A strong, healthy and globally competitive U.S. airline industry is vital for America. It is vital for our economic growth, our communities, our infrastructure and the traveling public. However, the airline consistently competes throughout the history of aviation, fuel cost will always be a main rising factor and that any other threats and political issue that takes place will affect world travelers.
Throughout the pass years of aviation, the airlines face drastic changes every year. Along with the reduction in air travel demand due to the recession and economic crises abroad, the volatility of jet fuel costs have heavily impacted the industry along with its merges.
After annual operating losses from 2001-2005, airlines finally broke even in 2009 and were profitable in the last two years. Industry experts contributing to the DOT’s report foresee these trends becoming the new reality:
“changes in the number of airlines controlling the industry, fare increases, and capacity reductions that began in 2008 are not a brief phase, but rather are signs of a greater shift in the industry that will remain for years to come.” (2012, Rogers)
Also, mergers plays a big role of competition. Mergers has wildly fluctuating fuel prices come cost cutting measures. Mergers naturally lead to consolidated schedules but airlines continue to cut flights to reduce capacity, especially on smaller aircraft. The number of scheduled flights dropped almost 14% between 2007 and 2012, with Midwest and Northeast hubs taking the biggest hit. Cincinnati’s hub operations were reduced 63% in the 5 year period, Pittsburgh, Cleveland, Chicago O’Hare and Philadelphia also saw dramatic decreases (2012, Rogers). My question is why not have enough regional jets to fly small amount of passengers? In my opinion, Boeing 737 or Airbus A320 should over crowd the hubs and airstrips.
According to Marketwire, many regionals are subject to scope clause restrictions on the type of aircraft that they can fly, resulting in inefficient fleets ill-equipped for maximizing profitability and generating new business opportunities. A number of regionals also operate under fixed-fee-per-departure contracts that have fee escalation clauses that do not keep pace with rising costs (2012, Marketwire).
North America and Europe will continue to be large and significant markets for regional airliners. Other regions, however, will grow in size and relative importance to the industry. These will include the Asia/Pacific area, Latin America, and the Middle East. In 15 or 20 years, the Asia/Pacific region could well overtake Europe as the second largest market for regional aircraft, presuming that progress is made in developing secondary routes within that region (2012, Marketwire). Regional carriers face nearly all of the same problems that major airlines do. In addition, regionals are saddled with additional difficulties unique to their place within the structure of the airline industry.
Nevertheless, the challenges facing regional airlines may be more difficult and complex than those facing major carriers. Plus, in the years ahead, opportunities for regionals to achieve substantial growth will be somewhat limited, especially in the saturated North American and European markets. As a graduate at EMU, I know that I will be facing these challenges but I also know that this is part of the professional world of aviation and that is "competition".
Thanks for reading
Ryan Pride
Sources:
Marketwire. (2012, November). Market research report-regional airline industry facing challenges in road to recovery. Retrieved from http://news.investors.com/newsfeed-marketwire/112912
Rogers, A. (2012, October). The state of the airline industry. Retrieved from
http://www.foxbusiness.com/travel/2012/10/08/state-airline-industry/
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