Aviation and airline industry is the only web of transportation capable of covering the globe. It is crucial for many aspects as business, economy, tourism, social-culture and integration. Many economists agree on the fact that the manufacturing of the first B747-400 – capable of flying long distances as from Paris to New York – triggered the power of globalization, acting as a catalyst. This is one of the many examples to let understand the significance of aviation in the human history.
The use of commercial aviation has grown majorly over the last few decades and can be segmented as pre- and post-deregulation. The deregulation act caused this industry to evolve into a very competitive and dynamic market, forcing many pre-deregulation airlines to file for bankruptcy.
The International Civil Aviation Organization named the deregulation as the major cause for the airline industry’s growth and structural change by suggesting “The adoption of liberalization measures by States to open up the air transport sector has been a major driving force for structural transformation of the airline industry. The traditional business model of the major network airline has come under scrutiny, particularly for airlines with global reach. The low-cost carrier (LCC) phenomenon continued to expand not only domestically but regionally and even globally.” (ICAO 2009 Annual Report, 16)
The reason for the agile growth in the industry could be based on a number of causes. Firstly the technological advancements in avionics enabled airplanes to be more durable and efficient. This allowed traveling longer distances with lover unit costs. Secondly air transportation became more convenient due to increased safety and flight standards. Also global economics has a very significant effect on air transportation. The rise in the overall disposable income levels caused many people from different areas of the world to travel on airplanes with intentions to explore business and leisure opportunities. The act of deregulation, open-sky agreements, trade unions and specific agreements among governments opened new and unintended markets for airlines. Another reason is that the deregulation also managed to lower airfares by enabling competition in the industry. Customers responded to the overall decrease in ticket price levels by increasing demand for air transportation. We can name globalization among the most significant reason for the increase in air transportation. The effects are reciprocal. Both globalization and air transportation benefited significantly from this process.
The total number of passengers transported by the airline industry in 2009 is a total of 2.280 million. There was also 38 million tonnes of freight carried. There are more than 900 commercial airlines in the sector possessing a total of 22.000 aircrafts, forming the main vein of the aviation industry. This giant structure employs more than 2.1 million people including pilots, technicians, line and staff managers and flight attendants.
I have already shared the airline market structure in my previous posts. I will dig deeper into the airline management issues in the near future.