The airlines in the world have been facing business pressures and this has raised eyebrows. The aviation industry has been forced to start thinking of how to re-strategize its business activities (Kayal, 1997). This includes business at the operational and financial levels. However, these challenges have worked for good to most airlines.
It made the airlines to work even harder to combat the situation and as a result, faced up to the challenges. This has in turn led to the success in turning around most of the affected companies (airlines). Most airlines underwent complete transformation as they reinvented themselves in order to be more effective and efficient. This essay paper examines the worldwide Airline Industry focusing majorly on the business pressures that the industry has been forced to undergo in an effort to stay afloat.
The final quarter of the twentieth Century has seen many countries of the world experience transformations in their transport industry. The situation has brought major impacts in the lives of the passengers and even in the business of the transport service providers. The transformations have mixed effects. On one hand, it has led to positive results to the stakeholders and on the other hand, the changes have had negative impacts. The negative changes have been a great challenge to both the customers and the service providers.
The transport industry is a vast industry involving land, air and even sea transport. Air transport is one of the transport modes that have been faced with the major challenges that come with generational change. The challenges that have faced this industry are vast.
Examples include challenges arising from macroeconomic difficulties such as the Asian financial problems of 1997 (Sarawati, 2001). Another occurred on ninth of September 2001. Majority of the transformations have majorly been as a result of dynamisms within the industry itself without involving the external factors.
These transformations, in a way, have contributed broadly to social welfare majorly because of the aspect of competition with the various stakeholders trying their level best to outdo the other and overcome their challenges.
The 21st Century has come with its fair share of the major issues that have greatly affected the airline industry. In the Western Hemisphere and specifically North America, the airlines have been greatly affected by these changes. Examples include the oil crises and the eventual increase in oil price. Another challenge is the blatant actions of terrorism.
Challenges of the 21st Century
People and governments have been faced with some terrible situations as a result of these unprecedented challenges in the industry. A recent paper, the Sunday Herald, provided some well-investigated information about the Jamaican Airline industry or rather Air Jamaica. The news article stated that the industry had lost up to a whopping $JA33 over a business period of ten years.
The article went on to state that the last time that the industry made a substantial profit was in the year 1974. This clearly shows how this industry has been undergoing a difficult business situation (Gordon, 2007).
The transport industry, just like all other industries has faced the need for wide and broad adaptation to the trends in vogue according to the evolving world in terms of the economical, social and labor changes. The three major factors have been the major players in the revolution of the transport industry. They include information revolution, globalization, and government financial and budget constraints.
Many airlines have been forced to downscale their employee base. This has resulted in the employees being considered redundant. This is as a result of the scaling down of national and regional operations and carriers.
In addition to the elevation of the budget carriers, many of the major carriers have been driven to bankruptcy forcing them to come up or rather develop their own budget subsidiary airline in order to compete. A good example is the Far East in which almost all the airline companies have each bought shares in the regional budget airlines (Ballantyne, 1997). In other words, they have completely owned the airlines.
There is a major and widespread belief that transport is always better organized by the private sector as opposed to the public sector or the government. In addition, it has been postulated that the rise of the private sector in the industry has given rise to very effective competition. This is another business pressure. Majority of the nations are aiming at attracting private airline investors. This is in an exercise that is set to cut government spending in the sector.
However, most currently, countries have the majority of their airline companies owned privately. For example, private individuals own almost all Latin American airlines. This is a great aspect characterizing the modern airline industry. This has done well in enhancing efficiency in the industry.
The challenge has been in the controlling of the surge in the number of prospective companies ready to invest in the sector. It is common knowledge that the airline, with its delicateness, has to be carefully taken care of in terms of who is given certification to proceed with the business.
Another business pressure that the aviation industry has been faced with is the ever-changing state of technology. Technological advancement has been challenging to the industry runners.
In order to keep up with the large extent of competition, the installed state of technology has to be up to date. It is important to keep in mind that it is a rather expensive affair coming up with a single plane, let alone installing an up to date state of technology. This has been a major challenge majorly because of the transitory nature of technology.
The occasional oil crises are another inhibitory factor to this industry. Oil is the source of fuel and consequent energy to this sector. During the 21st century, oil supply has been quite inconsistent as a result of many causes and effects. This has affected this industry greatly since there is always a direct correlation between this important commodity and the transport sector and not only the aviation industry.
One negative impact of such pressure has been the cost of transportation and freight. Transport costs have seen great elevation within this period and have led the passengers to dig deeper in to their pockets. Most of the time, they are forced to bear the burden since all the costs are directed towards them.
Apart from the passengers, the industry owners have to spend extra dollars to ensure a maintained supply and consumption of the commodity. This has greatly raised the cost of operation and maintenance of the industry and this is a problem that has seen some of the companies ground some of their planes.
This is in effort to cut down on expense and only remain with the number of fully functioning planes that are cost effective in terms of maintenance and operation. The industries that have been forced to reduce plane numbers have not been spared in terms of financial deficits, however. In addition to the financial challenges that the industry may be faced with, the companies are forced to scale down the number of employees and result in the loss of very vital human resource.
The aviation industry has everything to do with hospitality since it majorly involves providing services in order to appropriately serve their clients. Another form of pressure facing the hospitality industry is security. This century has seen a number of cases involving terrorist activities. Terrorism had previously haunted the whole world with various terror groups emerging and carrying out their heinous activities in various countries and nations of the world.
The trend has been that every incidence of attempted or successful terror attack is followed by travel warnings. The various countries through their embassies impose travel warnings and sanctions against their citizens travelling into the besieged countries. During these periods of sanctions and warnings, the aviation industry is largely affected.
Travel warnings translate into reduced transportation in terms of freight and freight into and out of the affected countries. Aviation companies are forced to deal with a problem of a great reduction in the number of passengers, which translates into reduced revenues to the industry.
The fact that these acts could be equally carried out in the planes, worsens the situation of terrorism. This has brought the widespread call for caution to be practiced in the airline sector (Gill, 2004). Thus, these companies have had to enhance and facilitate their security systems to keep up with the prevailing security situation boggling the entire globe (Markiewicz, 2000).
One major airline affected by these current challenges is the Southwest airlines. This is an industry that has been known to rake in millions in terms of profits year in year out. However, as the airline flew into the year 2009, the airline became under pressure (Kaiser, 1997).
Most of these challenges brought about financial implications, which forced the airline to cut its fight and slow down its network of new airplanes. The investors became greatly worried with shares of the respective shareholders falling as low as 40% in a period of three months.
This was a vaunted fuel system that had given the Southwest airline industry a great advantage over their competitors earlier (Jeff, 2007). However, this power turned negative when the prices of fuel went plunging down hence costing this industry hundreds of millions of dollars. The airline, once renowned for performance, was faced with a major rise in prices and was even forced to downsize the number of employees.
The period of global slowdown had negative effects on the aviation industry throughout the world. It went through a period of unprecedented changes. The changes occurred due to various reasons. One of them is that most of the well-known airlines had been incurring losses for several years.
This resulted in bankruptcy and there was need to restructure the whole thing (Blyton, Lucio, McGurk, & Turnbull, 2001). The revenues obtained from business traffic had also reduced greatly. This was also influenced when airlines in Asia and Europe consolidated by merging. Airlines in Europe and Asia adopted cost cutting as one of the strategies to combat the business issues.
This was seen as the most viable way to ensure security in the long run. However, airlines in North America were more reluctant to combat the challenges. The aviation industry has gone through a lot and is now well prepared to face the challenges that might come in the future (Linz, 2012).
Ballantyne, T. (1997). Open skies in Asia-today’s US perspective. Orient Aviation, 32-53.
Blyton, P., Lucio, M., McGurk, J., & Turnbull, P. (2001). Globalization and trade union strategy: Industrial restructuring and human resource management in the international civil aviation industry. The International Journal of Human Resource Management, 12(3), 445-463.
Gill, G. (2004). Perception of safety management and safety culture in the aviation industry in New Zealand. Journal of Air Transport Management, 10(4), 321-377.
Gordon, S. (2007). Air Jamaica spends millions wet leasing – airline struggles to cope with summer traffic. Jamaica Gleaner, 4-5.
Jeff, B. (2007). Southwest Airlines gains advantage by hedging on long-term oil contract. International Herald Tribune, 9-13.
Kaiser, R. (1997). Southwest may add cities to Iceland deal. Baltimore Business Journal, 98-121.
Kayal, M. (1997). European Airlines flying in open skies. Journal of Commerce, 21, 231-422.
Linz, M. (2012). Scenarios for the aviation industry: A Delphi-based analysis for 2025. Journal of Air Transport Management, 28-35.
Markiewicz, D. (2000). Issues change, but chamber rolls and 150 years later. Atlanta Journal Constitution, 323-421.
Sarawati, S. (2001). Operating environment for a civil aviation industry in India. Journal of Air Transport Management, 7(2), 127-135.