Premium Essay

Fees in the Aviation Industry

In: Business and Management

Submitted By o5mylitn
Words 2039
Pages 9
Fees in the Aviation Industry
Embry-Riddle Aeronautical University
ASCI 404
March 7, 2013

Fees in the Aviation Industry Within the past several years the airline industry has received plenty of negative press, due in large part to issues and events regarding airline fees, ethnic profiling at security checkpoints, sleeping air traffic controllers, and terribly long tarmac delays, to name a few. This paper aims its focus toward airline fees. Managers in the aviation industry, if not careful, can find themselves in the crosshairs of the Department of Transportation if they don't follow rules and procedures established by the federal government. Not only could a manager lose their job by deliberately failing to abide by established procedures, the carrier for which one is employed could be substantially fined by the Department of Transportation. A few of the problems associated with airline fees are their lack of transparency, the manner in which the information is displayed to customers on their websites, and the perception by the general public that the fees are exorbitant. Snider (2011), a Kiplinger's Personal Finance magazine writer, once said that he believes that in many cases, it is cheaper to ship bags than bring them onboard the aircraft. Though the popular perception in this country by many is "government is too big," when it comes to airline fees, government intervention is probably a good thing.
Airline Fee Issues There is probably nothing more annoying to the general flying public than the lack of transparency on most airline websites. It simply should not be so difficult to ascertain the total cost of one's ticket. For several years now, most airlines have been charging for services that used to be included in the price of a ticket. While this certainly helps the airline carriers stay afloat financially, it undoubtedly rankles the...

Similar Documents

Premium Essay

The Open Skies, an Unfair Advantage

...The Open Skies, An Unfair Advantage The Open Skies agreements between the United States and other countries is intended to expand international flights by eliminating governmental interference in commercial airline decisions. The goal is to free the air carrier from government control so they may provide more affordable, convenient and efficient air service to consumers. The end result is to promote increase travel, generate new economic revenue for United States (U.S.) cities and provide better economic growth for air carriers. But, with virtually unlimited access to the U.S. market through more than 100 Open Skies agreements the U.S. has signed with other countries. Foreign air carriers have unfair advantage in the open market over U.S. air carriers. Therefore, limiting those types of flights to a fifty percent increase of their current market share into the U.S. will help level the playing field and protect U.S. interests. The Joint Committee delegation will argue that unlimited flights flown into the U.S. is beneficial to all parties. It is their contention that unlimited access is essential to all partners’ markets and their profitability (U.S.-EU). The goal, in this open market, is to make it possible for all air carriers to offer the traveling public competitive pricing and services. The Joint Committee has taken the necessary steps by working with each member’s government to insure that no one air carrier has an unfair advantage. Many believe they have the right to......

Words: 1368 - Pages: 6

Premium Essay

Passenger Facility Charges

...Statutory and Regulatory Aspects of the PFC Program | 5 | A Recommendation Regarding PFC Limits | 6 | Works Cited | 7 | Executive Summary As established by the Aviation Safety and Capacity Expansion Act of 1990, the Passenger Facility Charge (PFC) program – codified at 49 U.S.C. §40117 and regulated by 14 C.F.R. Part 158 – allows airports enplaning more than 2,500 passengers per year to charge passengers up to $4.50 per each flight segment but not more than $18.00 per round trip ticket (Price & Forrest, 2012). PFC funds are collected by the airlines, forwarded to the airports by the collecting airlines, and must be expended by airports for projects directly related to safety, security, capacity, noise reduction, and carrier competition enhancement (Price & Forrest, 2012). This paper will provide an overview of the PFC program and examine the program’s history, detail the arguments for and against an increase in current PFC limits, examine the potential implications or benefits of an increase or of keeping the limit where it is now, and discuss the statutory and regulatory aspects of the PFC program. Finally, this paper will make a recommendation as to whether or not the PFC limits should be removed or increased. An Overview and History of the Passenger Facility Charge Program As established by the Aviation Safety and Capacity...

Words: 2888 - Pages: 12

Premium Essay

Case Study

...Office of Inspector General AVIATION INDUSTRY PERFORMANCE A Review of the Aviation Industry, 2008–2011 Number: CC-2012-029 Date Issued: September 24, 2012 Memorandum U.S. Department of Transportation Office of the Secretary of Transportation Office of Inspector General Subject: INFORMATION: Aviation Industry Performance: A Review of the Aviation Industry, 2008–2011 Controlled Correspondence No. 2012-029 Calvin L. Scovel III Inspector General The Secretary Acting Federal Aviation Administrator Assistant Secretary for Aviation and International Affairs Date: September 24, 2012 From: To: Since its inception, the aviation industry has undergone significant transformations as a result of technological developments, economic pressures, and other factors. Most recently, economic recession and recurrent high fuel costs have challenged U.S. airlines, which have taken a number of actions to lower costs and increase revenue—including capacity reductions, fare increases, baggage fees, and mergers. Beginning in 2002, the Office of Inspector General has issued periodic reports regarding the performance of the aviation industry. This report, the 11th in the series, focuses primarily on industry performance during the 2008–2011 period and summarizes long-term trends since 2000. This report also highlights issues related to changes in airlines’ business environment, the industry’s reactions to those changes, and the impact of these actions on the traveling......

Words: 17702 - Pages: 71

Free Essay

Gateway to Singapore

...Gateway to Singapore: Changi Airport Background Airports are “a vital part of a country’s transport infrastructure on which its economy, trade, and business depend.”  Changi Airport Group operates and manages the highly recognized and world-renowned Singapore Changi Airport.  Currently the world's sixth busiest international airport, Changi Airport has grown into a major air hub in Asia.  The various flight routes connect Singapore with 270 cities in 60 countries with the support of more than 100 international airlines.  Every 90 seconds, a flight departs from or lands at Changi Airport.  Passenger traffic at the airport exceeds 53 million people annually, roughly 10 times the population of Singapore. Changi Airport is not an ordinary airport and is known for its unconventional amenities.  It has a comfortable and clean environment and boasts superior customer service.  There are 350 retail stores and 120 restaurants inside the airport’s three terminals, which accounts for a total business area of roughly 750,000 square feet and 50% of the airport’s revenue (S$2 billion in 2013).  To name a few unique amenities, there are free movie theatres, napping and lounge chairs, karaoke studios, showers, prayer rooms, playgrounds, events for families and children, and gardens housed within the airport, among many other things.  It is viewed “not just as Singapore’s gateway to the world, but also the world’s gateway to Singapore.”  This all makes Changi airport a travel destination......

Words: 2354 - Pages: 10

Premium Essay

Shristi

...sHRishti SpiceJet Flies into Turbulence The aviation industry in India is facing turbulent weather in recent times. As the aviation industry is gearing up to tap the potential market of 99.5% of the country’s population 1, the news of one of the country’s prominent low cost carriers in trouble, for the second time in three years has raised a lot of eyebrows. The recent rescheduling/cancellation of SpiceJet flights have left irate passengers stranded, as the air fares of other airlines have shot up to 3 times. The company is facing a serious financial crunch of Rs 2000 crores to pay its debtors and meet the salary bill. Everything in this industry seems to be a fixed cost! There is also news about DGCA withdrawing slots for flying. The cyclic effect of operating cash shortage can be an indication of turmoil in the aviation industry. Pilots sense trouble and bail out to the competitors, the left over tend to fly extra hours which makes the travelers’ fearful of pilot fatigue. It’s all the money game. Only the ‘moolah’ gets you the fuel which is used to fly the aircraft and therefore the question arises whether to have all the pilots in the cockpit or the fuel to run the carrier. The same problem arises when it comes to fees related to takeoff and landing and other fixed expenses. The next major concern is the other employees…the engineers, flight attendants and the ground staff. They need to be paid too. Rs. 2000 crores is nowhere in sight though the Government has just......

Words: 486 - Pages: 2

Premium Essay

The Airport System Planning Process

...The Airport System Planning Process The common individual, even those who travel by aircraft frequently understand the simplest logistics of the aircraft and use common sense to establish that the airport was designed to some extent. However, the majority of travelers fail to understand the strategy involved with the airport system, how it is designed, and the planning or organization that go in to creating such a complex environment. Clearly, safety issues concerning air travel have been heightened during the past decade. While it is clear that major precautions are taken to secure the actual aircraft, prior to takeoff, during flight, and once the landing process has commenced, one often forgets about the safety implications involved in the actual airport. This paper evaluates AC No: 150/5070-7, titled “The Airport System Planning Process.” The aim is to give an overview of the process, including background regarding the purpose of the complex strategy, Within an integrated airport planning system, which is expected to provide guidance for future establishments in the field, there are four key aspects that must be exhibited. First, the system needs identification, where there is a specific reason that the airport was designed using the planning process selected. Second, there must be a system-wide development cost estimate. Such an expensive project, one might assume, does not require an accurate budget. However, it is crucial that one remain within the realm of the...

Words: 1639 - Pages: 7

Premium Essay

Jet Blue Airways

...annual revenue and became increasingly popular with travelers. But now that fuel prices have pushed up expenses for all airlines, and older carriers have sharply cut their own labor costs, the advantage JetBlue enjoyed as a start-up is greatly reduced. JetBlue — too new to have built up excessive costs that can now be trimmed, is trying mightily to raise fares in a bid to restore profits after surging fuel prices caused it to lose $42.4 million during the fourth quarter of 2009. The trends in the U.S. airline industry and how these trends might impact a company’s strategy The airline industry is susceptible to upturns and downturns with the trends in the economy. A growing economy and booming business mean greater demand for air travel, and a slow-down in the economy means reduced demand, consequent unutilized capacity and intensified competition. The availability of venture capital and other capital sources have an impact on the number of new entrants into the industry. Interest rate fluctuations have an impact on the cost of operations for companies that have high levels of debt. As a result, the JetBlue has struggled to survive. In 2008, crude oil prices increased to a record $140 per barrel (Thompson, Strickland, & Gamble, 2010). This dramatic price increase caused airlines to Struggle to offset the cost of fuel. Many began implementing...

Words: 1903 - Pages: 8

Premium Essay

Avaition Industry Info

...Aviation Industry Information The airline industry provides transportation services for passengers as well as cargo through scheduled air routes. The aviation industry derives its revenues from regular ticket fees and freight charges. Other major components of the aviation sector include: • Air traffic control   • Helicopter and private charter services   • Airport management   • Express delivery service History of the Airline Industry The pioneers of the airline industry, the Wright Brothers invented the first airplane in 1903. The first modern airliner, Boeing 247, was launched in 1933. It traveled at 155 miles per hour and had a capacity of ten passengers. Boeing 747 was launched by Pan Am in 1969. This highly sophisticated aircraft had four engines and a seating capacity of 450. The airline industry initially fell under the category of a public utility service, with government agencies establishing the air routes and prices. However, with the Airline Deregulation Act of 1978, the industry became market driven. Demand and Supply Drivers of the Airline Industry The demand drivers of the airline industry include: o Ticket prices   o Passenger income levels   o Access to and suitability of other modes of transportation   o Frequency of services • Safety   • Random factors such as terror threat The......

Words: 5964 - Pages: 24

Premium Essay

Finance and Accounting Systems in Aviation Industry

...Finance and Accounting Information systems used in Aviation sector Finance and Accounting Information systems used in Aviation sector SUBMITTED BY: BHAVIK K. VORA 421 MBA (Tech.) Telecommunications Contents | SR. NO. | TOPICS | PAGE NO. | 1 | Aviation Sector: An overview | 3 | 2 | Effect of information system in aviation sector | 3 | 3 | Finance and accounting information system | 4 | 4 | Sirax Airfinance platform by Lufthansa systems syssystesm | 4 | 5 | Sirax Revenue Accounting | 5 | 6 | Sirax Cost Accounting | 8 | 7 | Sirax Business Intelligence | | Aviation industry: An overview The aviation industry traditionally grew due to increase in demand of business travellers as the companies started expanding their operations in different places all over the world. Moreover rise and income of the people had a positive effect on the tourism industry and thus leading to the growth of aviation industry. Deregulation and Privatisation of the aviation industry provided further impetus to its growth. Since 1970, the growth rate in the aviation industry has been about 6-7% Sirax Airfinance platform by Lufthansa systems With respect to the uncertainties that airlines are facing today, Sirax Airfinance platform can prove to be of great help to the airlines as it provides the right information at the right time. It keeps the airline updated about their operations and financial condition. It provides the airline with timely,......

Words: 1268 - Pages: 6

Premium Essay

Economics of Low Cost Airline

...Title: Low Cost airlines Industry in India An overview of the Indian aircraft industry The Indian economy has grown at an average rate of around 8% in the last decade. The rise in business and leisure travel (both domestic & international) due to this growth, India emerging as a major origin and destination for international travel have all had a significant impact on commercial aviation in India. According to the airports authority of India (AAI), the passenger traffic is expected to grow at over 20% in the next five years. On the supply side, since 2003, when low fare travel in India was ushered in, a number of low cost carriers (LCC) have entered this fast growing market. However, all of the LCC carriers and - with rare exceptions – even the full service carriers (FSC) charging higher fares have been making losses. By and large, operating a commercial airline in India so far has not been a profitable business. In 2007, the industry witnessed a wave of consolidations primarily to stem the tide of red ink. Boom and bust in Indian aviation industry Air India and Indian Airlines retained a monopoly over civil aviation in India till 1992. The deregulation of the Indian economy that started in the mid-1980s, and proceeded more aggressively after the New Economic Policy in 1991, led to calls for opening up of the airline sector. Over the following years, several new airlines including Damania, EastWest, Jet, Sahara, Modiluft and NEPC started operations. However,......

Words: 1859 - Pages: 8

Premium Essay

Papar

...Contents South West Airlines 4 Goals and Objectives 5 Their Mission and Vision Statement 5 Strengths 6 Weaknesses 6 Opportunities 8 Threats 8 Analyzing company’s external environment 9 Analyzing the nature and strength of competitive forces 11 Competitive pressure stemming from bargaining power of buyer: 16 Determining whether the collective strength of the five competitive forces is conductive to good profitability: 17 Competitive pressure from seller of substitute products 18 Sign that competition from substitute is strong 19 Competitive pressure stunning from supplier bargaining power 20 PESTEL ANALYSIS 24 SCENARIO PLANNING 56 SCENARIO NO.1 58 SCENARIO NO.2 59 SCENARIO NO.3 59 SCENARIO NO.4 60 SCENARIO NO.5 60 SCENARIO NO.6 60 SCENARIO NO.7 61 SCENARIO NO.8 61 Competitors Objectives 62 Competitor's Current Strategy 63 Competitor's Resources and Capabilities 64 Competitor’s Assumptions 66 Regional Factors 67 Value chain activities: 68 Key competitive advantages: 72 Solutions: 82 Weights of Key success factors in five airlines: 86 COMPETITIVE ADVANTAGE 92 FIVE GENERIC COMPETITIVE STRATEGIES: 92 LOW COST PROVIDER STRATEGIES: 92 DIFFERENTIATION STRATEGIES: 95 BEST-COST PROVEDER STRATEGIES: 96 FOCUS (MARKET NICHE) STRATEGY: 96 STRATEGIC ALLIANCE AND PARTNERSHIP: 97 MERGER AND ACQUISITION STRATEGIES. 98 VERTICAL......

Words: 28700 - Pages: 115

Free Essay

Jet Blue Case Study

...a broadly defined objective which the company has to reach to make its strategy success. We can distinguish eight major groups of these goals: Financial resources Physical resources, Human resources, Market standing, Innovation, Productivity, Profit requirements and Social responsibility.1 Although JetBlue had some issues during their operations they mostly succeeded in reaching its strategic goals. In 1998 as the company was established by Neeleman, he raised 160 million dollars of capital from investors like Western Presidio Capital. This was a really strong start for a new firm in the aviation industry. In 2001, just three years after the company’s start, they were growing so rapidly that the possibility of an IPO came into consideration to fund its expansion plans. After the terrorist attacks on 11/9 it had to be postponed. The U.S government granted the Aviation industry a $15 billion bailout and JetBlue also gained its part from it so they could go on with their expansion plans.2 After the events a lot of airliners went bankrupt as the people were afraid of flying. JetBlue quickly identified those routes which were abandoned by the bankrupted firms, so for example they started to fly every day on the week to Florida. This helped them to stay and succeed on the market. As an innovation JetBlue always used new aircrafts and flew to airports which were considered bad by other companies. The biggest advantage they reached with it was the reduction of fuel......

Words: 1162 - Pages: 5

Premium Essay

Case of Aviation in India

...Civil Aviation Policy – Consultation with stake holders Civil Aviation sector in India has soared to great heights in the last few years. However, the aviation industry’s growth will need proper policy orientation to ensure systematic, sustainable and orderly development. Hence, it is imperative that a clearly defined, long term civil aviation policy is formulated. Such policy while addressing issues related to safety, security, infrastructure development, revenue models, private sector participation etc. must also provide for a safe and comfortable yet affordable air travel to passengers. The Ministry of Civil Aviation, Government of India, is in the process of formulating a Civil Aviation Policy. The civil aviation sector has many complex areas, which need to be addressed in formulation of the policy; some of them are indicated below. Organizations and individuals are requested to give their inputs, views and suggestions on aspects given below (or any other related issues), for facilitating the Ministry of Civil Aviation in drafting the proposed Civil Aviation Policy. These may be sent to the DT section, Ministry of Civil Aviation, Rajiv Gandhi Bhawan, New Delhi, India; or e-mailed to Dtsec.moca@nic.in Views of some stake-holders already received are placed below for reference and cross fertilization of ideas. While giving your views, please mention specifically if you have any objection in keeping your views in public domain. Your views may be sent before 20th February,...

Words: 39344 - Pages: 158

Premium Essay

Postal Monopoly and Competition in the Civil Aviation

...Postal monopoly and competition in the civil aviation In the early 20th century, monopoly organization is mainly in the sectors of heavy industry such as coal, steel and oil. However, today has expanded the scope of the monopoly rules to light industry, transportation, commerce, agriculture and various service sectors and other fields. Monopoly is an industry controlled by who is the only producer of a good that has no close substitutes. Monopolistic industry in general are related to most people and the industry which closely related to public utilities, such as telecommunications, postal services, water, electricity, gas, railways and aviation. These industries penetrate into all aspects of society, therefore, their prices high and low cost that concerns society as a whole. The overall efficiency of these industries directly related to other industry's ability to compete internationally. This report will first indicate and analyses the case, then it will use the knowledge to resolute the special fact of monopoly and competition in the United State. People can set postal services, sounds like a joke, but in the United States, there are not only private postal, but also the private prison. Companies which in the United States are generally known for high efficiency and good service, but the postal service is an exception. One of the reason is that lacking of competition and state subsidies in this industry, secondly, employees usually holding this work, which is easy......

Words: 1805 - Pages: 8

Premium Essay

Indian Aviation Industry

...CONFIDENTIAL EXPERT REPORT Research Study of the Civil Aviation Sector in India SUBMITTED TO: The Ministry of Corporate Affairs, Govt. of India, India SUBMITTED BY: Nathan Economic Consulting India Pvt. Ltd., India www.nathaninc.com January 24, 2012 CONFIDENTIAL Table of contents 1. 2. 3. 4. 5. Executive Summary ................................................................................................................................. 1 Introduction .............................................................................................................................................. 7 Market Structure and Competition Issues ......................................................................................... 11 Identification of Anti-Competitive Provisions and Practices ......................................................... 15 Analysis of the Identified Issues .......................................................................................................... 24 5.1 Fleet and Equity Requirements ................................................................................................................... 24 5.2 Route Dispersal Guidelines......................................................................................................................... 29 5.3 Slot Allocation ..............................................................................................................................................

Words: 21810 - Pages: 88