Summary
This is a summary of the text "Chaos in the skies ? the airline industry pre- and post-9/11", written by Gary J. Stockport. The case study states the difference in the industry before and after 9/11, in terms of demand, cost factors, returns, full service carriers and low cost carriers.
The global airline industry changed rapidly the 11th of September 2001. Four aeroplanes were hijacked and three of them were crashed into the towers of World Trade Center and the Pentagon. The airports across the country closed outgoing traffic and all US and Canadian flights were paralysed. The global industry in fact was affected of this incident, mainly because US accounted for around 40 per cent of the world air travel market. The industry was closed for three days and the total lost was estimated to over US$300m.
The year before the stock market suffered a crisis when the dot-com bubble burst. Now it was the sectors airlines and insurance that dropped with around 50 per cent in theirs share prices. Financial markets around the world were also affected, for example British Airways was down 33 per cent and Swissair more than 40 per cent.
Service is the main object in air travel. It is important to have fully booked flights because the cost to transfer an extra passenger is very low. There have been some structural changes in the industry for the last decades. Better jet engines that make it possible for longer routes and globalisation, deregulation, consolidation and technology improvements are main causes for structural changes.
The demand before 9/11 was very high mainly due to an increase in the number of retirees. Other aspects are the rise of world GDP, increasing world trade and investment and the liberalisation of markets. ...