The Business of Aviation

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>.