized as capital intensive, seasonal, thin profit margins, and labor intensive service-based.

Introduction to the airline industry V. Meril
Definition • Airline Industry is a system of transportation • Part of Aviation industry • Moving people and goods • Utilizing the airways • One of the only true global businesses Cargo
Scope Aircraft Airport Operations Support Industries Service Providers Manufacturers • Commercial • Fuel Supply • Runways • Travel Agents transport • Maintenance • Navigation • Freight • General Aviation systems • Ground Forwarders planes transportation • Military aircrafts • Hospitality Industry • Car Rentals 2
Type of airlines • Scheduled (fixed routes and timings) • Non-scheduled • Passengers • Cargo • Passenger & Cargo • Intercontinental • International • Domestic
84% world’s international traffic 240 member airlines 188 countries
Passenger Travel Leisure: Corporate: Extended period Short period Recreation purpose Official purpose 950 million tourists Increased profitability Worldwide (2010) Contributes to GDP Creates employment
Cargo Dangerous Non Perishable Live Animals Goods Perishable Passenger Air Freight Forwarders Airlines Passenger Cargo Airlines Super Cargo Airlines
Economic and Social Impact 2.5 billion passengers worldwide 5.5 million Airlines employees 9.5 million Airlines Supply Chain employees 18 million indirect Tourism jobs
History background 1944 1945 Chicago International Air Convention Transport Association on Standards and International IATA Recommended Civil Aviation Practices SARPS International Civil Aviation Organization ICAO
Freedom of the Air 1: Right to fly across a country’s territory without landing 2: Right to land for non-traffic purposes 3: Right to carry passengers and goods from OWN’s country to another 4: Right to carry passengers and goods from another country to one OWN’s 5: Right to carry passengers from one OWNs country to a 2 nd country and to a 3rd country
Freedom of the Air 4 3 5
Business Metrics / KPIs Revenue Passenger Kilometer Average Unit Revenue Available Seat Kilometer RPK Measure of passenger traffic Measure of yield Measure available capacity Number of Revenue Revenue Number of seats Passenger X X RPK X Number of kilometers Kilometers of the segments e.g: e.g: e.g: 200 seats X 7,000 kilometers 150 passengers X 7000 117,000 USD / 1,050,000 =1,400,000 ASKs kilometers= 1,050,000 RPKs RPKs= 0.16USD/kilometer
Business Metrics / KPIs Unit Cost Passenger Load Factor Measure of profitability Measure of capacity utilization Expenses (COST) RPK / / ASK ASK e.g: e.g: 140,000 $ / 1,400,000ASKs 1,050,000 RPKs = 0.1$ / 1,400,000 ASKs = 75% PLF
Revenue Management Yield Price Improvement Maximization of Profits Revenue Management Traffic Segmentation Traffic (RPKs)
Main Industry Features Thin Profit Seasonal • Capital Intensive • High Cash Flow Labor Intensive Service
Development of Commercial Airlines 1910s 1940s 1970/80s 2000 WW1 WW2 Deregulation New Era Military to Civil conversion