Chapter 5

Air Carriers
Industry overview:

The airline industry is very dependent on passenger's revenues to maintain its financial
viability. However, to characterize air line simply as movers of people presents to simplistic a
view of their role in transportation system. The airlines are a unique and important group of
carriers that meets some particular needs in our society. Although their share of the freight
movement on a ton mile basis is small, the type of traffic that they carry (high value,
perishables or emergency) makes them an important part in the transportation system.
Emphasis on total logistics cost in a quick response lead time environment will continue to
contribute to their growth in freight movements.

Types of carriers:

Air carriers can be segmented into for hire and private carriers. A private carrier is a firm
that transports company personnel or freight in planes that it owns or leases.

For- hire carriers can be classified according to the type of service they offer into:

1. The all cargo carriers: transports cargo primarily.

2. The commuter carrier: it is technically a regional carrier. The commuter publishes
timetables on specific routes that connect lesser populated routes with major cities.
3. The charter carrier: use large planes to transport people or freight. The
supplemental carrier has no time schedule or designed route. The carrier charters
the entire plane to transport a group of people or cargo between specified origins
and destinations. Many travel group tours use charter carriers.
4. The international carriers

Competition:

Due to their unique service, air carriers face limited competition from other modes for either
passengers or freight. Air carriers have an advantage in providing time sensitive, long
distance movement of people or freight. Airline compete to some extent with trucking for
the movement of higher valued manufactured goods, they face competition from
automobiles for the movement of passengers and to a limited extend from trains and buses.
For short distances (under 300 miles) the access time and terminal time offsets the speed of
the airline for the line haul.

Competition in rates and service among the air carriers is very intense, even though the
number of carriers is small. Carriers may have excess capacity (too many flights and seat
miles on a route) and attempt to attract passengers by selectively lowering fares to fill the
empty seats.

As a new carrier start to serve a route fares are lowered as are profits for many carriers. The
end result has been a reduction in the number of carriers and flights on many routes, in
particular, low traffic routes.

 For passenger service:

Competition in airlines takes many forms but the primary service competition is the
frequency and timing of flights on a route. Carriers attempt to provide flights at the time of
day when passengers want to fly.

In addition to frequency and timing of flights, air carriers attempt to differentiate their
service through the advertising of passengers' services. Carriers promote such things as on-
time arrival and friendly employees to convince travelers that it has the desired quality of
service. Gourmet meals and on board movies are some of the services that a carrier uses to
attract passengers to use and reuse its services.

Frequent flyer programs and special services for high mileage customers are popular
examples of other services to attract loyal customers.

 For cargo service:

As a result of the complete deregulation of air cargo, air carriers have published competitive
rates, but these rates are still higher than those available via surface carriers. Freight
schedules have been published that emphasizes low transit time between given points. To
overcome accessibility problems, some carriers provide door to door service through
contacts with trucking companies.

Service characteristics:

Advantages:

1. Speed: The major service advantage of air transportation is speed. The terminal to
terminal time for a given trip is lower via air transportation than via any of other
modes.
2. Length of Haul: Air carriers transport freight long distances.
3. Packaging: The packaging required for freight shipped by air transportation is usually
less than other modes, it is not common in air transportation to find a palletized
shipment that is shrinking wrapped instead of banded. The relatively smooth ride
through the air and the automated ground handling systems contribute to lower
damage and thus reduce packaging needs.
4. Small shipment size
5. Dependability: Air carriers are capable of providing reliable service. The carrier may
not always be on time to the exact minute but the variations in transit time are
 small. Sophisticated navigational instrumentation permits operation during most
weather conditions.

Disadvantage:

Poor accessibility is one disadvantage of air carriers. Passengers and freight must be
transported to an airport for air service to be rendered. This accessibility problem is reduced
when smaller planes and helicopters are used to transport freight to and from airports and
most of passengers use automobiles, limited accessibility adds time and cost to the air
service provided.

Terminals:

The air carriers' terminal (airports) is financed by the government. The carriers pay for the
use of the airport through landing fees, rent and lease payments for space, taxes on fuel,
and air craft registration taxes. In addition, users pay taxes on airline tickets and air freight
charges. Terminals charges are becoming increasingly more commonplace for passenger
traffic.

Airport terminals also provide services to passengers, such as restaurants, banking centers,
souvenir and gift shops, and snack bars.

Current issues:

 Safety:

The issue of airline safety is of a great importance to the airline industry. Any incident
involving airplanes receives a great deal of publicity from media because of the large
number of people affected at one time.

Several factors affect airline safety:

1. Airport security has come under close security over the past several years.
2. The frequent reporting of near collisions, minor accidents and airplanes calls have
heightened public awareness of the air safety problem
3. The issue of substance abuse concerning pilots and ground crew has become
important

 Technology:

Because the airline industry must offer quick and efficient service to attract business, it
constantly needs more sophisticated equipment. With other modes such as railroads and
water carriers travel time are measured in days, however air carriers measure travel time in
hours.

For this reason, the airline industry has developed automated information processing
programs like Air Cargo Fast Flow program which was designed by port authority of New
York/New jersey. The fast flow program is paperless system that speeds the processing of air
freight cargo through customs processing, which was found to take 106 out of 126 hours of
processing time for international shipments.

The system allows the air freight community to tie into custom clearing systems and thus
reduce paperwork and time requirements dramatically. The system also will provide better
tracking of shipments and better communication between connecting carriers. These
improvements will allow customers to receive their inbound shipments faster than ever
before.