The Business of Aviation
Most business men/women have heard the
cliché, how do you make a small fortune? Well for the aviation industry, that
saying is incredibly true. New businesses typically open up every day, but how
often do you hear of a new airline opening?
The reason you probably do not hear to
much about airlines opening up is because it does not happen often, due to the
regulations and the ability to adapt to changes. One reason that Delta Airlines
has become such a successful company is because of their size. “Delta serves
people in every continent besides Antarctica” ("Why is Delta
Airlines Successful?") Another airline that has seen great success is
Southwest. Southwest is one of the leading budget carriers, and they have had
their success because of their focus about the customers and employees.
“Southwest offers a bags fly free policy as well as complimentary peanuts”
(El-Erain, 2014). Offering these services to passengers keep the customers
happy and returning for business.
The
aviation industry is an industry that seems to be somewhat unpredictable. It
may seem like an airline is successful, however that airline could become
bankrupt of bought out by another airline in no time. The smaller budget/low
cost carriers are constantly being bought out by larger airlines, and also
changing ownership due to the company going bankrupt. Over the past 12 years,
10 major U.S. airlines have been cut, merged or gone bankrupted, leaving only
four major carriers left (The runway to the final four).
Not
only is the airline industry unpredictable, it also has minimal profit margins,
and those may be part of the reason airlines are not opening up as often as
other business. According to an article from CNN, airlines make less than six
dollars per passenger (Irvine, 2014). When you compare the profit, that the
airline makes, to the price of a ticket, you can see that they do not make
enough money to make a mistake. If an airline makes a decision at the wrong
time, it could become devastating for the company. The aviation industry only
shows 2.4% in their profit margin. In comparison to that, “U.S. private
companies reported an average net profit margin over the past six months of
7.6%” (Harrison, 2013).
There
are ways for the aviation industry to become profitable, however they must be
willing to adapt. If they cannot adapt, it is likely they will either be bought
out, or the airline could become bankrupt. As we have seen, if an airline wants
to stay successful they have to make the right decisions at the correct time,
and they must keep the customers content, and wanting to travel with the company
again.
REFERENCES
Bhaskara, V. (2014, April 22). Southwest Airlines
Opens for Business - Customers. Retrieved March 28, 2015, from
http://www.forbes.com/sites/airchive/2014/04/22/southwest-airlines-opens-for-business-customers/
El-Erain,
M. (2014, June 13). The Secret to Southwest's Success. Retrieved March 31,
2015.
http://www.bloombergview.com/articles/2014-06-13/the-secret-to-southwest-s-success
Harrison, J.D. "U.S. Private Companies
Squeezing More Profit out of Every Dollar Sold." Washington Post.
The Washington Post, 27 Mar. 2013. Web. 30 Mar. 2015.
<http://www.washingtonpost.com/business/on-small-business/us-private-companies-squeezing-more-profit-out-of-every-dollar-sold/2013/03/26/a41c3338-9645-11e2-9e23-09dce87f75a1_story.html>.
Irvine, Dean. "How Airlines Make 'less
than $6 per Passenger' - CNN.com."CNN. Cable News Network, 3 June
2014. Web. 28 Mar. 2015.
<http://www.cnn.com/2014/06/03/travel/how-airlines-make-less-than-6/>.
"The Runway to the Final
Four." CNNMoney. Cable News Network, n.d. Web. 30 Mar. 2015.
http://money.cnn.com/infographic/news/companies/airline-merger/
"Why Is Delta Airlines
Successful?" Delta Success Story. Delta Airlines, n.d. Web. 30
Mar. 2015. <http://www.deltaflights.org/delta-airlines-success.html>.
