North American and European Airline Industry Essay -- Business Managem

North American and European Airline IndustryINTRODUCTIONThe Airline perseverance is one of the worlds largest industriesgenerating all oer $300 billion in revenues in 2001 alone andadditionally has the second highest industrial growth rate, after thecomputer industry, with typical growth rates of 3-5% per annum overthe last 20 years (Humphreys, 2003 BA Fact book, 2002).For the purpose of this assignment, freight/cargo airline business activitieswill not be considered as freight incite consists of only 2 % of totalairline activity (see insert 3.1 and appendix 1) (BA Fact book, 2002,ICAO, 2003). Furthermore, due to the nature of the airline industryand the Asian market world a lot smaller and internally focused, wewill concentrate on the North American and European markets whichbetween them, account for 65% of the market (see figure 3.1 andappendix 1) (ICAO, 2003). Section 1The main forces shaping the airline sectors global businessenvironment.The past two years has seen an unpre cedented soma of airlines,worldwide, filing for bankruptcy and many more would have followedsuit had it not been for government intervention (Economist, 2002a).The main factors leading to their demise and to the problems currentlyfaced by the airline industry in general, have their roots in theexisting economic and political climate, which according to IATA (2002) continue to remain challenging.1.1 Economic Forces facing the airline industrySince the performance/profitability of the airline industry is closelyconnected to the economic cycle (BA Fact Book, 2002), the importanceof the global economic environment and the rival that it has on theindustry cannot be underestimated (see figure 1.1).This is evident from the performance of the industry during the late1990s as profitability soared on the back of a dexterous world economy(characterised by the hype generated by the technological revolutionrecord levels of corporate activity etc) which fuelled demand for airtravel. It is not surprising that the ensuant slump in air travelwhich began in the USA towards the end of 2000 and slowly spread toother parts of the world (Economist, 2001), corresponded to a changein the economic forces as the knock on effects of the US economicslowdown infiltrated the global economy.One of the main consequences of the g... ... flights and theintroduction of World Traveller cocksure a new business and economyproduct. These two markets of business and economy are perceived to bethe most demanding and profitable in the future and wherefore BA haveadditionally positioned itself well to take advantage of thesedevelopments (Economist, 2002b BA Fact book, 2002).Therefore, the penetration and consolidation of markets, costmanagement and refocusing of culture and al-Qaida assisted bythe collaboration available at heart its OneWorld Alliance are placingBA in a healthier position to survive the turbulence that lies ahead. last(a) THOUGHTSThe future of BA and that of many other airlin es is going to depend onthe highly volatile political and economic situation facing the worldas seen in section 1. War in Iraq is creating an increased sense ofpanic in the worlds industries and therefore, an accurate forecast asto the airline industry development is somewhat convoluted and complexdue to the overwhelming sense of uncertainty that prevails. Therefore,BAs future positioning and its subsequent success within this sectoris going to be decidedly susceptible to the worlds events.