AVIATION INDUSTRY

United States Aviation Industry

United States Aviation Industry

Industry Overview

The airline or aviation industry of the United States has seen exponential growth since the Second World War came to an end. In the year 1945, the prominent airlines transported approximately 3.3 billion passengers traveling on revenue. These are revenue passengers and flights operated for this purpose is calculated by revenue passenger miles or RPM. In the 1970s, deregulation of the industry changed the way airlines operated in the Unites States. In the year 1978, Congress passed the Airline Deregulation Act, which paved the way for new entrants to operate in the expanding aviation industry. This Act also gave the new carriers the freedom to operate as they saw fit and cover cities and destinations as they planned. Major airlines had covered 130 billion RPM after the deregulation. A decade after the change in the industry, the number of RPM increased to a staggering 330 billion (Leary, 1992).

New airlines began to operate by offering lower traveling expenses for passengers. Several new routes were opened and new services were also put on offer. The growth that stemmed from the Deregulation Act was exponential and continued till the year 1981. During this time, the number of passengers surged to 20 million every year. A similar number of new passengers began to opt for air travel following the Act of 1978. By the year 1990, the number of passengers traveling by air increased to a massive 466 million (Miller, 1981).

As of today, the United States airline industry is facing increased competition from low fare air carriers. This price war among the airlines has prompted major airlines to undergo organizational restructuring to compete with their cheaper rivals. One such move was by United Airline who offered employees a share of equity in exchange of jobs. A significant number of airlines filed for bankruptcy after low fare airlines forced them to lose passengers. The low cost warfare in the industry has also resulted in alliance among the big and small carriers. In the year 1993 during Clinton's term at the office, the President formed a National Commission that was responsible for ensuring a fair and healthy environment in the aviation industry. The Commission advised the airlines to seek technological advancements and enter the global market by adding to their international destinations (Leary, 1992).

The number of airline alliances has given birth to the term “global carriers”. Airlines in the United States have been the biggest beneficiary of these alliances and share a significant amount of market share in collaboration with international airlines. Examples of such alliances are NorthWest and KLM, STAR Alliance, American Airlines and British Airways, Atlantic Excellence and the alliance between Canadian Airlines and Qantas. The alliance between Qantas and Canadian Airlines is pending approval from the respective authorities.

Challenges in the Industry

The three biggest challenges in the industry of aviation are increased competition, rising costs and governmental regulations (Hanlon, 2007).

Delta Airlines

One of the biggest airlines in the United States is Delta Airlines ...