Industry Analysis Since the Passage Term Paper

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This is significant, because it shows how in the next three years, the airlines are going to face increasing amounts of competition, in a number of different markets. This is because the industry is targeting the same demographics of business and leisure travelers. As a result, the increased amounts of deregulation, will affect the industry in the future, as increased amounts of competition will more than likely mean lower fares. Yet, some of the traditional services that many customers have become use to such as: in flight meals and curbside check in are being eliminated. This is because most airlines are seeking to lower costs as much as possible, in an effort to remain competitive with the low cost carriers and new airlines that have entered the different markets. (Cento, 2009)

Task Environment

Three different specific factors that could be affecting the airline industry in the future would include: fuel prices, labor costs and new technology. When fuel costs increase dramatically, this can have an impact upon the overall bottom line of many carriers. To protect their earnings in the future, some low cost carriers such as Southwest have begun to use hedging, as way to limit their exposure. This is where they will purchase the futures contracts for oil. If the price of crude increases; these futures contracts can be sold, helping to mitigate the effects of higher fuel prices. (Vasigh, 2008)

Labor costs are one of the biggest factors that will be affecting the airline industry well into the future. This is because the cost of a flight crew and other personnel; will cause fares to increase or decline.

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Within the next three years, you will see the industry continue to place pressure on the unions to maintain this low cost structure, so that the airline can remain competitive in key markets. (Vasigh, 2008)

Technology will create a dramatic change within the airline industry in the future. This is because as the planes will become larger, there are more carriers that will use these planes to transport more people to one destination, as opposed to two or three planes. Over the course of time, these innovations will change the industry, as there are fewer flights from one carrier on busy routes, with larger planes. A good example of this is: how a number of airlines are using the Airbus A380 airplane for international travel. This is the largest commercial airplane produced and has been increasingly used to transport more customers to a single destination, with one plane. (Vasigh, 2008)

Summary

Clearly, in the next three years the airline industry will undergo a major transformation, as deregulation will lead to increasing amounts of competition in number of markets around the world. To remain competitive in under this new business model all carriers must: control fuel costs, labor cost and utilize technology to help reduce costs. As result, this will mean that consumers will see lower fares, with less of the traditional services. For airlines, they must consistently monitor the task environment, to ensure that their costs structures remain low in key markets......

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