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.

1. Introduction
to the airline industry
V. Meril

2. 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

3. 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

4. Type of airlines
• Scheduled (fixed routes and timings)
• Non-scheduled
• Passengers
• Cargo
• Passenger & Cargo
• Intercontinental
• International
• Domestic

5. 84% world’s international traffic
240 member airlines
188 countries

6. Passenger Travel
Leisure: Corporate:
Extended period Short period
Recreation purpose Official purpose
950 million tourists Increased profitability
Worldwide (2010)
Contributes to GDP
Creates employment

7. Cargo
Dangerous Non
Perishable Live Animals
Goods Perishable
Passenger
Air Freight Forwarders
Airlines
Passenger
Cargo Airlines Super Cargo
Airlines

8. 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

9. 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

10. 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

11. Freedom of the Air
4 3
5

12. 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

13. 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

14. Revenue Management
Yield
Price
Improvement
Maximization of Profits
Revenue
Management
Traffic
Segmentation Traffic (RPKs)

15. Main Industry Features
Thin Profit
Seasonal
• Capital
Intensive
• High Cash Flow
Labor Intensive
Service

16. Development of Commercial Airlines
1910s 1940s 1970/80s 2000
WW1 WW2 Deregulation New Era
Military to Civil
conversion