Introduction This lesson describes the key features of the airline industry which affect airport ramp services.

First, we will examine how the airline industry fits in with the air transportation industry. Then we will scope out the types of services provided. Finally, we will discuss passenger service, and introduce air cargo transport. Lesson Objectives After completing this lesson you will be able to: Define what is meant by the airline industry and describe it Describe the main characteristics of the airline industry Describe the difference between scheduled and nonscheduled flights List and describe the two types of air travel for passengers Describe what is meant by air cargo transport

What do you think? An airline's basic function is to transport people and goods. TRUE The Airline Industry - A System of Transportation An airline's basic function is to transport people and goods from one location to another using the airways. The airline industry consists of organisations providing this service for passengers and/or cargo. As a mode of transportation, it requires an infrastructure, including transport networks and nodes or terminals; vehicles as the means of transportation; and operations to control the transportation systems. ((Air transport provides the only global transportation network for passengers and cargo, making it essential for international business operations and for personal travel and tourism. As mentioned in the previous lesson, it provides substantial economic benefits by connecting people and businesses around the globe. It also provides significant social benefits by facilitating greater communication between different parts of the world and by providing greater access to remote areas. )) ((Ground handling services, including ramp services, are essential to the efficient use of the air transport infrastructure. )) ((Transport networks are also known as the airways. )) ((Terminals are also known as airports. )) ((Air traffic control refers to an example of the operations used to control air transportation. )) KEY An airline's basic function is to transport people and goods from one location to another using the airways. The airline industry consists of organisations providing this service for passengers and/or cargo. The airlines that provide cheduled flight service can be categorised as major airlines, low cost

carriers or regional airlines. Major airlines are usually those large airlines that connect the major cities of the world. Regional airlines, on the other hand, represent a type of airline service that is intended to feed the major airlines. Low Cost Carriers usually provide point-to-point service with no additional amenities.

Characteristics of the Airline Industry Lets take a look at the primary characteristics of the airline industry, including both passenger and cargo transport: Highly Competitive Increased competition means that the airlines and handling agents must be constantly looking for innovative ways to attract and retain their customer base. This must be done while maintaining at least minimum services in line with industry standards. It's A Service Industry In transporting passengers and their belongings (or their products, in the case of cargo customers) from one given point to another for an agreed price, airlines perform a service for their customers. Unlike the manufacturing industry, there is no product provided, nor is there inventory created and stored for later sale. Although there are a great deal of equipment and facilities involved in air transportation, it is clearly a service industry. Thin Profit Margins Airlines earn a net profit between 1 - 2% compared to an average of 5% for other industries. For the airlines, earning enough profit to satisfy their stockholders, as well as invest in the equipment and facilities they require, is a genuine challenge. The deregulation of the provision of ground handling in many countries has meant a proliferation of ground handling agents over the past 10yrs. Competition has resulted in reduced handling fees, and thus currently very slim profit margins. Large companies that have invested in airline ground handling are hoping to increase their shareholder value by bringing their business expertise to bear in this rapidly growing market. Time will tell the extent to which they will succeed or it may be that these investors will have to be content with a significant cash flow but a low profit margin in an unusually dynamic and expanding sector.

Capital Intensive Airlines need expensive equipment and facilities in order to operate, such as; airplanes, flight simulators, and maintenance hangars. The airline business is expensive from start-up, and since all of an airline's equipment at some point will need to be replaced airlines are leasing equipment on an increasing basis. This includes equipment they may have actually owned previously but sold to someone else and have leased back.

In terms of handling services, the high cost of ownership and maintenance of specialist GSE, is a barrier to entry for potential agents. For this reason, most handling agents are part of one of the large international companies (e.g.,Servisair, Menzies, Swissport, Avia Partner) or part- owned subsidiaries of airlines, or airport companies or other large companies who have the required capital. Seasonal The airline business can be very seasonal, especially in North America, Europe and tourist destinations. The busiest periods in these locations are the summer months and the last two weeks in December. The result of such peaks and valleys in travel patterns is that airline revenue also rises and falls, and the need for airport staff, and an increase in temporary seasonal contracts and it may be necessary to serve two or more seasonal contracts before becoming a permanent employee. The same is not necessarily true for all airports. The larger world airports, for example, have scheduled year round traffic without these fluctuations. This means that the airports that serve major capital cities with a predominance of business passengers, such as London Heathrow Airport, have a more steady need to recruit qualified personnel. High Cash Flow Because large airlines and handling agents own a large fleet of expensive aircraft or Ground Service Equipment which depreciate in value over time, they typically generate a substantial positive cash flow (profits plus depreciation). Most airlines use their cash flow to repay debt or acquire new aircraft. When profits and cash flow decline, an airline's ability to repay debt and acquire new aircraft is jeopardised. Labor Intensive The airline industry is also labor intensive. Each major airline or airline service company employs a multitude of staff: pilots, cabin crew, aircraft engineers, ramp services, loading staff, reservations agents, airport passenger service staff, security staff, catering staff, cleaners, managers, accountants, lawyers and many others. Although computers have automated many functions, there are still many tasks (such as airport ramp services and passenger services) that require talented, skilled people. The increase in terrorist activity and consequent tightening of security precautions has placed a strain on airlines, airports and airline handling services in recruiting sufficient staff. This is because most countries now insist on thorough background checks on all potential employees who would have access to the security sensitive areas of the airport. This can take a lot of time and expense. Measure Your Progress! Which describe the main characteristics of the airline industry? Provides products and creates inventory Capital intensive Labour intensive High profit margin

Current Status The airline industry is highly globalised, both in passenger travel and cargo transportation. In the last five years, the industry has experienced a great deal of turmoil, making it very unstable. Recent bankruptcies demonstrate the financial troubles of the industry, some of which are a result of operational inefficiencies. Economic recession and travel reductions following terrorist activities have contributed to a volatile environment. The need for improved security processes will require additional investment on the part of the industry while containing costs will continue to be a priority.

What do you think? Scheduled flights use predetermined routes according to a planned timetable, while non-scheduled flights do not. TRUE Types of Air Travel The two main types of airline service are non-scheduled flights and scheduled flights. For the public, the most visible part of civil aviation is scheduled air transport, but in fact, the vast majority of flights operate under general aviation. From a global perspective, there are over 900 airlines worldwide with an Air Operating Certificate, which means they have been legally certificated to operate an airline. ((Non-scheduled flights are typically charter flights for travellers who want to hire a plane to fly to a specific place at a specific time. A charter airline operates these flights that take place outside normal schedules through hiring arrangements with a particular customer )) ((Scheduled flights have predetermined routes according to a planned timetable and published schedules. Scheduled airlines are considered to be a category of civil aviation, representing all types of non-military aviation, and which includes both private and commercial aviation. The other major category of civil aviation is general aviation, including all other flights, private or commercial. )) KEY The two main types of airline service are scheduled flights and non-scheduled flights. Scheduled flights take place using predetermined routes according to a planned timetable. IATA focuses primarily on scheduled traffic. Flights by IATA members represent 94% of the worlds international scheduled traffic. IATA is now comprised of 260 member airlines from 136 countries. According to the latest IATA statistics, in 2004 there were more than 1.9 billion passengers and 39.5 million tons of cargo transported, of which 25 million tons were international.