Essay on Airline Industry - a Study

2240 Words Aug 4th, 2015 9 Pages



Since the inception of flight in 1903, air travel industry has been a crucial means of transportation for people and products. The invention of the first aircraft hundred-plus years ago brought about a revolution of how people travel. It has been a dynamically changing industry. Air travel remains a large and growing industry. It facilitates world trade, economic growth, tourism and international investment, and is therefore central to the globalization of many other industries.
This paper will discuss the characteristics of airline industry in the United States with more focus on passenger airlines, its market structure and competitive
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They are also called as budget airlines, cheap flights and discount carriers. These airlines may charge extras like food, pillows, and priority boarding and seat allocation to make up for the lost revenue for discounted ticket price. The low-cost airlines are Allegiant Air, Frontier Airlines, JetBlue, Southwest Airlines, Spirit Airlines, and Virgin America. Currently, the world’s largest low-cost carrier is Southwest Airlines.

SERVICE INDUSTRY Airline business is fundamentally a service industry. Airlines perform a service for their customers, transporting them and their belongings from one place to another for an agreed price. It is similar to other businesses like banks, restaurants, and insurance companies. Customers are not given a product in return for the money they spend. There is no inventory created and stored for sale at some later date.

MARKET STRUCTURE The American airline today is an oligopoly; with four major carriers dominate the industry, with a combined market share of 61.2%. These airlines are American Airlines, Delta Air, Southwest Airlines, and United Continental. An oligopoly exists when a market is controlled by a small group of firms. These firms have price making power. The industry is highly competitive and capital-intensive. Because of its capital-intensive nature, fixed costs and barriers to exit are high. But can we characterize it as a traditional oligopoly? As barriers to entry are low due

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