Airlines Industry Overview

Excerpt from Airlines Report

Companies in this industry provide scheduled domestic and international passenger transportation, as well as mail and freight transportation. Major US companies include American (owned by AMR), Delta, and United Continental, as well as the air operations of express delivery companies such as FedEx and UPS; outside the US, leading companies include Air France-KLM, Deutsche Lufthansa, Japan Airlines, and Quantas (Australia).

Competitive Landscape

Demand depends highly on the health of the economy, which affects spending on business and leisure air travel. Because many costs are fixed, the profitability of individual companies is determined by efficient operations and on favorable fuel and labor costs. Large companies enjoy economies of scale in purchasing and the ability to provide more extensive services. Small airlines can compete by serving local or regional routes. The US industry is highly concentrated: the eight largest companies account for more than 75 percent of industry revenue.

Products, Operations & Technology

Major services include domestic passenger transportation (about 70 percent of industry revenue) and international passenger transportation (20 percent); mail and freight transportation accounts for most of the remainder. Other revenue comes from providing maintenance, servicing, training, and reservations. Some airlines also offer nonscheduled (charter) flights. Some airlines carry only cargo, using specially equipped planes. Most passenger airlines also provide cargo services.