Airline Industry
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1. Analysis
Industry: Airline Industry
In the case study two groups of competitors were acknowledged: legacy carriers and the low cost carriers (LCC). The legacy carriers included most of the best-known U.S. Airlines, like United, Delta or American Airlines. These airlines used the “Hub and Spoke” model as their operations system. The LCC, including used a different type of operations model called the “Point to Point Model”, pioneered by Southwest Airlines. In 2001 many airlines cut the traditional longer routes in order to reduce costs and the demand for smaller regional routes begins to expand rapidly, helping regional carriers to become much more profitable.
General Environment:
During this time the airline industry faced many changes due to the general environment. Even though, there were very small differences between the cultures of each airline. There were other aspects of the environment at the time that were affecting the industry. The airlines were experiencing softening demand and higher costs due to increasing fuel prices which lead airlines to begin operating much more regionally. But there were other reasons that lead to this as well. The low cost carriers began targeting a new low budget customer, which lowered their fairs up to 65% than that of legacy carriers. There was also an emerging market with Business Customers, who were very demanding in flying airlines that would ensure that they would arrive on time to their destination. This was a great advantage for Jet Blue Airlines, since its operating principal was based on not canceling flights. There were also much more centralized cities like New York or Washington that had greater demand for flights than others.
At the time, many airlines began to try and mimic Southwest’s LCC model mentioned above, but deregulation, fare wars, amongst other problems arising, made it impossible. The 9/11 terrorist attacks made the airline industry go through and even more downfall, where the demand for flying by customers dropt significantly, leaving many competitors under bankruptcy protection.