Pummeled by poor profits and scarred from a terrorist attack against the US, the airline industry finds itself on a bumpy course. In an effort to head off a drop in the number of passengers and rising costs for security, companies laid off staff and trimmed services. In an already intensely competitive market, the inevitable industry wide shakedown will have far-reaching effects on the industry's trend towards expanding domestic and international services. Therefore, this analysis will include an in depth discussion of the airline industry and its opportunity for success or failure in the future. .
MARKET ANALYSIS .
The market analysis section includes the demand and supply analysis, as well as the threats and opportunities that the commercial airline industry faces. The following pages include this analysis.
Demand Analysis.
Previous Trends in the Industry.
In the airline industry, economic cycles are a regular part of everyday life. Only twice has the industry experienced negative annual growth traffic - in 1991 and from 2001 to 2002. Economic growth is the main long-term driver behind air travel growth as well as globalization and the internet which are allowing people more opportunities to fly today. In the short-run, air travel growth is more volatile. Consumer confidence and business profits can influence demand significantly as well as the level of disposable income for travelers to use. When income is depressed or uncertain, visits to friends or business trips can be delayed or even cancelled. .
Before the terrorists attacks in 2001, the airline industry experienced excellent growth from 1997 - 2000. A strong economy and a competitive pricing environment allowed airlines to carry more passengers than they had every carried before. Airlines experienced record profits of $5.2 billion and international profits by U.S. carriers rose rapidly to $1.1 billion (www.air-transport.org).
