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Factors Affecting the US Airline
Industry
• Turbulence in the Industry
 Serious financial trouble post 9/11 terrorist attack.
 Recession in early 2000s lowered the overall demand.
• Affected by seasonal fluctuation
 Increased travel during summers.
 Inclement weather during winter leads to flight cancellations and delay.
• Safety
 Post 9/11, fear of flying.
 People preferred regional aircrafts.
• Increasing Fuel Cost
 Cost of fuel 10-20% of overall cost.
• Increased security regulations by the government
leading to high cost.
• Labor Unions
 Acrimonious relationships leading to strikes and huge losses.
• Increased competitive pressure from low cost carriers.
• Overexpansion of major airlines.
• Bloated flight schedules
Regional Airline Industry
• Short-haul flights.
• Serviced communities that were not well connected.
• Operated to serve as a feeder airlines.
• Operated mostly through partnership.
 Major carrier paid regional airlines a contracted fee per
departure.
 Regional airlines gained access to established customer base and
steady revenue stream.
Problems faced by Regional Airlines
Industry
• Over dependence on Major Airlines (Partners)
 Partners controlled the regional scheduling.
• More affected by bad weather because of being
limited to geographical region.
• Forced to accept lower fees due to increased
pressure on major carriers to cut cost.
• Increased risk due to bankruptcy filling of major
carriers.
SkyWest Inc.
• Founded in 1972 as SkyWest Airlines.
• Parent company of skyWest and Atlantic
Southeast airlines.
• Since 2002, named Regional Airline company
of the year.
• Until 2006 operated through partnership with
united and Delta.
• In Dec, 2006 signed contract with Midwest
Airlines.
Partnerships
• Delta Connections
 60% of SkyWest Inc capacity.
SkyWest received reimbursement of 100% direct cost
and fixed dollar payment per completed flights.
ASA received reimbursement of 100% direct cost .
• United Express
40% of SkyWest’s capacity
 Received fixed fee per completed departures.
One time start-up cost for each aircraft delivered.
SkyWest’s Strategies
• Geograpical expansion through acquistions.
• Expansion of current partnerships.
• Developing New Partnerships.
• Establishing partnerships with low-cost carriers.
• Diversifying operations to reduce risk

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US airlines industry

  • 1.
  • 2. Factors Affecting the US Airline Industry • Turbulence in the Industry  Serious financial trouble post 9/11 terrorist attack.  Recession in early 2000s lowered the overall demand. • Affected by seasonal fluctuation  Increased travel during summers.  Inclement weather during winter leads to flight cancellations and delay. • Safety  Post 9/11, fear of flying.  People preferred regional aircrafts. • Increasing Fuel Cost  Cost of fuel 10-20% of overall cost.
  • 3. • Increased security regulations by the government leading to high cost. • Labor Unions  Acrimonious relationships leading to strikes and huge losses. • Increased competitive pressure from low cost carriers. • Overexpansion of major airlines. • Bloated flight schedules
  • 4. Regional Airline Industry • Short-haul flights. • Serviced communities that were not well connected. • Operated to serve as a feeder airlines. • Operated mostly through partnership.  Major carrier paid regional airlines a contracted fee per departure.  Regional airlines gained access to established customer base and steady revenue stream.
  • 5. Problems faced by Regional Airlines Industry • Over dependence on Major Airlines (Partners)  Partners controlled the regional scheduling. • More affected by bad weather because of being limited to geographical region. • Forced to accept lower fees due to increased pressure on major carriers to cut cost. • Increased risk due to bankruptcy filling of major carriers.
  • 6. SkyWest Inc. • Founded in 1972 as SkyWest Airlines. • Parent company of skyWest and Atlantic Southeast airlines. • Since 2002, named Regional Airline company of the year. • Until 2006 operated through partnership with united and Delta. • In Dec, 2006 signed contract with Midwest Airlines.
  • 7. Partnerships • Delta Connections  60% of SkyWest Inc capacity. SkyWest received reimbursement of 100% direct cost and fixed dollar payment per completed flights. ASA received reimbursement of 100% direct cost . • United Express 40% of SkyWest’s capacity  Received fixed fee per completed departures. One time start-up cost for each aircraft delivered.
  • 8. SkyWest’s Strategies • Geograpical expansion through acquistions. • Expansion of current partnerships. • Developing New Partnerships. • Establishing partnerships with low-cost carriers. • Diversifying operations to reduce risk