In the U.S., 30,000 flights are completed in a day. A 747 weighs about 870,000 lbs. When it takes off, it can fly 7,000 miles. And, airplanes create thrust using propellers, jet engines, and rockets. The wings of airplanes create lots and lots of air that goes through the wings. The engines of jets are some of the most powerful engines in the world. The John F. Kennedy Airport in New York City is 4,930 acres of land including 880 acres of central terminals. They started building it in April 1942. The LaGuardia Airport in New York City owns 660 acres of land also. These are some of the busiest airports in the U.S.A. These are international airports. The scale and scope of airline companiesare from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of airplanes in various types. Airline services can be categorized as being intercontinental, intracontinental, regional or domestic and may be operated as scheduled services or charters. These variations in the types of airline companies, their operating scope, and the routes they serve makes analysis of the airline industry somewhat complex. Nevertheless, some patterns have emerged in the last 50 years of experience. The general pattern of ownership has gone from government owned or supported to independent, for-profit public companies. This occurs as regulators permit greater freedom, in steps that are usually decades apart. This pattern has not been completed for all airlines in all regions. The demand for air travel services is derived demand. That is, it depends on other things: business needs for cargo shipments, business passenger demand, leisure passenger demand, all influenced by macroeconomic activity in the markets under study. These patterns are highly seasonal, and often day-of-week, time-of-day, and even directionally variable. Notwithstanding these demand patterns, the overall trend of demand has been consistently increasing. In the 1950's and 1960's, annual growth rates of 15% or more were common. Annual growth of 5-6% persisted through the 1980's and 1990's. Growth rates are not consistent in all regions, but certainly areas where deregulation prmore competition and greater pricing freedom resulted in lower fares and sometimes dramatic spurts in traffic growth. The U.S., Australia, Japan, Brazil, Mexico, and other markets exhibited this trend. The industry is cyclical. Four or five years of poor performance are followed by five or six years of gradually improving good performance. But profitability in the good years is generally low, in the range of 2-3% net profit after interest and tax. It is in this time that airlines begin paying for new generations of airplanes and other service upgrades they ordered to respond to the increased demand. Since 1980, the industry as a whole has not even earned back the cost of capital during the best of times. Conversely, in bad times losses can be dramatically worse. As in many mature industries, consolidation is a trend, as airlines form new business combinations, ranging from loose, limited bilateral partnerships to long-term, multi-faceted alliances of groups of companies, to equity arrangements between companies, to actual mergers or takeovers. Since governments often restrict ownership and merger between companies in different countries, we see most consolidation taking place within a country. In the U.S., over 200 airlines have been merged, taken over, or simply gone out of business since deregulation began in 1978. Many international airline managers are actively lobbying their governments to permit greater consolidation, in order to achieve higher economies of scale and greater efficiencies.
