The Airline Business in the Twenty-First Century

The Airline Business in the Twenty-First Century

The Airline Business in the Twenty-First Century

The Airline Business in the Twenty-First Century

Synopsis

This text focuses on the major issues that will affect the airline industry as we enter the new millenium. All of the factors such as, low cost operators and the cutting of labour costs are analysed with a view of the options of the managers.

Excerpt

The good, the bad and the indifferent

For the then Chairman of Air France, 1993 was an unhappy time. Every evening, as he left his office to go home, his airline had lost another US$4 million! This went on, day in day out, for a year or so. Of course, it was not quite like that. But by the end of that financial year, his airline had lost almost US$1.5 billion. Such figures graphically illustrate the depth of the crisis faced by the world's airlines in the early 1990s. This was a bad time for the airline business.

While the years 1987 to 1989 had been highly profitable, in the period 1990-93 the airline industry faced the worst crisis it had ever known. The crisis started early in 1990 as fuel prices began to rise in real terms while a worsening economic climate in several countries, notably the USA and Britain, began to depress demand in certain markets. The invasion of Kuwait on 2 August 1990 and the short war that followed in January 1991 turned crisis into disaster for many airlines. Eastern Airlines in the United States and the British airline Air Europe collapsed early in 1991 while Pan American and several smaller airlines such as Midway in the United States and TEA in Belgium had gone by the end of the year. The end of the Gulf War early in 1991 did not lead to any improvement in airline fortunes, since the underlying problem was the slowdown in several key economies, not the war. In many markets, such as the North Atlantic, liberalisation combined with inadequate traffic growth was resulting in overcapacity and falling yields as airlines fought for market share. Financial results in 1992 were worse than in 1991, and 1993 was little better. Of the world's twenty largest airlines, only British Airways, Cathay, SIA (Singapore Airlines) and Swissair made a net surplus in each of the three years 1991 to 1993. It was the North American carriers that posted the largest losses in this period. Conversely several Asian airlines continued to operate profitably.

A number of airlines required massive injections of capital to survive through the early 1990s, particularly Europe's state-owned airlines such as Air France. Those from member states of the European Union received

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