Challenges of the 21st Century in Aviation Management and the Forces of Change Research Paper
- Length: 12 pages
- Sources: 12
- Subject: Transportation
- Type: Research Paper
- Paper: #31845532
Excerpt from Research Paper :
Aviation Management is a complex issue in any environment. In the 21st century environment Aviation Management faces many challenges. These challenges are related to Globalization, Challenges specific to legacy airlines, Air Traffic control shortages and Ethics including the impact of greenhouse gas emmissions. The purpose of this discussion is to examine the Challenges of the 21st century in Aviation Management and the forces of change.
Challenges for Legacy airlines
Like any industry, aviation is effected by the issue of globalization and the manner in which it has altered how and when people travel. Globalization has also meant the development of many new airlines in various areas of the world. These new airlines create a great deal of competition for legacy airlines. In fact the United States Governmental Accounting office reports that
"U.S. airlines, particularly legacy airlines, have faced an unprecedented set of challenges since 1998. These challenges were both internal factors that are reshaping the airline industry and external events that sharply reduced the demand for air travel. Within the airline industry, even before the events of September 11, the growth of the Internet as a means to sell and distribute tickets, the growth of low cost airlines as a powerful marketforce, and the shifting role of regional airlines were all transforming the Industry ("Commercial Aviation," 2004)."
As a result of these internal and external forces the manner in which these airlines are managed must change so that they can compete with newer airlines. In addition the new ways in which tickets can be sold through 24-hour- reservations and communications has also transformed the industry forever and presents challenges for aviation management. The ability of customers to compare prices amongst airlines instantaneously gives them a certain advantage that was not possible prior to the 21st century. There are many travel websites that do all the comparisons for customers at no charge and allow them to book a flight instantaneously. This change in the way that tickets are purchased causes changes in aviation management that require careful study of price points and demand for certain destinations. The onslaught of information available to consumers has completely changed the airline industry and the nature of aviation management.
One of the major internal issues is the presence of aging fleets amongst the legacy airlines. Many of the newer carriers have emerged with some of the newest aircraft currently available. These aircraft are sleek and contain many of the features that consumers expect when flying including larger seats with more leg room and in-seat internet access and entertainment. Managers have to adjust to this new competition which may mean retiring some of the aircraft in their fleets to make room for aircraft that is more efficient and competitive.
In addition to competition a major issue that the airlines face is a decline in profitability. The GAO also explains that
"Since 2000, legacy airlines financial performance has deteriorated significantly, while low cost airlines have used their comparative cost advantage to expand their market share. Low cost airlines maintained their unit cost advantage over legacy airlines between 2000 and 2003, despite concerted cost cutting efforts by legacy airlines. For several of the legacy airlines, their weakened financial condition combined with significant future financial obligations makes their recovery uncertain."
The GAO further articulates the difference in unit costs between legacy airlines and low cost airlines. In 2003 the low cost carriers paid nearly 6 cents less per 3000 flights then did the low cost carriers. This means that the low costs carriers are spending much less per available seat mile than their legacy counterparts. This cost savings translates to better profit margins for the low cost carriers.
Mergers and Alliances amongst Legacy airlines
Through the world there have been many alliances and mergers amongst various airline companies have altered the way the entire industry operates and functions. A great deal of these alliances and mergers have been created as a result of globalization. According to latrou & Mason (2009)
"Global alliances have developed in response to the economic demand of global markets and to the opportunities provided by deregulation and liberalization initiatives. These cooperative agreements initially took the form of simple code share agreements; but as deregulation started to take effect in the European Union and a Single Internal European Aviation Market was created and as the U.S. authorities pursued more "open" and less restrictive bilateral air services with other countries, the horizontal links between carriers took the form of deeper and more complex cooperation (latrou & Mason 2009)."
Some have insisted that airline alliances are simply a second best solution. European airlines though do believe that alliances are a transitional stage that will lead to mergers in the future (latrou, 2004). The only viable alternative, because had it not been for the regulatory constraints which make a carrier's traffic rights dependent on the nationality of its ownership, airlines would have moved to mergers which seem to hold the promise of efficiencies, synergies, cost reductions, scale benefits and better control over operations.
Recommendations for Legacy Airlines facing the challenges of Globalization
The main recommendation is to develop management strategies that are consistent with the changes that are occurring in the context of aviation. There must be a concerted effort to reduce costs in a manner that allows for growth while still remaining competitive.
In addition legacy airlines must also examine their fleets and devise ways to retire aircraft that no longer meets the needs of passengers. This means the purchasing of aircraft that has the amenities that are consistent with what newer airlines are offering. This is vitally important of the legacy airlines want to have the ability to compete with the low cost airlines in the future. Additionally, some managers may need to offer additional terminal services while customers are still at the airport. These services also give airlines certain competitive advantages. When certain services are provided complimentary with the purchase of a ticket, the customer's value is increased. Consumers are more likely to continue to purchase tickets from companies that offer them services that they can utilize.
Alliances and mergers have been utilized as a way to deal with the complications that come as a result of globalization. Such alliances and mergers have the potential to be both beneficial and detrimental to airlines. On the negative end of the spectrum mergers can occur to the point that they form extremely large airlines and many problems can occur as a result of such mergers. Amongst the problems is an increase in the lack of competition. When there is a lack of competition consumers do not have choices when it comes to airline travel and service often deteriorates
On the other hand alliances and mergers can be beneficial to both the airline companies and consumers. Alliances and mergers allow the airline companies to combine their resources and know-how to create a new entity. When properly managed such alliances and mergers result in the development of airlines that are more efficient and are able to considerably reduce costs. As it pertains to aviation management there must be a concerted effort to properly exploit all of the resources that are made available through an alliance or merger. Failure to do so can result in a merger that is unsuccessful, which may result in the collapse of an airline.
Overall legacy airlines have to learn how to adjust to the impact caused by globalization. Without such adjustments many airlines will continue to lose profits well into the future. Those responsible for aviation management must understand the aforementioned issues that exist as a result of globalization so that the proper strategies can be implemented that will ensure the success of companies in the airline industry.
Route development is also a major issue for aviation management. Airlines cannot function efficiently when route development is reduced or not properly organized. According to Strickland (2010)
"Numerous airports around the world have been exposed to serious loss or reduction in traffic due to the failure of, or change of network route strategy by, key airline customers. The difficulties with which airports are confronted can be illustrated by way of a number of examples. The UK's London Stansted Airport has seen conscious reductions in capacity by key low-cost carrier (LCC) clients Ryanair and easyJet. London Gatwick Airport saw an exodus of legacy carrier capacity to the U.S. market once the first-stage Europe- U.S. Open Skies agreement was concluded in 2008; it was also exposed following them collapse of large UK charter carrier XL Airways in the autumn of the same year. Over a two-year period it lost almost 3 million passengers, amounting to 8% of its total traffic . Italy's Milan Malpensa Airport suffered a much more dramatic decline in traffic when its main legacy carrier customer, Alitalia (Strickland 2010, 108-109)."
Reduction in traffic caused by route changes can have a negative impact on airlines because it reduces the number of passengers per flight. For instance, airplanes that used to be filled to capacity…