Chaos in the skies – the airline industry pre and post 9/11 Case Study Chaos in the skies- the airline industry pre and post 9/11 1. Introduction The terrorist attack on the New York World Trade Center and the Pentagon on September 11, 2001, when civilian planes were turned into guided missiles flown by suicide bombers driven by religious fundamentalism and hatred for the United States not only seared themselves into the consciousness of the American people, but into the economic and business fabric of the country, and as a result, of the world.
While the United States economy was slowing in the months before this tragic event, the aftermath of the bombings led the economy into a depression. The airline and travel industry were the worst hit of all industries. This is a review of the situation before and after 9/11 on industry of these attacks and an overview of responses both by government and on industry to the event. 2. Situation before 9/11 STEP 2. 1 Social Factors The demand for air transport was basically caused by a rising world GDP, an increasing world trade and investment liberalization of markets.
Between 1990 and 2000 airlines benefited from an increasing number of tourist passengers from 450 million up to 700 million. The main reasons for people to fly were leisure and business trips. Travelling by plane was also a symbol of wealth and success. 2. 2 Technological Factors There has been made huge steps in airline technology, with the invention of more efficient engines the demand for long-distance flight could be satisfied. The internet opened a whole new and cheaper distribution channel for airlines.
Furthermore airlines could improve their non-core services to get competitive advantages towards other airlines for example TV screens in the seats or faster boarding with new boarding systems. 2. 3 Economical Factors There was an increasing of US passengers travelling with planes of 160% between 1978 and 2000 (almost 660 million passengers) Through the year 2000 the operating costs for airlines went up constantly caused by higher fuel prices and rising labour costs furthermore the widening of the non-core services of airlines caused immense costs. Airlines reacted on that with reducing labour and cutting costs.
Furthermore many airlines started out-sourcing their non-core services and activities in order to get back to the core-service and to save costs. 2. 3. 1 Competitive situation 1st visit to Coursework. info? Welcome! As a welcome gift, you are viewing the the complete version of this essay, to view other documents in full you will need to become a subscriber. A basic impact on the competitive situation in the airline industry was 1978 US open markets policy which enabled competitors to enter the industry. In the further development of the industry several airlines merged in order to benefit from economies of scale.
In 1984, 15 airlines had 90% of the US market in 1990 there were 8 airlines with a market share of 90%. The increasing competition among the airlines lowered the flight prices and airlines had to reduce costs. By the introduction of Hub and Spoke systems fix costs for airlines could be reduced and efficiency could be increased, also customers benefited from these networks. The development of the airline industry basically brought up two different models, the so called Low Cost Carriers who try to offer very low prices to their customers by eg. educing on ground services and only offering point to point services. On the other hand there are the traditional Full Service Carriers providing the customer a broader range of services and opportunities. The Low Cost Carriers could win market share because of increasing customer price sensitivity, also business travel declined in 2001 41%. There was a trend of business travellers buying cheaper tickets and to renounce full services. 2. 4 Political factors Basically the industry was fragmented from the constraints of national and international regulations, politics and public ownership.
These small impacts were in the form of landing rights and competitive restraints. 3. Situation after 9/11 STEP 3. 1 Social Factors The attacks of 9/11 led to a declining of bookings of 74% of US domestic flights and 19% worldwide in the first four days. People were afraid of using air travel. Furthermore the longer check in times because of higher safety standards increased the door–to-door travelling time and customers were looking for alternatives such as video conferencing, using the car or the train.
Furthermore customers were not willing to pay the prices they paid before 9/11. 3. 2 Technological Factors Airlines invested huge amounts of money into new security systems and safer cockpit doors the changeover of the aircrafts caused enormous costs. 3. 3 Economical Factors After 9/11 the economy was facing a recession. Stock market was completely closed for a week, sectors like insurance airlines decimated. Many airlines were facing bankruptcy. Furthermore insurances raised their premiums up to 500% which increased operating costs for airlines. 3. 3. 1 Competitive situation
Full Service Carriers suffered from the customers fear people avoided long-distance flights, also business flights decreased. To counteract the decreasing bookings and the demand for cheaper prices the Full Service Carriers introduced a dramatic cost-cutting program, including reducing employees. The Low Cost Carriers acted different from the Full Service Carriers, they started campaigns to rebuild the customers’ trust into flying and offered attractive and very cheap bundles to customers. As a result Low Cost Carriers could strengthen their market position and win new customers. 3. Political Factors Immediately after 9/11 the government increased security standards in airports and aircrafts, which of course caused higher operational costs for airlines. The government provided the aviation industry an emergency assistance of $ 15 billion only ten day after the attacks. In 2001 President Bush introduced a very controversial security tax, which every customer had to pay. In 2003 a US District Court decided that a hijacking is a risk which is foreseeable, this was the go-ahead for family members of the airplane passengers of the 9/11 flights to sue the airline industry. . Conclusion / Recommendations The events of 9/11 accelerated and aggravated negative financial trends which already evident in the airline industry. In order to return to profitability, several steps must be taken to increase consumer demand for air travel, especially business travel, control costs, and address certain pricing issues. The Congress has enacted and the President has signed into law several measures aimed at helping the airline industry to recover and respond to terrorist attacks. However over the long term, the outlook for the U.
S. airline industry is more uncertain. The industry faces persistent structural problems that have to be addressed to avoid another wave of bankruptcies in the next economic downtown, and if the industry is to take full advantage of the very substantial progress made in lowering unit costs. If the Federal Reserve increases the interest rate, investments in airline industry will become costlier. Similarly, if government follows contractionary fiscal polices by increasing the tax rates, the profits of the airline industry will be affected.
Thus, economic polices and changes in the structure of the economy highly influence the structure of the airline industry as the industry is highly sensitive and dynamic to the policy changes. mplementation of the New Security Guidelines The security industry flourished after the 9/11 attacks. The need for security and how it was going to be implemented was top priority. According to McCamey, ” . . . a long war on terrorism is sending multinational companies into the arms of private security organizations” (2001, p. 1). Many companies wanted to upgrade security within their buildings to ensure the safety of their employees.
According to Embree and Wicks, “As the need to protect people and assets grow, it’s become equally important to control and monitor those who need access to what is protected” (2003, p. 35). This could be done in a variety of ways: from introducing CCTV cameras into the workplace or upgrading the security associated to the accessibility of the building security personnel had their hands full. The airline industry is one the fastest industries to upgrade their security. Since the terrorist attacks occurred from highjacked airplanes, the airline industry had to establish new security measures to allow people to feel safe while flying.
Shortly after the terrorist attack on the United States, President Bush provided twenty billion dollars for the upgrading of intelligence and security. These changes involved stricter background checks and the tougher security requirements on baggage checks (McCamey, 2001). Terrorism and the Role of Security Professionals What is terrorism? Terrorism, according to the Federal Bureau of Investigations (FBI), is “an unlawful use of force or violence against persons or property to intimidate or coerce a government, the civilian population, or any segment thereof, in furtherance of political or social objectives”(Conley, 2003b, 198).
It is an unsettling reality, but terrorist operate and work in and around our everyday lives (Conley, 2003b). The role a security officer has is important when counteracting terrorism, especially in such an establishment which caters to millions of people traveling from all parts of the world. This role has become more prevalent following the terrorist events on 9/11 (Conley, 2003b). Security officers are employed to ensure the safety of the assets they are assigned to protect (Conley, 2003a). As Tom M. Conley states, “it is the security officer who is on the front line” (2003b, 200).
Security officers are intimate with their work environments. Unlike law enforcement personnel such as the FBI or CIA who are not employees of the airport, a security officer is able to detect minor disparities in their work environment and abruptly address those abnormalities (Conley, 2003b). Security officers must be able to conduct activities outside of observation and patrol. These activities include baggage checks and vehicle checks, screening passengers and personnel, and operating detection equipment such as x-ray machines (Hertig, 2003, 203).
Alongside the role a security officer plays, there are a number of new requirements that are addressed in the airline industry. Transportation Security Administration The new security requirements had short and long-term goals. The new requirements were in enacted November of 2001. The reason for this was that President Bush wanted to make sure that the heightened security would take effect before the holiday seasons of Thanksgiving and Christmas which are two of the largest traveling times of the year (Abrams, 2001). Congress, on November 19, 2001, constructed the Aviation and Transportation Security Act (ATSA).
The ATSA formed the Transportation Security Administration (TSA), which was formerly headed under the Department of Transportation. On November 25, 2002 following the construction of the Homeland Security Act, TSA was assigned to the Department of Homeland Security (Dillingham, 2003). The TSA was developed in order to improve the quality of airline security following the September 11, 2001 events; shortly after the TSA was developed, roughly 65,000 new federal personnel were employed. New Requirements Since the new regulations came fairly quickly, the goals were set in short and long terms.
According to Jim Abrams, some of the short term goals included “criminal background checks on 750,000 airport employees, the presence of more law enforcement, the screening of all checked baggage with whatever means available, including X-ray machines and hand inspections, the placement of more air marshals on flights, and more passengers will be pre-screened, with more cross-checking with FBI and other watch lists for suspicious passengers” (2001). As of 2003, the department of Homeland Security, headed by Tom Ridge, made the decision to increase the number of air marshals by 5,000 (Regional, 2003).
Those short-term affects were to happen within the first year of implementation. The long term affects of the new security on airlines were: “A new Transportation Department agency put in place to oversee all transportation security measures, all 28,000 airport baggage screeners [are] federal workers, all checked baggage is to be inspected with explosives detection machines, [and] Trusted-passenger programs will be implemented, using new technologies to identify passengers and expedite screening” (Abrams, 2001).
Most of the new regulations proposed security of the baggage and the passengers on the plane. According to the TSA, as quoted in the article by Gerald L. Dillingham, “[The TSA has] confiscated more than 4. 8 million prohibited items (including firearms, knives, and incendiary or flammable objects) from passengers” (2003, p. 8). The Department of Homeland Security has also backed up this fact by stating “airport screeners have, since February 2002, intercepted more than 7. million items, including 1,437 firearms, 2. 3 million knives, and 49,331 box cutters – the terrorists’ weapon of choice on 9-11. Attempts at concealment included razor blades hidden in tennis shoes” (Gips, 2003). Personal Security However, since it is obvious from the September 11 attacks, a passenger once on the plane can be just as dangerous as a bomb. Therefore, the passenger themselves need to be searched for weapons as well as their carry-on luggage. Passengers have also noticed more security changes.
The carry-on luggage is searched more carefully and hand searches of bags are not as uncommon as they once were. Passengers themselves might be searched more carefully with wand and pat down searchers rather then the walk through detectors (Abrams, 2001). Also their vehicles are also checked for bombs upon arriving at the airport even if one is there just to pick up a loved on, each car is checked by a security officer. More searchers were not the only things passengers noticed when flying. Many regulations to carry on and check in also changed. Air travelers are limited to one carry-on bag and one personal item (such as a purse or briefcase) on all flights” (Airport, 2003). When a passenger is checking in they are required to have a government issued photo ID, which could also be checked at multiple points throughout the airport, as well as proper documentation of reservations from the airline if one uses an E-ticket (Airport, 2003). Another difference is the number of people allowed in the gate area. Before the terrorist attacks any person was allowed to see their loved one to the gate and watch the plane depart.
However, since the attacks only passengers are allowed past the screening checkpoints to the gate. Conclusion The terrorist attacks on 9/11 were one of many terrorist attacks that ravaged our country, but it is and still remains to be the most memorable one. The death toll is unknown to this day, three years following the tragic events; victims and families are still not at peace. September 11, 2001 was a much needed wakeup call for the airline industry; security measures were under heavy reconstruction following the events.
Today the role of a security professional is a complex one. Two years following the 9/11 attacks, airline security still seem to remain stricter. However, people seem to have acclimated themselves to these new changes and no longer gripe about the long lines and time restraints the new regulations have caused. People tend to understand that for their safety these regulations had to occur and seem to take the long lines and having to come to the airport even earlier in stride. The new security measures have become routine.