Air Transportation Nature of the Industry Air travel in the United States grew at a rapid

Air Transportation

Nature of the Industry

Air travel in the United States grew at a rapid pace until 2001, expanding from 172 million passengers in 1970 to nearly 642 million in 2003. However, over the next 3 years, a combination of factors--including the events of September 11, 2001, and an economic recession--combined to reduce traffic to 1996 levels. Nevertheless, air travel remains one of the most popular modes of transportation.

Airlines transport passengers and freight over regularly scheduled routes or on routes. Several classes of airlines function in the United States. As of 2004, there were 15 major airlines---12 passenger and 3 all cargo--which the U.S. Department of Transportation defines as having operating revenues of more than ＄1 billion. The largest of these, often called the Big Six, generally have a hub and also fly internationally. A hub is a centrally located airport designated by an airline to receive a large number of its flights from many locations, and at which passengers can transfer to flights to any of the locations served by the airline system. In this way, the greatest number of passengers, from as many locations as possible, can be served in the most efficient way with a given set of resources.

In competition with the Big Six are low-cost, low-fare carriers. These carriers have traditionally not used hub and spoke systems and have offered flights between limited numbers of cities. They primarily have focused on flying shorter routes (400 miles or less) and on serving leisure travelers. But some low-fare carriers are expanding their routes to include longer transcontinental and nonstop flights. These moves have helped low-fare carriers expand their customer base to include more business travelers.

Another type of passenger airline carrier is the commuter or regional carrier. As of 2004, there were approximately 75 of these carriers. Regional airlines operate short-and medium-haul scheduled airline service connecting smaller communities with larger cities and with hubs. Some of the largest regional carriers are subsidiaries of the major airlines, but most are independently owned, often contracting their services to the majors. The regional airlines fleet consists primarily of smaller 19- to 68-seat turboprop and 40- to 70-seat jet aircraft. The regional airlines are the fastest growing segment of commercial aviation with I out of every 7 domestic airline passengers flying on a regional airline during at least part of his or her trip.

Air cargo is another sector of the airline industry. Cargo can be carried in cargo holds of passenger airlines or on aircraft designed exclusively to carry freight. Cargo carriers in this industry do not provide door-to-door service. Instead, they provide only air transport from an airport near the cargo's origin to an airport near the cargo destination. Companies that provide door-to-door delivery of parcels either across town or across the continent are classified in the couriers and messengers industry.

Most sectors of the airline industry were in a downturn in 2002, with several passenger airlines having declared bankruptcy and others on the verge of doing so. After 6 relatively successful years in the late 1990s, fueled by an increase in passenger volume and a booming economy, the growth in airline passenger traffic began to slow in 2001, coinciding with the economic recession. After the tragic events of September 11, 2001, passenger traffic dropped steeply, causing airlines to cut flights, lay off workers, and park surplus aircraft. Although passenger volume has since recovered somewhat, the growth rate in the industry will likely continue to be depressed for several years.

As the low-fare airlines continue to compete and gain market share over the higher-cost major airlines, and as passenger traffic remains lower, managing costs has become mor

A．Y

B．N

C．NG