Airline
An airline provides air transport services for passengers or freight, generally with a recognized operating certificate or license. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit.
Airlines vary from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of airplanes. Airline services can be categorized as being intercontinental, intracontinental, or domestic and may be operated as scheduled services or charters.
Airlines vary from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of airplanes. Airline services can be categorized as being intercontinental, intracontinental, or domestic and may be operated as scheduled services or charters.
History
U.S.
Tony Jannus conducted the United States' first scheduled commercial airline flight on 1 January 1914 for the St. Petersburg-routes, Braniff Airways, American Airlines, Delta Air Lines, United Airlines (originally a division of Boeing), Trans World Airlines, Northwest Airlines, and Eastern Air Lines, to name a few.US airline
route structure before World War II
Passenger service during the early 1920s was sporadic: most airlines at the time were focused on carrying bags of mail. In 1925, however, the Ford Motor Company bought out the Stout Aircraft Company and began construction of the all-metal Ford Trimotor, which became the first successful American airliner. With a 12-passenger capacity, the Trimotor made passenger service potentially profitable. Air service was seen as a supplement to rail service in the American transportation network.
At the same time, Juan Trippe began a crusade to create an air network that would link America to the world, and he achieved this goal through his airline, Pan American World Airways, with a fleet of flying boats that linked Los Angeles to Shanghai and Boston to London. Pan Am and Northwest Airways (which began flights to Canada in the 1920's) were the only U.S. airlines to go international before the 1940s.
With the introduction of the Boeing 247 and Douglas DC-3 in the 1930s, the U.S. airline industry was generally profitable, even during the Great Depression. This trend continued until the beginning of World War II.
Europe
The Imperial Airways Empire Terminal, Victoria, London. Trains ran from here to flying boats in Southampton, and to Croydon Airport.
The first countries in Europe to embrace air transport were Finland, France, Germany, the Netherlands and the United Kingdom.
KLM, the oldest carrier still operating under its original name, was founded in 1919. The first flight (operated on behalf of KLM by Aircraft Transport and Travel) transported two English passengers to Schiphol, Amsterdam from London in 1920. Like other major European airlines of the time (see France and the UK below), KLM's early growth depended heavily on the needs to service links with far-flung colonial possessions (Dutch Indies). It is only after the loss of the Dutch Empire that KLM found itself based at a small country with few potential passengers, depending heavily on transfer traffic, and was one of the first to introduce the hub-system to facilitate easy connections.
France began an air mail service to Morocco in 1919 that was bought out in 1927, renamed Aéropostale, and injected with capital to become a major international carrier. In 1933, Aéropostale went bankrupt, was nationalized and merged with several other airlines into what became Air France.
In Finland, the charter establishing Aero O/Y (now Finnair, one of the oldest still-operating airlines in the world) was signed in the city of Helsinki on 12 September 1923. Junkers F 13 D-335 became the first aircraft of the company, when Aero took delivery of it on 14 March 1924. The first flight was between Helsinki and Tallinn, capital of Estonia, and it took place on 20 March 1924, one week later.
Germany's Lufthansa began in 1926. Lufthansa, unlike most other airlines at the time, became a major investor in airlines outside of Europe, providing capital to Varig and Avianca. German airliners built by Junkers, Dornier, and Fokker were the most advanced in the world at the time. The peak of German air travel came in the mid-1930s, when Nazi propaganda ministers approved the start of commercial zeppelin service: the big airships were a symbol of industrial might, but the fact that they used flammable hydrogen gas raised safety concerns that culminated with the Hindenburg disaster of 1937. The reason they used hydrogen instead of the not-flammable helium gas was a United States military embargo on helium.
The British company Aircraft Transport and Travel commenced a London to Paris service on 25 August 1919, this was the world's first regular international flight. The United Kingdom's flag carrier during this period was Imperial Airways, which became BOAC (British Overseas Airways Co.) in 1939. Imperial Airways used huge Handley-Page biplan
es for routes between London, the Middle East, and India: images of Imperial aircraft in the middle of the Rub'al Khali, being maintained by Bedouins, are among the most famous pictures from the heyday of the British Empire.
Asia
A Philippine Airlines DC-3 at Manila, Philippines
Some of the first countries in Asia to embrace air transport were India, Hong Kong, Indonesia, Malaysia and the Philippines.
The first country in Asia to embrace air transport was the Philippines. Philippine Airlines was founded on February 26, 1941, making it Asia's oldest carrier and the oldest operating under its current name. The airline was started by a group of businessmen led by Andres Soriano, hailed as one of the Philippines' leading industrialists at the time. The airline’s first flight was made on March 15, 1941 with a single Beech Model 18 NPC-54 aircraft, which started its daily services between Manila (from Nielson Field) and Baguio, later to expand with larger aircraft such as the DC-3 and Vickers Viscount. Notably Philippine Airlines leased Japan Airlines their first aircraft, a DC-3 named "Kinsei". On July 31, 1946, a chartered Philippine Airlines DC-4 ferried 40 American servicemen to Oakland,California from Nielson Airport in Makati City with stops in Guam, Wake Island, Johnston Atoll and Honolulu, Hawaii, making PAL the first Asian airline to cross the Pacific Ocean. A regular service between Manila and San Francisco was started in December. It was during this year that the airline was designated as the Philippines flag carrier.
Air India Boeing 747-400. The Government of India is the majority stake-holder in Air India and Indian Airlines.
Another airline company to begin early operations was Air India, which had its beginning as Tata Airlines in 1932, a division of Tata Sons Ltd. (now Tata Group) by India's leading industrialist JRD Tata. On October 15, 1932, J. R. D. Tata himself flew a single engined De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi to Bombay via Ahmedabad. The aircraft continued to Madras via Bellary piloted by Royal Air Force pilot Nevill Vincent.
Following the end of World War II, regular commercial service was restored in India and Tata Airlines became a public limited company on 29 July 1946 under the name Air India. After the Independence of India, 49% of the airline was acquired by the Government of India. In return, the airline was granted status to operate international services from India as the designated flag carrier under the name Air India International.
Neighbouring countries also soon embraced air transport, notably with the beginning of a new nation, Pakistan began Orient Airways Ltd (Pakistan International Airlines), Cathay Pacific founded in 1946, Singapore Airlines and Malaysian Airlines in 1947 (as Malayan Airways), Garuda Indonesia in 1949, Japan Airlines in 1951, and Korean Air in 1962. With the outbreak of World War Two, the airline presence in Asia came to a relative halt, with many new flag carriers donating their aircraft for military aid and other uses.
Development since 1945
Post-war airline route structure.[citation needed]
As governments met to set the standards and scope for an emergent civil air industry toward the end of the war, it was no surprise that the U.S. took a position of maximum operating freedom. After all, U.S. airline companies were not devastated by the war, as European companies and the few Asian companies had been. This preference for "open skies" operating regimes continues, within limitations, to this day.
World War II, like World War I, brought new life to the airline industry. Many airlines in the Allied countries were flush from lease contracts to the military, and foresaw a future explosive demand for civil air transport, for both passengers and cargo. They were eager to invest in the newly emerging flagships of air travel such as the Boeing Stratocruiser, Lockheed Constellation, and Douglas DC-6. Most of these new aircraft were based on American bombers such as the B-29, which had spearheaded research into new technologies such as pressurization. Most offered increased efficiency from both added speed and greater payload.
In the 1950s, the De Havilland Comet, Boeing 707, Douglas DC-8, and Sud Aviation Caravelle became the first flagships of the Jet Age in the West, while the Soviet Union bloc countered with the Tupolev Tu-104 and Tupolev Tu-124 in the fleets of state-owned carriers such as Aeroflot and Interflug. The Vickers Viscount and Lockheed L-188 Electra inaugurated turboprop transport.Airline trunk route systems.[citation needed]
The next big boost for the airlines would come in the 1970s, when the Boeing 747, McDonnell Douglas DC-10, and Lockheed L-1011 inaugurated widebody ("jumbo jet") service, which is still the standard in international travel. The Tupolev Tu-144 and its Western counterpart, Concorde, made supersonic travel a reality. In 1972, Airbus began producing Europe's most commercially successful line of airliners to date. The added efficiencies for these aircraft were often not in speed, but in passenger capacity, payload, and range.
1978's U.S. airline industry deregulation lowered barriers for new airlines. In this period, new start-ups entered during downturns in the normal 8-10 year business cycle. At that time, they find aircraft, are financed, contract hangar and maintenance services, train new employees, and recruit laid off staff from other airlines.
As the business cycle returned to normalcy, major airlines dominated their routes through aggressive pricing and additional capacity offerings, often swamping new startups. Only America West Airlines (which has since merged with US Airways) remained a significant survivor from this new entrant era, as dozens, even hundreds, have gone under.
In many ways, the biggest winner in the deregulated environment was the air passenger. Indeed, the U.S. witnessed an explosive growth in demand for air travel, as many millions who had never or rarely flown before became regular fliers, even joining frequent flyer loyalty programs and receiving free flights and other benefits from their flying. New services and higher frequencies meant that business fliers could fly to another city, do business, and return the same day, for almost any point in the country. Air travel's advantages put intercity bus lines under pressure, and most have withered away.
By the 1980s, almost half of the total flying in the world took place in the U.S., and today the domestic industry operates over 10,000 daily departures nationwide.
De-regulated hub and spoke airline route structures.[citation needed]
Toward the end of the century, a new style of low cost airline emerged, offering a no-frills product at a lower price. Southwest Airlines, JetBlue, AirTran Airways, Skybus Airlines and other low-cost carriers began to represent a serious challenge to the so-called "legacy airlines", as did their low-cost counterparts in Europe, Canada, and Asia. Their commercial viability represented a serious competitive threat to the legacy carriers. However, of these, ATA and Skybus have since ceased operations.
Thus the last 50 years of the airline industry have varied from reasonably profitable, to devastatingly depressed. As the first major market to deregulate the industry in 1978, U.S. airlines have experienced more turbulence than almost any other country or region. Today, almost every single legacy carrier except for American Airlines has operated under Chapter 11 bankruptcy provisions or have gone out of business.
U.S.
Tony Jannus conducted the United States' first scheduled commercial airline flight on 1 January 1914 for the St. Petersburg-routes, Braniff Airways, American Airlines, Delta Air Lines, United Airlines (originally a division of Boeing), Trans World Airlines, Northwest Airlines, and Eastern Air Lines, to name a few.US airline
route structure before World War IIPassenger service during the early 1920s was sporadic: most airlines at the time were focused on carrying bags of mail. In 1925, however, the Ford Motor Company bought out the Stout Aircraft Company and began construction of the all-metal Ford Trimotor, which became the first successful American airliner. With a 12-passenger capacity, the Trimotor made passenger service potentially profitable. Air service was seen as a supplement to rail service in the American transportation network.
At the same time, Juan Trippe began a crusade to create an air network that would link America to the world, and he achieved this goal through his airline, Pan American World Airways, with a fleet of flying boats that linked Los Angeles to Shanghai and Boston to London. Pan Am and Northwest Airways (which began flights to Canada in the 1920's) were the only U.S. airlines to go international before the 1940s.
With the introduction of the Boeing 247 and Douglas DC-3 in the 1930s, the U.S. airline industry was generally profitable, even during the Great Depression. This trend continued until the beginning of World War II.
Europe
The Imperial Airways Empire Terminal, Victoria, London. Trains ran from here to flying boats in Southampton, and to Croydon Airport.
The first countries in Europe to embrace air transport were Finland, France, Germany, the Netherlands and the United Kingdom.
KLM, the oldest carrier still operating under its original name, was founded in 1919. The first flight (operated on behalf of KLM by Aircraft Transport and Travel) transported two English passengers to Schiphol, Amsterdam from London in 1920. Like other major European airlines of the time (see France and the UK below), KLM's early growth depended heavily on the needs to service links with far-flung colonial possessions (Dutch Indies). It is only after the loss of the Dutch Empire that KLM found itself based at a small country with few potential passengers, depending heavily on transfer traffic, and was one of the first to introduce the hub-system to facilitate easy connections.
France began an air mail service to Morocco in 1919 that was bought out in 1927, renamed Aéropostale, and injected with capital to become a major international carrier. In 1933, Aéropostale went bankrupt, was nationalized and merged with several other airlines into what became Air France.
In Finland, the charter establishing Aero O/Y (now Finnair, one of the oldest still-operating airlines in the world) was signed in the city of Helsinki on 12 September 1923. Junkers F 13 D-335 became the first aircraft of the company, when Aero took delivery of it on 14 March 1924. The first flight was between Helsinki and Tallinn, capital of Estonia, and it took place on 20 March 1924, one week later.
Germany's Lufthansa began in 1926. Lufthansa, unlike most other airlines at the time, became a major investor in airlines outside of Europe, providing capital to Varig and Avianca. German airliners built by Junkers, Dornier, and Fokker were the most advanced in the world at the time. The peak of German air travel came in the mid-1930s, when Nazi propaganda ministers approved the start of commercial zeppelin service: the big airships were a symbol of industrial might, but the fact that they used flammable hydrogen gas raised safety concerns that culminated with the Hindenburg disaster of 1937. The reason they used hydrogen instead of the not-flammable helium gas was a United States military embargo on helium.
The British company Aircraft Transport and Travel commenced a London to Paris service on 25 August 1919, this was the world's first regular international flight. The United Kingdom's flag carrier during this period was Imperial Airways, which became BOAC (British Overseas Airways Co.) in 1939. Imperial Airways used huge Handley-Page biplan
es for routes between London, the Middle East, and India: images of Imperial aircraft in the middle of the Rub'al Khali, being maintained by Bedouins, are among the most famous pictures from the heyday of the British Empire.Asia
A Philippine Airlines DC-3 at Manila, Philippines
Some of the first countries in Asia to embrace air transport were India, Hong Kong, Indonesia, Malaysia and the Philippines.
The first country in Asia to embrace air transport was the Philippines. Philippine Airlines was founded on February 26, 1941, making it Asia's oldest carrier and the oldest operating under its current name. The airline was started by a group of businessmen led by Andres Soriano, hailed as one of the Philippines' leading industrialists at the time. The airline’s first flight was made on March 15, 1941 with a single Beech Model 18 NPC-54 aircraft, which started its daily services between Manila (from Nielson Field) and Baguio, later to expand with larger aircraft such as the DC-3 and Vickers Viscount. Notably Philippine Airlines leased Japan Airlines their first aircraft, a DC-3 named "Kinsei". On July 31, 1946, a chartered Philippine Airlines DC-4 ferried 40 American servicemen to Oakland,California from Nielson Airport in Makati City with stops in Guam, Wake Island, Johnston Atoll and Honolulu, Hawaii, making PAL the first Asian airline to cross the Pacific Ocean. A regular service between Manila and San Francisco was started in December. It was during this year that the airline was designated as the Philippines flag carrier.
Air India Boeing 747-400. The Government of India is the majority stake-holder in Air India and Indian Airlines.
Another airline company to begin early operations was Air India, which had its beginning as Tata Airlines in 1932, a division of Tata Sons Ltd. (now Tata Group) by India's leading industrialist JRD Tata. On October 15, 1932, J. R. D. Tata himself flew a single engined De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi to Bombay via Ahmedabad. The aircraft continued to Madras via Bellary piloted by Royal Air Force pilot Nevill Vincent.
Following the end of World War II, regular commercial service was restored in India and Tata Airlines became a public limited company on 29 July 1946 under the name Air India. After the Independence of India, 49% of the airline was acquired by the Government of India. In return, the airline was granted status to operate international services from India as the designated flag carrier under the name Air India International.
Neighbouring countries also soon embraced air transport, notably with the beginning of a new nation, Pakistan began Orient Airways Ltd (Pakistan International Airlines), Cathay Pacific founded in 1946, Singapore Airlines and Malaysian Airlines in 1947 (as Malayan Airways), Garuda Indonesia in 1949, Japan Airlines in 1951, and Korean Air in 1962. With the outbreak of World War Two, the airline presence in Asia came to a relative halt, with many new flag carriers donating their aircraft for military aid and other uses.
Development since 1945
Post-war airline route structure.[citation needed]
As governments met to set the standards and scope for an emergent civil air industry toward the end of the war, it was no surprise that the U.S. took a position of maximum operating freedom. After all, U.S. airline companies were not devastated by the war, as European companies and the few Asian companies had been. This preference for "open skies" operating regimes continues, within limitations, to this day.
World War II, like World War I, brought new life to the airline industry. Many airlines in the Allied countries were flush from lease contracts to the military, and foresaw a future explosive demand for civil air transport, for both passengers and cargo. They were eager to invest in the newly emerging flagships of air travel such as the Boeing Stratocruiser, Lockheed Constellation, and Douglas DC-6. Most of these new aircraft were based on American bombers such as the B-29, which had spearheaded research into new technologies such as pressurization. Most offered increased efficiency from both added speed and greater payload.
In the 1950s, the De Havilland Comet, Boeing 707, Douglas DC-8, and Sud Aviation Caravelle became the first flagships of the Jet Age in the West, while the Soviet Union bloc countered with the Tupolev Tu-104 and Tupolev Tu-124 in the fleets of state-owned carriers such as Aeroflot and Interflug. The Vickers Viscount and Lockheed L-188 Electra inaugurated turboprop transport.Airline trunk route systems.[citation needed]
The next big boost for the airlines would come in the 1970s, when the Boeing 747, McDonnell Douglas DC-10, and Lockheed L-1011 inaugurated widebody ("jumbo jet") service, which is still the standard in international travel. The Tupolev Tu-144 and its Western counterpart, Concorde, made supersonic travel a reality. In 1972, Airbus began producing Europe's most commercially successful line of airliners to date. The added efficiencies for these aircraft were often not in speed, but in passenger capacity, payload, and range.
1978's U.S. airline industry deregulation lowered barriers for new airlines. In this period, new start-ups entered during downturns in the normal 8-10 year business cycle. At that time, they find aircraft, are financed, contract hangar and maintenance services, train new employees, and recruit laid off staff from other airlines.
As the business cycle returned to normalcy, major airlines dominated their routes through aggressive pricing and additional capacity offerings, often swamping new startups. Only America West Airlines (which has since merged with US Airways) remained a significant survivor from this new entrant era, as dozens, even hundreds, have gone under.
In many ways, the biggest winner in the deregulated environment was the air passenger. Indeed, the U.S. witnessed an explosive growth in demand for air travel, as many millions who had never or rarely flown before became regular fliers, even joining frequent flyer loyalty programs and receiving free flights and other benefits from their flying. New services and higher frequencies meant that business fliers could fly to another city, do business, and return the same day, for almost any point in the country. Air travel's advantages put intercity bus lines under pressure, and most have withered away.
By the 1980s, almost half of the total flying in the world took place in the U.S., and today the domestic industry operates over 10,000 daily departures nationwide.
De-regulated hub and spoke airline route structures.[citation needed]
Toward the end of the century, a new style of low cost airline emerged, offering a no-frills product at a lower price. Southwest Airlines, JetBlue, AirTran Airways, Skybus Airlines and other low-cost carriers began to represent a serious challenge to the so-called "legacy airlines", as did their low-cost counterparts in Europe, Canada, and Asia. Their commercial viability represented a serious competitive threat to the legacy carriers. However, of these, ATA and Skybus have since ceased operations.
Thus the last 50 years of the airline industry have varied from reasonably profitable, to devastatingly depressed. As the first major market to deregulate the industry in 1978, U.S. airlines have experienced more turbulence than almost any other country or region. Today, almost every single legacy carrier except for American Airlines has operated under Chapter 11 bankruptcy provisions or have gone out of business.
The pattern of ownership has gone from government owned or supported to independent, for-profit public companies. This occurs as regulators permit greater freedom and non-government ownership, in steps that are usually decades apart. This pattern is not seen for all airlines in all regions.
The overall trend of demand has been consistently increasing. In the 1950s and 1960s, annual growth rates of 15% or more were common. Annual growth of 5-6% persisted through the 1980s and 1990s[citation needed]. Growth rates are not consistent in all regions, but countries with a de-regulated airline industry have more competition and greater pricing freedom. This results in lower fares and sometimes dramatic spurts in traffic growth. The U.S., Australia, Canada, Japan, Brazil, Mexico,India and other markets exhibit this trend.
The industry is cyclical. Four or five years of poor performance precede five or six years of improved performance. But profitability in the good years is generally low, in the range of 2-3% net profit after interest and tax. In times of profit, airlines lease new generations of airplanes and upgrade services in response to higher demand. Since 1980, the industry has not earned back the cost of capital during the best of times. Conversely, in bad times losses can be dramatically worse.
Warren Buffett once said that despite all the money that has been invested in all airlines, the net profit is less than zero. He believes it is one of the hardest businesses to manage.
As in many mature industries, consolidation is a trend. Airline groupings may consist of limited bilateral partnerships, long-term, multi-faceted alliances between carriers, equity arrangements, mergers, or takeovers. Since governments often restrict ownership and merger between companies in different countries, most consolidation takes place within a country. In the U.S., over 200 airlines have merged, been taken over, or gone out of business since deregulation in 1978. Many international airline managers are lobbying their governments to permit greater consolidation to achieve higher economy and efficiency.
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