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Introductionto the airline industry

V. Meril

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Definition

Airline Industry is a system of transportation

Part of Aviation industry Moving people and goods Utilizing the airways One of the only true global businesses

Cargo

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Scope

2

Aircraft

Manufacturers

Airport Operations Support Industries

Service Providers

Commercialtransport

General Aviationplanes

Military aircrafts

Runways

Navigationsystems

Fuel Supply

Maintenance

Groundtransportation

Hospitality

Industry

Car Rentals

Travel Agents

FreightForwarders

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Type of airlines

Scheduled (fixed routes and timings) Non-scheduled

Passengers Cargo Passenger & Cargo

Intercontinental International Domestic

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84%

240

188

worlds international traffic

member airlines

countries

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Passenger Travel

Leisure:

Extended period

Recreation purpose

950 million touristsWorldwide (2010)

Contributes to GDP

Creates employment

Corporate:

Short period

Official purpose

Increased profitability

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Cargo

Dangerous

GoodsPerishable

Non

PerishableLive Animals

Passenger

Airlines

Cargo Airlines Super CargoPassenger

Airlines

Air Freight Forwarders

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Economic and Social Impact

2.5 billion passengers worldwide

million Airlines employees5.5

9.5million Airlines Supply Chain employees

18 million indirect Tourism jobs

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History background

1944

ChicagoConvention

onInternational

ivil Aviation

International CivilAviation

Organization

ICAO

1945

International AirTransport

Association

IATAStandards andRecommended

Practices

SARPS

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Freedom of the Air

1: Right to fly across a countrys territory without landing

2: Right to land for non-traffic purposes

3: Right to carry passengers and goods from OWNs country to another

4: Right to carry passengers and goods from another country to one OWNs

5: Right to carry passengers from one OWNs country to a 2ndcountry and to a 3rdcountry

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Freedom of the Air

345

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Business Metrics / KPIs

Revenue Passenger Kilometer

RPK

Measure of passenger traffic

Number of Revenue

Passenger

XKilometers of the segments

e.g:

150 passengers X 7000kilometers= 1,050,000 RPKs

Average Unit Revenue

Measure of yield

Revenue

XRPK

e.g:

117,000 USD / 1,050,000RPKs= 0.16USD/kilometer

Available Seat Kilometer

Measure available capacity

Number of seats

XNumber of kilometers

e.g:

200 seats X 7,000 kilometers=1,400,000 ASKs

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Business Metrics / KPIs

Unit Cost

Measure of profitability

Expenses (COST)

/ASK

e.g:

140,000 $ / 1,400,000ASKs= 0.1$

Passenger Load Factor

Measure of capacity utilization

RPK

/ASK

e.g:

1,050,000 RPKs/1,400,000 ASKs= 75% PLF

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TrafficSegmentation Traffic (RPKs)

Yield

ImprovementPrice

Revenue Management

Revenue

Management

Maximization of Profits

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Main Industry Features

Service

Capital

Intensive

High Cash Flow

Labor Intensive

Thin Profit

Seasonal

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Development of Commercial Airlines

1910s

WW1

1940s

WW2 Deregulation

1970/80s 2000

New Era

Military to Civil

conversion