Continental Airlines Essay

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

Continental’s internal forecasts indicated that a further decline in passenger volume should be anticipated throughout 2009, with a

2 Specifically, on June 13, 2008, Continental Airlines announced that it planned to reduce its flight capacity by 11 percent. By shrinking capacity, Continental expected to reduce the number of domestic and international flights from its three major hubs in Houston, Cleveland, and Newark (Maynard 2008).

This report provides an examinaion of the current structure, performance, stragergy and management of Delta Airlines, along with an industry analysis of the airline industry. The report uses current and past financial and statistical data for the company along with other up to date material to determine Delta's current market position and future potential.

Continental, Northwest and United Airlines intended to adopt part of the new fare system. Continental, because it is in Chapter

Pan American Airways grew dramatically and they used advertising as a key item in their growth strategy. Pic 1 shows some of the routes Pan American used to assist the Allies in World War 1 in 1941. This poster helped gain consumer confidence because it showed that if its safe for the military it should be safe for the typical consumer. It also allowed for a form of patriotism, by hinting at the ideal of fly with the company who supports our nation.

When Gordon Bethune left his job at Boeing in February 1994 to accept the position of chief operating officer (COO) of Continental Airlines, the company was struggling to survive. Even though it was the fifth largest commercial airline in the United States, with revenues of nearly 6 billion dollars, the company had reported a net loss every year since 1985, and was ranked the last among the top ten commercial airlines in the United States in terms of operational performance and customer satisfaction-Continental was the last among the ten largest airlines in the United States in punctuality of arrivals, had the highest number of reports of

Moody’s projects that ROIC for rated US airlines will improve sharply in 2015 as lower fuel costs and capacity discipline spur growth in profits. The average ROICs for 2010-2014 for Delta, Southwest and United were 10.8%, 8.4% and 7.5%, respectively. Moody’s believes that each of these companies can keep their ROICs above these historical averages if the industry maintains capacity discipline, and the price of Brent oil remains below $100/bbl (Mar-15). CAGR from 2005 to 2014 for airline revenues in the US was 5%. EBITDA margin also increased from 9.5% in 2013 to 11.8% in 2014. The

Due to a change in passenger profile, business class and first class seats have suffered declining demand. Many companies have been forced to introduce low-cost fare options. Since southwest has been an industry leader and “ahead of the curve” in providing low cost, standardized travel options, it has no need to change strategy, thus saving on restructuring costs. The Company also benefits from its long establishment in the low-cost airline market, allowing the Company to capitalize on significant customer awareness of the brand.

The airline industry is in a downturn. In 2001, the International Air Transport Association had a net loss of $17 billion, which is more than the industry has made in its entire history. 3 This has led to a grim short-term outlook for the airline manufacturers, and subsequently Boeing has cut 2002 production in half4 and Airbus by one fourth. 5 This, however, is not necessarily a good measure of the industry’s condition, since both companies have an extensive backlog that can be used to maintain these new targets. Although the total backlog of 2,783 planes is worth an estimated $172 million dollars6 it is also somewhat uncertain due to lax cancellation penalties negotiated by the airlines during the boom years. Furthermore, the rise of low-cost airlines does not directly translate into a larger market for aircraft due to the fact that the success of low end carriers tends to reduce the demand for aircraft by the large carriers.7 It is important to note however, that this is not a permanent depression in the market, but a reflection of the cyclical nature of the industry.

History – The airline business has been in existence for over 75 years. There have been many upward and downward swings in the overall airline business economy. History has recorded that while 140 airlines have declared Chapter 11; only two have emerged. Today, the U.S. airline industry is facing an unprecedented financial crisis and the outlook is bleak. Only one major carrier that has shown a profit over the past four years and, in the same timeframe, the other major carriers show a combined total loss in excess of 25 billion dollars. This downward spiral cannot be attributed solely to the 9/11 disaster, many other factors contributed to their downfall.

The airline industry provides services for passenger and cargo transport. Over the years the airline industry has faired fairly decent. That is, until the September 11 tragedy in 2001. From 1995 through 2000, the airline industry earned about $23 billion then lost about $35 billion from 2001 through 2005 (McCabe, R., 2008). There are many factors that indicate the economic downfall of the airline industry after the September 11 incident. The purpose of this paper is to discuss some of these factors and their impact the airline industry. Issues for discussion include: (1) shifts and price elasticity of supply and demand, (2) positive and negative externalities, (3) wage inequality, and

Forecasting is a critical function of revenue management and strategical planning for businesses. With the help of historical information, forecasting allows businesses to anticipate changing market trends, predict product demand and manage the costs of inventory (Lambert, 2011). While forecasting has many applications and is utilized in numerous trades, this research focuses on forecasting within the airline industry. In this context, the emphasis is on forecasting to optimize profit, by anticipating demand and adjusting capacity needs and prices accordingly.

Abstract: Competition today is one of the major threats to an airline industry. Competitive advantage therefore can be achieved by establishing cost leadership. The ultimate challenge faced by any company would be to leverage between the escalating operational costs and falling revenues so as to maximise the profits. Determine the costing procedure of an airline industry and the various possible efforts it takes to reduce the costs. The airline industry employs a trend and horizontal analysis to evaluate its performance and productivity. This industry can be categorised into international, national, regional and cargo operations. The major costs incurred by the airline industry are weather costs, fuel

Profits dropped again in the quarter ending 30-Jun-2014, representing 1st quarter of Financial Year 2015, with the company posting a 52% decrease in operating profits to SGD39 million (USD31 million). (Center for Aviation, 2015). Singapore Airlines is still one of the most competitive airlines in the world market and has not suffered an annual loss s far however, the fact is that the airline has faced in the recent past - and continues to face – some of the greatest challenges ever as a business. The airline company has to make strategic adjustments for the group to be better positioned for profitability, sustainability and growth. Singapore Airlines still has a number of core strengths as well as a lot of opportunities, however, serious challenges are also present ahead with any proposal of strategic adjustments coming with risks. In this SWOT analysis, the report incorporates Singapore Airline's 1st Quarter Financial Year 2015