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The Evolving Airline Industry

The airline industry is facing billion dollar losses and thousands of jobs.  For the week of April 2, 2003 passenger traffic was down 17.4% from the previous year.  Travel overseas suffered even worse with traffic down 25% from that of the previous year.  The war with Iraq and the SARS outbreak are significantly contributing to the decline in passengers.  (See "War Worries, SARS Cut Air Traffic17.4% for Week", U.S. Business News Wall Street Journal).  However, these events might be the essential push the industry needs for hastening its restructuring efforts.  Restructuring the internal operations and basic way of business seems inevitable for the airlines.  The restructuring efforts should include:

1.      Cost Reductions; this should be a method to fundamentally restructure the way business is done internally.

2.      Lowering of Taxes and Fees; the government should assume the monthly aviation security costs, which the airlines are now paying to help with new security programs.

3.      Removal of the security tax placed on tickets, since the events of September 11^th.  Some estimate this to cost the industry $4 billion.

4.      Government should accommodate them by allowing mergers, alliances, and sale of assets among companies to take place.  

This restructure is widespread and controversial.  It will require time and compliance of government and individual firms.  An internal change in the way of doing business is necessary as well as government aid.  The outlook for the industry looks dismal at the moment, but confident management sees the problem subduing with the restructuring measures that will be taken.