The airline industry is a market like any other, with its prices being controlled by supply and demand. Since September 11, 2001, the airline industry has been trying to recover from billions of dollars in loss. Months after the tragedy of the two towers many major airlines, such as U.S. Airways, filed for bankruptcy. This one incident had a major affect on the supply and demand of their market. How are things looking now, and where will they be in the next two to five years?

rlines are not only particularly sensitive to external shocks (9-11) but also to economic growth. During cycle troughs, passenger traffic collapses, load factors display modest performances leading to the mothballing of numerous aircraft and to major declines in airlines‘ profitability. Moreover, high aircraft order cancellation fees limit the possibilities of canceling the delivery of aircraft ordered in previous years.” (Pebereau, Michel) Postponed deliveries set the airlines with an obligation to pay for their aircraft when demand is at its lowest. It would make sense to financial institutes to use the aircraft as collateral, but their value declines. And because of this it is a lot easier to focus on supply to show predictions for the future. “The rigidity of supply enables easy forecasting of cycle changes in the sector, demand being more volatile.” (Pebereau, Michel)

“Based on Airline Monitor forecasts: old aircraft retirements -300 units, traffic growth +9% and capacity growth +7%, the supply/demand balance indicator should follow a downward slope indicating that overcapacities are being reduced. Supply/demand balance is an indicator of overcapacities calculated as follows: ((supply-demand)/demand).” (Pebereau, Michel) So they are predicting that in 2006 there will be an end to overcapacities, but that possible orders in 2004 could somewhat threaten this surplus reduction.

There is a lot that needs to be d

Some topics in this essay:
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