Even Lufthansa has complained of suffering from the pain caused by pilot walkouts, with issues like these outweighing the benefits that lower oil prices had to offer in recent times. The problems faced by many of the larger operators have benefited low-cost carriers operating in the region tremendously.
At a time when Air France employees were on strike, low-cost carriers like EasyJet managed to increase their pretax profit guidance. Receive our latest posts regarding the travel industry in your mailbox by subscribing to our newsletter here. Previous Next.
The Fuel Factor Fuel price remains to be the biggest concern faced by the airline industry in the modern world. Overcapacity A number of airlines like the TWA have already gone out of business because of issues like overcapacity. Labor Unrest A number of airlines in Europe have suffered because of issues like pilot walkouts.
The Emergence of Low-Cost Carriers The problems faced by many of the larger operators have benefited low-cost carriers operating in the region tremendously. Related Posts. December 29th, 0 Comments. December 4th, 0 Comments. Leave A Comment Cancel reply Comment. But struggling airlines often have to resort to cut-throat pricing to fill up their excess capacity, and as a result, even the stronger players in the industry are adversely affected by this lack of pricing power.
Aircraft are very expensive pieces of equipment, and airlines have to continue making large lease or loan repayments regardless of business conditions. Large commercial jets can have a lifetime as long as years.
Airlines also need large labor forces to run their complex operations, making payroll expenses another component of relatively fixed costs that have to be incurred month after month. Volatility in oil prices is yet another challenge that airlines have to contend with See also: 4 Ways Airlines Hedge Against Oil. The airline industry is particularly vulnerable to exogenous events such as terrorism, political instabilities and natural disaster, which can drastically affect their operations and passenger demand.
The U. Long lines due to security procedures at check-in, cramped seating, inconvenient schedules, poor service - the list of airline travelers' complaints is a lengthy one. The perception that air travel is an ordeal makes it very difficult for airlines to charge the higher prices that are necessary to return to profitability. Social media has propelled a number of what can only be described as PR disasters recently, and undoubtedly caused harm to the industry.
Airlines provide a vital service, but factors including the continuing existence of loss-making carriers, bloated cost structure, vulnerability to exogenous events and a reputation for poor service combine to present a huge impediment to profitability. While a handful of low-cost airlines have successfully managed to post consistent profits, by and large, profitable airlines are few and far between. Tools for Fundamental Analysis. Financial Ratios. Company Profiles.
Lifestyle Advice. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. Absent of the profit incentive for investing in CS, airline management is more concerned with filling as many seats as possible - and increasing the number of seats per flight by shrinking seat width and legroom to tack on a few extra rows in economy class.
Heck, fuel efficiency in the airline industry is even measured by passenger kilometers per liter, with notoriously no-frills budget carrier Norwegian Airlines ranked first in By contrast, luxury airliner British Airways, famed for its hospitality and generous legroom, ranks least fuel-efficient.
Worse, the study posits that customer acquiescence is the reason airlines get away with CS flubs that would sink any other service industry. Furthermore, customers are often willing to accept vouchers as compensation, thereby opting to fly with the offending airline again - and within a one-year expiration date set by the airline. On the employee-facing side, the notion that CS is insubstantial is drummed into cabin crew by airline management, sometimes on a daily basis.
Furthermore, cabin crew are not paid during boarding, taxiing or disembarkation, nor are they compensated for flight delays, so the disincentive to go above and beyond is rooted in pay structures.
Unlike other industries where the Voice of Customer can make or break a business, customers continue to purchase tickets from airlines that treat them poorly or offer delayed flights.
The sheer complexity of flight logistics and over-congested airports means that airlines can fairly reasonably blame anyone but themselves for delays. Secondly, the industry itself is oligopolist, particularly for US domestic flights where four carriers control over 80 percent of flights.
Third, hierarchical customer segmentation between the highest-value, premium customers and perennial coach fliers who refuse to pay extra for a too-small blanket has mired us in the belief that if we pay less, we deserve sub-par service. Similarly, after the Titanic was deemed sinking, crew members proceeded to allocate seats on an insufficient number of lifeboats to first-class ticket holders ahead of the riffraff.
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