The US Airline Industry in 2004 Essay Example | Topics and Well Written Essays - 1750 words

The US Airline Industry in 2004 - Essay Example Intestate routes were being admitted and were dispersed to some twenty three airline companies. Also, a promulgated establishment of guidelines of priorities and inter-firm agreements was created. (Anon., n.d.) Pre-Deregulation Era In the succeeding years, an industrial ordeal took place as cost increases on the fares were implemented causing an ossification to the structure of the airline industry. As a result, manifold airlines were not approved to conduct operations between the year 1937 and 1978. Nevertheless, the so-called â€Å"new entrants† have set up themselves as carriers in the local geographical areas in the form of intra-state routes. Due to some oil shocks in the 1970s, an accelerated increase on the ticket prices brought hysterics towards the consumers. The Civil Aeronautics Board decided to impose large increments on fares and a four year frozen activities on some newly acquired routes and delimitation on the capacity of routes. In addition, developing argument s regarding economic liberalism has caused less neither government regulation nor intervention on market practices, and in this case, the US Airline Industry. ... Business Strategies The Hub-and-Spoke System As a matter of discussion and recollection, several changes have been made following the advent of the deregulation in 1978. The hub and spoke system was adapted which has both allowed more efficiency by traveller concentration and facility improvements and maintenance. The Hub and Spoke system is a specialized operation that would limit flights of large carriers to small ports; instead, larger airlines coordinate with smaller airlines to take the flight franchise on smaller airports and smaller towns and cities. Because of this, the erection of international airports has been limited overwhelmingly where in the case of the US, the only international airport that was added is the one in Denver since the deregulation era. The Direct Foreign Investment (FDI) According to (Izquierdo, Ribes and Rodriguez, 2010), in tradition, the theories relating to the internationalization of firms have been based on the behavior of manufacturing industries. However, there has been a marked shift towards the tertiarization of the economy on a global scale and direct foreign investment (FDI) in the service industries amounts to 50 – 60% of all FDI and the share is forecasted to rise further. Internationalisation, Mergers and Acquisitions Most of the world’s airlines, just like some of the US airlines, export their services to other countries. American, Southwest and Delta airways are involving its operation in the international market. Some of these internationalization movements are done in a direct manner but most of the time US Airlines are cooperating with foreign airline companies in a forged agreement. Several major US Airlines merged with international airlines or even acquires some of them with motives of