Air Transportation Industry Analysis NAICS Code is 481111

Industry Analysis – Schedule Passenger Air Transportation
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Industry Analysis – Schedule Passenger Air Transportation
1.0 Introduction
The paper will focus on the Schedule Passenger Air Transportation industry. Its NAICS code is 481111. The industry is made of establishments that primarily engage in the provision of passenger air transportation (NAICS, n.d). The transportation provide follows regular schedule and routes. Sources of information such as the United States Census Bureau will provide necessary data about the industry. In addition, online business magazines like Vault will offer important industry data that will be useful (Vault, n.d). the International Air Transport Association (IATA) also has key industry information. The history of the industry dates back to 1914 when 25-year old Tony Jannus flew aircraft across Tampa Bay (Johanson, 2014). Significant progress has been made in the industry and now on average, 8 million people fly per day (IATA, 2013). The research paper will seek to examine the scheduled passenger air transportation industry. An essential tool in the analysis of any industry is Porter’s five forces. With the reframing of the tool, the paper will examine the industry, there is a low threat of new entrants because of the huge cost involved. Buyers are the passengers, and they can easily switch from one firm to another since the switching costs are low. The sellers, in this case, are the manufacturers of the airplanes. They are few and have contracts with firms in the industry. In regards to conduct, while some focus on amenities, others focus on cost. In terms of performance, the profitability of the industry has been growing. Profitability depends significantly on the ability to minimize costs and the performance of the global economy. The remaining part of the paper will examine in detail the history, major players, competition, performance, buyer behavior, and other significant aspects relevant to the industry.
2.0 Discussion
a) History
The development of the aviation industry in the past led to the creation of both the passenger and cargo transportation industry. The first successful flight happened in 1903 in North Carolina, centuries later, the industry gained popularity and became one of the main players in the transport industry. Initially, the government controlled the routes structures and set the prices for the air transport but the domestic carriers took over and the airlines became independent to expand and adopt other routes that seemed convenient to them. With this transition, the air transportation industry recorded major changes in its operations and it led to the growth of major passenger and cargo airlines. The development of the scheduled air transportation industry is mainly depended on the success of the air transportation industry and it dates back to 1914 when a young pilot; Tony Jannus flew an aircraft across Tampa Bay (Johanson, 2014). The flight that lasted for approximately 23 minutes is considered as the first scheduled commercial airline flight in the history of scheduled flights (Johanson, 2014). The industry is a clear indication of the progress from the seemingly impossible achievements over 100 years ago to the tremendous success of the industry about a century later. Today, the aviation industry not only provides passenger and cargo transportation in the world but it also provides numerous job opportunities and is one of the main contributors to the development of the economy. According to IATA, the industry is among the top 20 in the main economic contributors and contributes an estimate of about 540 billion dollars to the economy in the world today (IATA, 2013).
b) The main players
The major players in the industry are classified according to the amount of revenue generated from their annual operations. They hold two certificates; the certificate of convenience which grants companies the right to provide scheduled services and the operations certificate which outline the operation regulation guidelines for the airlines. The major players in the industry provide an average of one billion dollars in revenue annually and provide worldwide service to its consumers. These airlines include; Alaska Airlines, American Airlines, American Eagle airlines, Continental airlines and the United and Us Airways (Vault n.d). The main cargo airlines are FedEx and United Parcel Service. Additionally, the operations of some airlines are limited to the national and regional operations and the revenue contributed towards the economy is much lower than those collected by the major airlines which operate internationally.
c) The Competition
The competition in this industry is huge stemming from the fact that airlines provide services to every part of the world. The influence created by the airlines in other industries is huge but the competition to remain relevant in the market is also huge and directly affects the operations of the scheduled airlines. In most cases, competition comes from the technological advancements witnessed overtime that give rise to the development of more sophisticated airlines that provide the best customer experience. Additionally, the government policies put in place to regulate the competition available affects the general performance of the key players in the industry. The airline industry has over 2000 airlines that operate in about 3800 airports worldwide (Global Industry Airline Program). These figures present a general outlook of the huge competition that exists in this industry.
d) Performance
Performance in the industry is determined by two main dependent variables: the ability to minimize costs and how the state of the global economy. The key factors that often affect the industry’s strategies to minimize cost include...