The US Airline Industry in 2012

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The US Airline Industry in 2012

The critical issue in the case study, "The US Airline Industry in 2012" is stabilizing the industry's cost and demand factors to allow it to grow and prosper. The author describes the history of the industry as well as a number of factors that have impacted the industry. The airline industry has experienced tremendous growth and is the "dominant mode of long-distance travel in the US" (Grant, 2013), however, the industry's profits have been low, with a "dire" financial picture. It is especially telling that "the total market capitalization of all quoted US airline companies was $30.1 billion--less than the market value of Starbucks, less than one third of the market value of Facebook on the day of its initial public offering, and about one-half of that of the industry's major supplier, Boeing" (Grant, 2013). The problem has many root causes, including legislation, dynamic costs, and weak economy. While these issues are not new, it is difficult for the industry's organizations to manage. On one hand, the organizations are limited by increasing fuel and labor costs, fluctuations in the economy (which impact the amount of travel that occurs) and capacity utilization. On the other hand, consumers demand lower fares and a modicum of service. A snapshot of the problems the industry faces can be revealed as the author describes the benefits of leasing newer equipment to take advantage of the fuel efficiency these planes offer. While this is a positive factor, the fuel efficiency must be weighed with the cost of acquiring the equipment. The airline industry must determine the right mix of fares, services and routes to offer while balancing theses costs ...