Case Study: The Airline Industry

Abstract

The airline industry provides many illustrations of the concepts and techniques described in this book. It is a major industry comprising a large number of firms of various sizes. Some airlines offer only local or national services, but many operate internationally. In the 1990s airlines face the challenge of competing profitably in a rapidly changing environment. Against an underlying trend of increased airline travel, demand is subject to marked fluctuations. In 1991 economic recession coinciding with the Gulf War caused a substantial reduction in the demand for airline travel. Increases in the price of oil have a significant effect on airlines’ costs, as in the future will demands for reduced pollution. Airlines have been subject to extensive regulation by governments and have had to cope with many changes in the regulatory framework. In recent years the trend has been to reduce the degree of regulation. In 1978 the US market was the first to be substantially deregulated. Deregulation has also occurred in Canada and Australia, and in the EC as part of the implementation of the single market.