All This, Despite 'Being Central to Globalization'

Recent analysis of the airline industry raises some intriguing, yet troubling issues. A recent report suggests that, "Air travel remains an extensive and growing industry that facilitates tourism, international investment, world trade and economic growth.

Central to the globalization occurring in other industries, air travel remains a very restricted industry. Business travel has grown over the last decade as companies become increasingly international in their investments, supply and production chains, and customers. The rapid growth in international direct investment has also contributed to a rise in business travel."  

The analysis, from a report by Frost & Sullivan, entitled 'Merging Air Transport Market Dynamics,' finds that airlines earn revenue by transporting cargo, selling frequent flyer miles to other companies, fuel surcharges, baggage fees, and up-selling in-flight services. The largest proportion of the industries generated revenue derives from regular and business passengers. This research covers market segments by the geographic regions of Europe, Latin America, Russia, North America, Africa, Middle East and the Asia Pacific.

"The airline industry is the most global business, while being the most restricted industry," says Frost & Sullivan Industry Analyst Nathan K. Smith. "Some regulation of the industry is likely and essential if governments continue restricting the global airline industry from the freedom allowed to other industries." Customers have fewer issues about their flag carrier. Instead, they are more concerned about the service quality and value provided.

Airline profitability is closely tied to economic growth and trade. The economic slump in the United States and the weaker global economy has led to low passenger demand and cargo growth. Labor, one of the airline industry's biggest adversaries, is putting pressure on the industry for unacceptably high wages and benefits. Further, the U.S. government has and continues to react too slowly to resolving the air traffic congestion and security issues that confront it. To ensure airport, airline and passenger safety, governments monitor threats and seek continual improvements in screening, surveillance, perimeter and access control.

"Airport security is a major concern for airlines, airports and governments," concludes Smith. "Innovative technologies and solutions are creating effective options for increased security and cost efficiency, thereby driving the market."

FMI: www.frost.com