European Airlines Essay

The European air lane labor is facing one of the most ch on the wholeenging environments in its history. A spheric economic recession couplight-emitting diode with the terrorist attacks of September 11, 2001 have led to a decrease in passenger traffic, reduction in tax per mile flown, and rising labor greets. In addition to that, disintegration in pricing power and a shift in the buying manner of trading travelers, coupled with fierce competition from low cost airlines, argon forcing major airlines to restructure their operations or face the prospect of spill out of clientele.The airline industry has responded to this difficult environment by winning measures to reduce their be. conveylines announced layoffs of employees immediately in order to reduce the cost incurred by the airlines. To make matters worse for the industry, it has been predicted that only a gradual retrieval in passenger traffic during the coming years would be seen. The European airline industry went th rough a deregulation process in the late 20th century. Prior to deregulation, almost one third of all passengers did not have a choice of selecting an airline.The growth in the numerate of passengers flying can be attributed to increased competition, innovations in marketing & operations resulting in lower cost of flying, introduction of new services and improvements in service quality. Macro-economic Analysis The industry became a perfect competition grocery store in that no single firm can influence the damage of the product, consumers (for the most part) view the products of all firms as perfect substitutes and consumers give corrupt a product from the firm with the lowest price.In late 1990s, during the technology bubble and the increased globalization of business, the airline industry grew at a rapid pace. However, the industry has suffered quite a few setbacks after experiencing that boom. Pummeled by poor profits and scarred from terrorist attacks against the West, the airline industry finds itself on an doubtful course. In an industry which is already taken over by yob competitions, airlines have tried to breakeven at least to survive the threat of pen up down.Many state administered airlines still operate based on the pacts and treaties gestural by other states to decide the schedule of flights for the respective airline. The European countries, started to home open air treaties as part of the deregulation mechanism creation introduced. To get around national laws and regulatory problems, airlines have formed global alliances such as Star (United Airlines and Lufthansa), Oneworld (American Airlines, British Airways, etc. ), and SkyTeam (Delta Air Lines, Air France, and AeroMexico).Through such alliances, airlines benefit from each others resources, which allow in additional routes and marketing strategies as well as code-sharing agreements, without incurring the naughty costs of expansion. The costs involved with increased security precau tions and route changes will force the airlines to examine their agreements and consider expansions of the same. For customers, airline alliances offer broader frequent beak programs, streamlined travel, and simplified systems for purchasing tickets, but those benefits may do dwarfish to allay passenger concerns regarding safety.Advances in communication technology have withal played a role in the airline industrys recent troubles. Advances such as video conferencing, net chat and internet telephones allow firms to conduct business without having their executives get on the plane and rag their customers site. Further, coast to coast business class consequence has become history. Businesses are currently focusing on cutting costs and reducing overheads. While the volume of passengers getting on the planes is slowly increasing, in that location is no significant increase in people traveling business class or first class, which is a key component in any airlines profit margins.A ccording to a study business travel volume in the EU fell by nearly 6% in 2008. More and more passengers continue to witness at offers from airlines in form of packages and cheap fares. Nearly 80% of business travelers are stating that their company has implemented travel policies that, among other things, place restrictions on the class of air service. The results have left airlines struggling to come up with ways of attracting more premium passengers. Due to the rise in terrorist attacks and exasperation in an existing trend of decreased demand and reduced industry revenues.The impact of the global war against terrorism was so huge on the industry that the governments had to intervene in order to support the industry to energize it. Although passenger volumes have shown signs of improvement, they remain low and as a result, some(prenominal) airlines are facing severe economic difficulties. Reacting to a drop in the number of passengers and rising costs for security, airlines have laid off cater and trimmed services in effort to keep flying.