Crafting and Executing Strategy
John M. Baryogar
Dr. Russell Handlon
October 30, 2011
Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy
The airline industry is facing one of its most difficult times in history. A worldwide recession along with the terrorist attacks of September 11, 2001 have led to a decrease in passenger traffic, reduction in revenue and rising fuel prices. Additionally, airline companies face the increase competition from new entrants. The shortage of pilots has also caused problems for the airline companies.
In 2008 when the economy started to take a downward turn, businesses began to cut back on employee travel, consumers were being more conscious about their spending. Airlines had to come up with a strategy by charging consumers for check bags, headphones pillow and blankets to increase revenues to offset high fuel prices. The Airport Transport Association determined that each cent increase in the price of a gallon of jet fuel cost the industry an additional $190 million to $200 million a year (Thompson, Strickland, & Gamble, 2009).
New competition included Virgin America which is a low-fare carrier with a hub in San Francisco and administrative offices in New York City. It serviced flights between San Francisco and New York. It also operated five daily flights between San Francisco and Los Angeles. Another competitor was Newair & Tours based out of Canada.
Accordingly, training schools were not providing enough schools for airline pilots. The airline industry needed three thousand more pilots each year to make up for the shortage. The shortage was caused by thousands of pilots retiring every year. It was also caused by the lack of hours of first officers (Thompson, Strickland, & Gamble, 2009).
The airline industry has responded to this difficult environment by taking measures to restructure their strategy. If they do not...