A 

Abortion
Accounting
Advertising
Africa
African-American Studies
Aging
Agriculture
American Indian Studies
Anthropology
Archaeology
Architecture
Argumentative
Art: Artists (Alphabetized)
Art: General
Become an Affiliate and Earn $$$
Biographies (Alphabetized)
Book Reviews (Non-Fiction) (Alphabetized)
Business: Companies (Alphabetized)
Business: General
Business: Industries (Alphabetized)
Business: International
Business: Small
California
Canada
Caribbean
Child Abuse
China
Communication: Journalism
Communication: Language & Speech
Communication: Media
Communication: Non-Verbal
Communication: Television
Communication: Television & Children
Communism
Computer Science
Consumerism
Criminal Justice: General
Criminal Justice: Juvenile Delinquency
Criminal Justice: Police Science
Criminal Justice: Prisons
Cuba
Death & Dying: Euthanasia
Death & Dying: General
Death & Dying: Suicide
Drama: American
Drama: English
Drama: World
Drugs: Alcohol
Drugs: General
Economics: Banking
Economics: Economists (Alphabetized)
Economics: General
Economics: Inflation
Economics: International Trade
Economics: Macroeconomics
Economics: Microeconomics
Economics: Taxation
Education: Administration
Education: Curriculum
Education: General
Education: Higher
Education: Physical
Education: Psychology
Education: Reading
Education: Special
Education: Teaching Methods
Education: Theory
Energy: General
Energy: Nuclear
Energy: Solar
Environmental Studies
Evolution
Family & Marriage
Films: Artists (Alphabetized)
Films: General
Finance: Companies (Alphabetized)
Finance: General
Former Soviet Union: Post-1990
France
Gender & Sexuality
Geography
Germany
History: Ancient Greek & Roman
History: European
History: Great Britain
History: U.S. (After 1865)
History: U.S. (Before 1865)
History: U.S. Presidency
History: U.S. Presidents (Alphabetized)
Homosexuality
Immigration
India
Indonesia
International Relations: Arms Control
International Relations: Cold War
International Relations: Non-U.S.
International Relations: U.S.
Japan
Jewish Studies
Korea
Labor
Latin America
Law: Business
Law: Capital Punishment
Law: General
Law: International & Non-U.S.
Law: Supreme Court
Leadership
Literature, American: Authors (Alphabetized)
Literature, American: Faulkner
Literature, American: Fitzgerald
Literature, American: General
Literature, American: Hawthorne
Literature, American: Hemingway
Literature, American: Melville
Literature, American: Poe
Literature, American: Steinbeck
Literature, American: Twain
Literature, English: Authors (Alphabetized)
Literature, English: Chaucer
Literature, English: Conrad
Literature, English: Dickens
Literature, English: General
Literature, English: Joyce
Literature, English: Lawrence
Literature, English: Shakespeare
Literature, English: Swift
Literature, General: Children
Literature, General: Classic (Greek & Roman)
Literature, General: Russian
Literature, General: World
Management: General
Management: Japanese
Management: Motivation
Management: Theory
Management: Women
Marketing: Companies (Alphabetized)
Marketing: General
Marketing: Plans
Mathematics
Medical: Aids
Medical: Dentistry
Medical: Diseases & Disorders (Alphabetized)
Medical: General
Medical: Nursing
Mexican-American Studies
Mexico
Middle East: Egypt
Middle East: General
Middle East: O.P.E.C.
Military
Music: Classical
Music: General
Mythology
Nutrition
Parapsychology/Occult
Philosophy: Ancient Greek
Philosophy: Descartes
Philosophy: Eastern
Philosophy: General
Philosophy: Kant
Philosophy: Sartre
Poetry: American
Poetry: English
Poetry: Milton
Poetry: World
Political Science: Elections & Campaigns
Political Science: Foreign
Political Science: Lobbyists & Pressure Groups
Political Science: Machiavelli
Political Science: Mill
Political Science: Political Theory
Political Science: U.S.
Psychology: Behaviorism
Psychology: Child & Adolescent
Psychology: Disorders
Psychology: Dreams
Psychology: Experimental
Psychology: Freud
Psychology: General
Psychology: Jung
Psychology: Physiology
Psychology: Piaget
Psychology: Rogers
Psychology: Social
Psychology: Testing
Psychology: Therapies
Public Administration: General
Public Administration: Government Agencies (Alphabetized)
Racism
Real Estate
Recreation & Leisure
Religion: Eastern
Religion: General
Religion: Islam
Religion: The Bible
Research: Completed Studies (With Statistics & Results)
Research: Designs & Proposals
Research: Statistics & Methodology
Russia: Pre-1917 Revolution
Science: Astronomy
Science: Biology
Science: General
Science: Genetics
Sociology: Durkheim
Sociology: General
Sociology: Marx
Sociology: Social Problems
Sociology: Social Theory
Sociology: Social Welfare
Sociology: Weber
Soviet Union: 1917-1990
Sports: Drugs
Sports: General
Technology
Transportation: Automotive
Transportation: Aviation
Transportation: General
Transportation: Railroads
Urban Studies
Vietnam
Women Studies
 

AIR TRANSPORT INDUSTRY.   Term Paper ID:23788 Click to get this paper

Essay Subject: Industry overview, deregulation, case studies of ValuJet & Southwest Airlines, successes & problems, economics, future. Tables. Table of Contents.... More...

8 Pages / 1800 Words 10 sources, 11 Citations, APA Format $32.00 Return to List of Papers

Paper Abstract: Industry overview, deregulation, case studies of ValuJet & Southwest Airlines, successes & problems, economics, future. Tables. Table of Contents. Paper Introduction: Table of Contents Table of Contents  Executive Summary  Introduction  The Air Transport Industry  ValuJet  Southwest Airlines  Outlook for ValuJet  Outlook for Southwest Airlines  Investment Recommendation  References  Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Since the company's ability to enter newmarkets is determined in part by the size of its fleet, and since thecompany is committed to staying with the homogenous fleet of 737s, it runsthe risk of ending up with a large number of older aircraft that it nolonger needed (depending on the market), or that do not meet newenvironmental standards. Kripalani, M. Introduction The airline industry has been subject to intense price competitionsince it was deregulated, and the result has been a number of new aircarries which specialize in regional service and no-frills operations.These carriers typically purchase older aircraft (which are less expensivethan ordering new aircraft) and often operate outside the industry-widecomputerized reservations system. "Southwest Airlines." Value LineInvestment Survey, p. The company's strategy is to make up thedifference of lower revenue with increased demand through its lower fares(Thorpe, 1996, p. Regulated until 1978,airlines created differentiated service in the form of first class andeconomy seats so that consumers on the same aircraft were likely to havepaid very different prices for the trip. V. Investment Recommendation Of these two airlines, Southwest is clearly the better investment forlong-term performance and for those investors who are risk averse.Investors who might anticipate a takeover at ValuJet should also considerthe financial ramifications of the many lawsuits being brought against thecompany, and are better advised to find alternative investment vehicles fortheir funds. (1992, May 25). "Prepare for Turbulence." FinancialWorld, pp. Southwest's success gave rise to a new generation of low fareairlines, with ValuJet entering the market in the early 199 s.Unfortunately, ValuJet suffered a string of accidents which culminated inthe complete loss of Flight 592 in May 1996, bringing the future of thislow fare carrier into question. 28-3 . The airline industry was characterizedby giants (American, United, TWA) which offered nationwide and someinternational service, and by regional carriers, such as Southwest, whichoffered short trips between airports not served by the nationals. "The 'Safety Wall.'" WallStreet Journal, pp. For example, Southwest gets 672 hours per year on averagefrom pilots versus 371 for American Airlines pilots, and 6 percent morepassenger miles per flight attendant (Levinson, 1993, p. A1, A6. In its targetmarkets, Southwest has positioned itself to even compete favorably withtraveling by car (Thorpe, 1996, p. WhenValuJet began flying again, it did so with a reduced schedule, and there isconsiderable speculation about whether the company will be able to continueoperations long-term. Perhaps due to overexpansion or perhaps due to poor luck, ValuJetexperienced a series of mishaps in its short history. Table of Contents Table of Contents 1 Executive Summary 2 Introduction 3 The Air Transport Industry 3 ValuJet 4 Southwest Airlines 5 Outlook for ValuJet 8 Outlook for Southwest Airlines 8 Investment Recommendation 8 References 1 Executive Summary The air transport industry is highly competitive and characterized bylarge national airlines (such as American and United) which compete withsmaller regional airlines (such as Southwest). R. From an investment standpoint, Southwest is the wiser investment,although those investors who may consider ValuJet a takeover target (andwho have high risk tolerances) might consider this a highly speculativestock. In exchange for these inconveniences,passengers receive low fares relative to the industry as a whole. The company is also involved in litigation resultingfrom the crash, and the long-term prospects for the company arequestionable. As of the beginning of 1992, the companyhad done this with more than half of the Boeing 737-2 aircraft that itoperated (Brown, 1992, p. A6). It serves 31 cities in its service region, and 19states. Based in Atlanta, the airline serves the SoutheasternUnited States and competes with Continental Airlines as well as with otherregional carriers. Cole, J., & Pasztor, A. It has one of the youngestfleets in the industry (6.9 years compared with an industry average of 12.9in 1992), and the best on-time and baggage handling records in 1992 (Gold,1993, p. In January 1994, aDC-9 skidded off a runway in Washington which resulted in the entireairport being shut down. The stock, which had two two-for-one splits in 1995 andwhich peaked at more than 3 dollars per share in late 1995, has plummetedto below $12 per share in late 1996. Levinson, M. The following chart identifies key operatingstatistics for Southwest (seat miles are in billions, cost factors are incents) (Klein, 1996, p. (1993, August 2). "Death in the Everglades." Time, p. Instead, airlineswould compete on service and image. 7 |7. 29). 34). 251. 2 77):| |1995 |1994 |1993 ||Revenue Passenger Miles (RPM) |23.33 |21.61 |18.83 ||Available Seat Miles (ASM) |36.18 |32.12 |27.51 ||Load Factor |64.5% |67.3% |68.4% ||Revenue per RPM |11.83 |11.56 |11.77 ||Cost per ASM |7. (1996, May 2 ). Sanborn, S. The reinstatement of the federal excise tax is notexpected to have a negative effect on Southwest demand since it hasindicated it will increase fares in only 2 percent of its markets, butthis will affect profitability. These figuresenabled the company to realize profits during years in which the industryas a whole was suffering. The industry was deregulated in 1978, with the result that companiesno longer competed so much on service as on price. Gold, J. However, the company announced that it was slowing theexpansion of its services, voluntarily, at the same time that it postedthis impressive revenue mark (Cole & Pasztor, 1996, p. 2 . % |69.7% ||Revenue per RPM |13.4 |13.8 |13.1 ||Cost per ASM |6.8 |6.8 |9.8 | Southwest Airlines Because Southwest's flights are generally an hour or less in length,the airline saves money by not having to serve meals. ValuJet ValuJet is a low-priced airline that offers inexpensive tickets forregional travel. The litigation in which ValuJet is involved as a result of Flight592 is likely to make the likelihood of any takeover attempt remote. Additional incidents, including one where the landing gearcollapsed after a particularly forceful landing, led the FAA to begin anintense review of ValuJet in February 1996. 8 |7.25 | In addition, the company has a 7 percent average load factor in anindustry that averages 63 percent, and operating costs per passenger mileare 22 percent less than the industry average. Outlook for Southwest Airlines The outlook for Southwest is considerably brighter than for ValuJet.The company has one of the highest safety records in the industry, and thecompany has also benefited from higher ticket prices and increasedpassenger traffic. 262). It has a liberalwork rule arrangement with its unions, so productivity is high, and overallcosts are low. 262). (1993, October 12). Each of these factors contributes to the company's financialand marketing success. (1992, September 14). Under the program, Southwest sells some of its older 737s, thenleases them back for its own use. At the same time, the company can modify itsremaining 737-2 s in order to make them compatible with noise andpollution regulations if it needs the capacity. The Air Transport Industry Until 1978, air transport rates were approved by the government, whichmeant that price was not a primary competitive factor. Larson, E. However,the company's aging aircraft fleet would not be an asset to most carriers,and it is unclear whether stockholders would realize a reasonable profit,even at today's low prices. This review found that ValuJetwas in compliance with the FAA regulations, but cited concern about pilottraining and aircraft maintenance (Larson, 1996, p. Companies such asSouthwest recognized potential for low fares, and began building a nichefor themselves by offering low fares with commensurably low levels ofservice. The following chart identifies key operating statistics for Southwest(seat miles are in millions, cost factors are in cents) (Shammas, 1996, p.5541P):| |1995 |1994 |1993 ||Revenue Passenger Miles (RPM) |2,624 |941 |44 ||Available Seat Miles (ASM) |3,813 |1,471 |63 ||Load Factor |68.8% |64. "Something Novel in the Air."Newsweek, p. The no-frills strategy paid off for the fledgling airline, whichposted half again as many revenue passenger miles in April 1996 as it didin April 1995. Outlook for ValuJet The crash of Flight 592 has brought increased scrutiny to ValuJet (andto low-fare carriers in general), and the long-term effect on ValuJet isnot yet known. Florida has been one of the airline's staple destinations; theairline began its service with flights to Tampa and Orlando from Atlanta in1993. In June 1995, a ValuJet flight went through anemergency evacuation after an engine failed and shrapnel flew into thecabin. "Southwest Airlines Co." Standard& Poor's NYSE Stock Reports, p. In May 1996, ValuJet Flight 592 crashed in the Everglades, killing allaboard and resulting in a shutdown of the carrier for several months. This program enables the company to releaseaircraft that it no longer needs or that no longer meet the stringent newenvironmental standards. (1996, September 2 ). (1996, September 2 ). "Air Transport Industry." ValueLine Investment Survey, p. Klein, S. Despite its no-frills orientation, the company maintainsstrong customer satisfaction and high levels of customer service,encouraging repeat business. "ValuJet." Standard & Poor's NasdaqStock Reports, p. (1996, June 26). The deregulation of 1978 introduced a situation in which the nationaland regional carriers were suddenly able to compete in an environment thatresembled a free market. 57). (1996, September 9). (1996, May 13). When the airline enters a new market, such asBaltimore, its fares are as much as 85 percent less than those of itshigher-priced competitors, attracting passengers quickly and forcing thecompetition to either match the price or lose market share. S. A. Shammas, J. The main factors thataffected whether an airline could serve a particular city was whether ornot that city had enough gates for the new carrier, and whether the carrierwas able to afford to purchase them. 2 77. References Brown, D. Investors with a high tolerance ofrisk might consider the stock at this low level, and the company might be atakeover target in the future as other carriers seek its routes. For example, the company has traditionally expanded its 737 fleet byadding older aircraft available at discounts (sometimes as much as 3 percent) (Kripalani, 1992, p. Southwest solved this problem by beginning a lease-back program in1988. "Shrewd Capital Planning AllowsSouthwest to Outperform Competition." Aviation Week & Space Technology, pp.56-57. 34. The company's stock has spilt three times since 199 (three-for-twosplits in 199 and 1993 along with a two-for-one split in 1992), and itsprice-earnings ratio is a healthy 13.1 percent. 3 . Thisresearch examines two low fare air carriers, ValuJet and SouthwestAirlines, and considers them from the standpoint of potential investments. "Nosedive." Forbes, p. 5541P. Rate schedules were lifted, price fixing waseliminated and route management was removed. 3 ). 262. 2 ). 251), and thecompany's commitment to low fares and its safety record should help itmaintain good performance even in light of the ValuJet crash (which broughtincreased attention to all low fare carriers). Its load factor is wellwithin the industry norm of 67 percent (Sanborn, 1996, p. Southwest's success has not been without problems, and the company hasagain demonstrated an ability to find creative solutions to those problems. Southwest's success has come about because it is providing a productthat the market wants, no-frills regional air travel, at a price that isattractive. Thorpe, W. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.