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POST-9/11 Management OF U.S. AIRLINE INDUSTRY
Strategic Management of the United States
Airline Industry after the 9/11/2001 Terrorist Attacks
Strategic Management of the United States
Airline Industry after the 9/11/2001 Terrorist Attacks
Airlines in the United States have a long, complicated history in terms of management strategy that includes alterations due to technological advances, bankruptcies, economic downturns, deregulation and even presidential intervention, but none of these forces had the power to both destroy and restructure the industry like the events of September 11, 2001.
The 9/11/01 attacks on the United States fundamentally altered the way the U.S. airline industry operated both publically and internally. One area that suffered significantly from these attacks, and brought about the need for major overhaul within the industry itself was strategic management strategies and practices within the airline industry in its entirety. The 9/11 attacks on America brought about the need for immediate change in these strategies, but the turnover from need to application proved rough and unprecedented, and was added to tremendously by the stress of the time at hand. In making the shift in management strategies and practices within the United States airline industry, airlines across the country were fundamentally changed by deregulation, competition, and the ever-lingering aftermath of the September terrorist attacks.
Pre-9/11 Management Strategies and Practices
As it is known throughout the business world, the significance of management strategy revolves around a corporation's ability to survive and grow by responding to environmental changes, and until 9/11, the U.S. airline industry had never seen environmental changes arise so abruptly. Prior to 9/11, airlines were seeing a steady decline in both yields and fares, particularly in early 2001, but had remained optimistic and able to maintain current management practices that had been in place for years (Goldschein, 2011, p.2). Before September 11, problems were beginning to materialize across the board for U.S. airlines. A meltdown began to unfold in the technology sector, and with this came the tightening of business budgets across the country. Business trips were postponed, conferences were cancelled, and passenger traffic began a steady decline (Besant, 2002, p.1). However, despite this decline in traffic and slight decline in revenue, seats were consistently being added to flights across the country in an effort to combat shifts in profit.
Airline giants such as United Airlines and Continental ruled the air in terms of profits and presence, and passengers continually received all the "standard" amenities of flying such as low costs for baggage and complimentary customer service features while in-flight that had remained in place in terms of operational strategy since the inception of air travel itself. Overall, the atmosphere in the United States airline industry in late summer 2001 was becoming one that was considered increasingly problematic despite the optimistic views held by management and staff. Airlines were continuing to spend at a rate that was hopeful of a regeneration of profits, but profits at that time were beginning to look bleak. Internal management within the airline industry began to brace for a continual and steady decline, but what they ultimately received was nearly unimaginable.
9/11 Management Chaos
The events of 9/11 brought swift and steady chaos into the airline industry, and internal management faced the struggles of keeping up with the changing environmental atmosphere within the industry that coincided with the initial impact of the first plane into the World Trade Center. Immediately, management in the U.S. airline industry made the decision to ground all aircrafts across North America, diverting all inbound U.S. traffic to Canada, which remained enacted for the next three days before airports began to reopen and management began to strategize for the airline industry's future operation.
What appeared within the industry was a total collapse in air traffic. For the first sixty days after September 11, scores of flights were cancelled due to lack of willingness of passengers, who were deterred by fears of further terrorist attacks and massive newly-implemented security delays (Besant, 2002, p.2). The few planes that did fly carried with them few passengers, and many advanced bookings were cancelled at a significant and steady rate.
In addition to the aforementioned issues at hand within the industry, management was forced to deal with the presence of insurance underwriters who quickly took the position that terrorist attacks feel outside many standard policies, which raised the prospect that airliners would be grounded due to lack of coverage, as airlines do not put uninsured planes in the air (Besant, 2002, p.2). Soon, pending transactions in terms of new planes and aircraft deliveries to airlines within the United States stood at a standstill, which placed airlines further into what appeared to be a black hole of debt that would certainly cripple the industry in its entirety.
An industry which only days before the attacks was dealing with massive downturns in profits, now had the additional hardship of dealing with massive carrying costs in terms of daily operations, salaries, and newly-implemented security screenings, all of which remained enacted despite the absence of corresponding revenues to finance such proceedings. Further, as airline payrolls represent a massive percentage of expenses, the potential directors' and officers' liabilities that threatened to accrue were overwhelming, often exceeding policy limits and further intensifying the pressures on airline management who were placed on the brink of further disaster (Belobaba, 2002, p.2).
In an industry in which aviation strategic management typically focuses on the scientific improvement of managerial practices in an effort to enhance an airline's financial bottom line, managers, who are depicted as rational actors within the industry found themselves at a crossroads in terms of how to make decisions for the airline industry's greater good in terms of profitability, as in the U.S. airline industry, entities that do not profit, do not survive. In terms of new management that would come into play, the idea of creating strategy that would be considered "a socially valuable technical function, normally acting in the general interest of workers, employers, customers, and citizens alike" became both necessary and exceedingly difficult in a post-9/11 framework (Alvesson and Karreman, 1992, p.1).
September 11, 2001 became the event that would become the proverbial "last straw" in launching the struggling U.S. airline industry -- which had over-expanded and over-spent in a competitive frenzy during the post-deregulation period -- into a full-blown mania (Fraher, 2011, p.14). In this post-9/11 world of industry uncertainty in which bankruptcies, mergers, outsourcing and furloughs, combined with increasing customer fees and decreasing customer service, many issues that arose in terms of management has largely been attributed to what critics argue was a twenty-three-year "incubation period" that began with airline deregulation (Turner, 1976, p.381). Turner is noted as one of the first researchers who evaluated organizational decision-making, noting disasters do not typically occur spontaneously, but instead incubate over a number of years until being ignited by a precipitating event (Fraher, 2011, p. 12).
Researcher and former pilot Amy Fraher notes that this "incubation period" in the U.S. airline industry began with the Airline Deregulation Act of 1978, in which disbanded the government-instituted Civil Aeronautics Board (CAB) and withdrew government control from the industry, which allowed airlines to now compete over routes, schedules, and fares in a free market (Allvine, Dixit, Sheth, and Uslay, 2007, p.10). Since its signing in 1978, the United States airline industry has long struggled to keep up with this new competition, and these struggles continued to be seen by many airlines, who struggled to stay relevant in what Fraher notes as the post-9/11 period originated with managerial decisions made during the first decades of deregulation when intense competition and unparalleled expansion required the extensive purchase of new airplanes and record hiring of employees at industry leading pay rates (Fraher, 2011, p.12).
After 9/11, safety and security regulation responsibilities were given to the newly-created Transportation Security Administration (TSA) which operated under the Department of Homeland Security. This body, which was created just months after 9/11 once again brought a government-sanctioned entity into airports regardless of past deregulation standards. In conjunction, this presence of this government-employed body, in September of 2001, Congress passed the Air Transportation Safety and System Stabilization act, which authorized payments of up to five billion dollars in assistance to reimburse airlines for the post-attack four-day total shutdown of air traffic and attributable losses through the end of 2011 (Cox and Smith, 2005, p.1). It also created and authorized the Air Transportation Stabilization Board (ATSB) to provide up to ten billion dollars in loan guarantees for airlines in need of emergency capital (Cox and Smith, 2005, p.1).
Airline managers had to now deal with the pressures of maintaining their own operational protocols and strategies that had been in operation for decades, adjusting these strategies to fit the post-9/11 landscape, and now allowing the government back into the industry in certain capacities despite deregulation. 9/11 brought with it the capacity for airlines to create the internal restructuring necessary with deregulation, with the additional presence of the government in newly-created aspects of security and national defense.
By the turn of the century, though, these low-costs carriers had become profitable or at least had significantly reduced their losses due in large part to concomitant increases by major carriers that were increasing their prices in response to decreasing yields and higher energy prices (Doganis 2001). By and large, passenger traffic across the board increased significantly prior to September 11, 2001 and all signs indicated it was continue to
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