The Airline Industry after 9/11

Paper Summary:

This paper shows that the decline in airline revenues post-9/11 served to further exacerbate the rise of low-cost airlines and the financial fragility of airlines with high fixed costs. As 9/11 devastated revenues for large airlines with high costs, low-cost airlines flourished. Further, the trend toward low-cost airlines seems to be here to stay, illustrating the dangers of inflexibility and high fixed costs in the cyclical airline industry. The paper presents a literature review of articles and websites on the topic.

From the Paper:

"In the fallout following the events of 9/11, several major airlines filed for bankruptcy, including Swissair, U.S. Airways, United Airlines, and Sabena. Airlines struggled to reduce high fixed costs, and cost-cutting initiatives quickly followed apparent revenue decreases, as close to 15 percent of the industry workforce lost their jobs in the last quarter of 2001. In the six months after September 11th, close to 1,000 aircraft were grounded, and some companies had close to 50% reductions in both flight frequency and routes. These cost reduction efforts were often successful, as Delta reduced costs by U.S. $1.1 billion, and United reduced costs by U.S. $1.2 billion (A. T. Kearney, Inc.)."

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