Out Of Control Operating Costs
Out of Control Operating Costs
and the Major Airlines
BY
Abstract
Out of control operating costs is one reason that the major airlines today are having the financial difficulties they do. The industry has changed dramatically in the last few years, and those that don?t change with it will not survive. The lower cost airlines seem to have captured the changing market and been able to benefit during the evolution. Many reasons are to blame for the majors being on the loosing end of the stick, but in this paper I will only discuss a few of the most important ones.
The airline industry today faces more financial problems than ever before. Since 2001, the U.S. airline industry has confronted financial losses of previously unseen proportions. From 2001 to 2003, the industry lost $23 billion, and two of the nation?s biggest airlines have gone into bankruptcy. In the first quarter of 2004, only two of the seven major airlines, American and Southwest, made profits (Bond 2004). In addition to rising fuel and equipment costs, fares have stayed extremely low because of fierce competition with low cost carriers. US Airways, the seventh largest carrier, based out of Charlotte, NC seems to have the
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