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The Airline Industry: Leading Companies

Introduction

In the United States, the airline industry provides transportation services for freights or passengers. To deliver these services, an airline company leases or owns an aircraft, and sometimes they can combine their services with another airline for mutual benefits. Airlines are identified or recognised by the government after they have been issued with a license by the aviation committee. The firms offer different services; for example, a company might operate a single aircraft that delivers mail or cargo worldwide. Alternatively, others offer full benefits, and they provide service internationally using different aircraft. Classification of aircraft follows the services offered which can be regional, domestic, intercontinental, intra-continental, or international.

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Explanation of Industry and Companies Within It

In the United States, airlines are highly leveraged because they are compelled to lease, buy engines or new aircraft regularly. The management must maintain the fleet to meet the market demand while operating planes to ensure they remain economical in the industry (Blocker et al. 34). There are associated costs which must be considered to continue offering quality services. The cost of operating an airline includes aviation insurance, labor, IT services, spare parts, handling services, fuel, catering, sales distribution, training, and aviating insurance, among others (Blocker et al. 37). Airlines are required to uphold all regulations which control their operations. Some of the US airline companies include Southwest Airlines, United Airlines, JetBlue, and Alaska Airlines, among others.

Brief History of Airline Industries and Companies Investigated

The U.S. airlines were established and reared during subsidy and regulation. The Post Office began delivering mails using the U.S. army pilots and aircraft in 1918. Hence, since its birth in 1903, airlines have evolved to be the most reliable means of transport of products and people. United Airlines was started in 1916 by William Boeing, and it was known as Boeing Airplane Company (Blocker et al. 34). By 1919, the company had achieved its international postal delivery, and they went ahead and established United Aircraft Corp. in 1928. Southwest Airline was established in 1966 by Rollin King and Herbert Kelleher. The airline was incorporated as a Southwest Company in 1975. The company began its operations to additional cities within Texas, and it expanded its functions to adjustment states in 1979.

Type of Products Provided by the Company and Type of Customers

Southwest Airlines provide different types of products and services, which improves the customer’s experience. Examples of products and services include entertainment, community coffee, mobile, express bad drop, and business select and earlybird check-ins (Asahi and Murakami 89). The company has a broad customer base in the industry because it provides low-cost airlines. Products and services offered by United Airlines include gift registry, gift certificates, priority boarding travel services, united airlines credit cards, and premier access travel services (Joshi 54). United Airlines have nine different types of customers: global executives, schedule optimizers, corporate troopers, mile accumulators, reluctant travelers, the tour takes, travel seekers, quality vacationers, and frugal flyers.

How Industry and the Decision Have a Bearing on the Lives of Americans

The airline industry has a bearing on Americans’ lives in terms of the decisions made, which have economic and social impact. The airline industry is the most reliable means of transport, which helps global business and tourism to thrive (Blocker et al. 34). Therefore, it plays a considerable role in stimulating economic growth in the U.S. The industry also has a social impact on Americans’ lives because it provides leisure and cultural experiences to the people. The Americans are provided with a wide choice of holiday destinations worldwide, which allows them to visit friends and relatives living in distant places.

Form of Competition Found in Airline Industry

In the United States, the form of competition is known as an oligopoly. In such a market, the industry is controlled by a small group of firms because entry barriers are significant enough to prevent a potential competitor from entering the market. By 2019, in the U.S., there are four major domestic airlines, which include United Airlines Holdings, Southwest Airlines, Delta Airlines Lines, and American Airlines (Blocker et al. 34). It implies the actions of one company can considerably influence the function of other firms. Government plays a role, and they can discourage or encourage oligopolistic behavior in an industry. Hence, the standard form of competition in the airline industry in the U.S. is an oligopoly.

Mission and Vision of Each Company

The mission statement of United Airlines focuses on developing an inclusive environment associated with dignity and respect that plays a role in empowering employees to enable them to serve in a global marketplace (Joshi 54). The company’s vision is to embrace diversity, which allows them to serve customers from different backgrounds. The vision of Southwest Airlines is to become the most efficient, reliable, loved, and most profitable airline (Asahi and Murakami 89). The company’s vision is defined by three factors: being a strong brand valued and preferred airlines and attaining high profitability. The mission of Southwest Airline aims at attracting and mating clients by offering quality services and experiences.

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Fiscal Year Sales, Expenses, and Net Profit of the Companies Compared with the Figures of Whole Industry

Company Net profit Expenses Sales
Southwest Airlines In the year 2019 southwest airline made a net profit of $2.3 billion. The expenses were $19.5 billion. Not available
United Airlines In 2019, united airline made a profit of $641 million. The annual expense were $39 billon The sales were $43.26 billion
Airline Industry Net profit of U.S airline industry made $28 billion. The expense of airline industry was $795 billion The sales was $247.64 billion

Price per Share of Common Stock of Each Company

The price per share of common stock of Southwest Airlines is $46.81; alternatively, for United Airlines, it is $40.93 (Asahi and Murakami 90; Joshi 54). From the comparison above, it is evident that buying stock from Southwest airlines is profitable compared to United airline. Southwest Airlines offers a high price for the stock compared with the United Airline.

Three Finical Ratio of Each Company Compared With the Industry

Company Debt ratio Debt/equity ratio Current ratio
Southwest Airlines 0.68 1.94 0.77
United Airlines 0.61 1.71 0.55
Airline Industry 1.00 negative equity 0.45

The current ratio implies that the company is better positioned to meet its short-term debt obligation, which is calculated by dividing current assets with current liabilities. The current ratio of the airline industry is low compared with the individual companies. The airline industry has more debts than assets compared with the companies. The airline industry has negative equity, implying that it takes additional debt to cover losses rather than shareholder equity. Government regulations also have an impact on the operation of the company resulting in poor performance.

Types of Jobs in the Industry and Type of Training Needed

There are several types of jobs in the airline industry, which require a high level of training. Some of these jobs include pilot, air traffic controller, aircraft mechanic, airport manager, transport security screener, airfield operation specialist, and aeronautical engineer (Blocker et al. 35). A pilot requires a bachelor’s degree in aeronautical engineering, aircraft operations, and aviation. An air traffic controller must have a bachelor’s degree and three years of progressive work experience. An aircraft mechanic must have obtained 18 months of training and practical experience in airframe and power plants (Blocker et al. 36). For a person to become an airport manager one needs to have a bachelor’s degree in aviation or a related field.

Conclusion

The airline industry plays an essential role in the United States economy because it creates employment for many people and generates revenues for the government through taxation. Different airlines positioned themselves differently in the market since they offer varied services and products. The airline industry in the U.S. is an oligopoly since four major airline companies control it. The management of airlines must maintain the fleet to meet the market demand while operating planes to ensure they remain economical in the industry. Airline industry also has a social impact in the U.S because it facilitates connection between families who stay far away from each other. The mission and vision statement of Southwest airline and United Airlines provides a roadmap of what the companies aim to achieve.

Works Cited

Asahi, Ryota, and Hideki Murakami. “Effects of Southwest Airlines’ Entry and Airport Dominance.” Journal of Air Transport Management vol. 64, 2017, pp. 86-90.

Blocker, Kaetlyn, et al. “Quality Analysis of United States Commercial Air Carriers: Airline Quality Rating 2019.” Web.

Joshi, Swapn. Aspect Based Sentiment Analysis for United States of America Airlines. 2017. Master’s thesis, Dublin, National College of Ireland. Web.

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