The airline business is a tough business.

Profit margins are thin, fixed costs

are high, capital expenditures are large, government regulation has been
unstable, and taxation can be unmerciful. Demand can be chilled by an
outbreak of disease, recession, war or terrorism.

The airline business also is a glamorous business. Its technology is

breathtaking. The defiance of gravity, the allure of exotic destinations or
primordial geographic domination has drawn investment and managerial
talent into the industry at a level surpassing what dispassionate financial
analysis seemingly would warrant.

By shrinking the planet, aviation is a principal means of intermingling and

integrating disparate economies and cultures, stimulating social and cultural
cross-fertilization, economic growth and diversity in an increasingly
interdependent global environment.

Trade and tourism are heavily reliant on this most modern means of
transportation. Whole economic sectors (e.g., hotels, automobile rental firms,
convention business, and tourist destinations) depend on safe, secure,
dependable, efficient and reasonably priced commercial air transportation.

“Just-in-time” [JIT] inventory has moved to a global scale with the

expeditious movement of cargo by air. The economic ripple effect throughout
industrial and commercial. sectors and geographic regions is profound.

GOVERNMENT AND THE AIRLINE INDUSTRY

As a fundamental component of the infrastructure upon which economic

growth is built—the veins and arteries of commerce, communications and
national defense—a healthy transportation system offering reasonable prices
and ubiquitous service to the public is vitally important to the health of the
nation it serves.

No nation can aspire to participate in the global economy without safe and
dependable airline service. For that reason, throughout history, governments
the world over have promoted and encouraged its development by providing
infrastructure, research and development, protective regulation, subsidies,
and outright ownership of airlines.

“If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize
it.”

At the dawn of the 21st century, more than 1,000 scheduled airlines operate
more than 15,000 aircraft. The commercial airline industry carried 1.6 billion
passengers and 22 million tons of cargo annually, about 40% of the world’s
manufacturing exports based upon value.
Today, airlines carry 2.3 billion passengers on more than 26 million flights
worldwide.

Worldwide, civil aviation employs 28 million people, directly, indirectly or

induced.

By 2000, the commercial airline industry accounted for more than a trillion
dollars a year in economic activity, directly, indirectly, and induced.

If the industry were a nation, it would rank seventh in the world in economic
production, just ahead of Canada.

Air transportation is an integral part of the tourism and travel industry,

arguably the world’s largest single industry.

The tour and travel industry employs one out of every 15 workers. It
accounts for 12.9% of consumer spending and provides 7.2% of worldwide
capital investment.”

How Major Airlines are Structured

Operations
Flight – flight attendants and pilots
Ramp – fuelers, baggage handlers, lavatory servicing, utility/cleaners and
caterers
Customer Service – ticket counters/gate agents and special service
personnel, including airport lounge Representatives
Technical Operators – maintenance, engineering and quality control

Operations personnel are responsible for operating an airline’s fleet of aircraft

safely and efficiently.They schedule the aircraft and flight crews and develop
and administer all policies and procedures necessary to maintain safety and
to meet all FAA operating requirements.
Operations is in charge of all flight-crew training – both initial and recurrent
training for pilots and flight attendants – and it establishes the procedures
crews are to follow before, during and after each flight to ensure safety.

Dispatchers release flights for takeoff, following a review of all factors

affecting a flight. These include weather, routes the flight may follow,
fuel requirements, and both the amount and distribution of weight onboard
the aircraft. Weight must be distributed evenly aboard an aircraft for it to fly
safely.

By keeping planes in excellent condition, maintenance programs keep aircraft

in safe, working order; ensure passenger comfort; preserve the airline’s
valuable physical assets (its aircraft); and ensure maximum utilization of
those assets. An airplane costs its owner money every minute of every day,
but generates revenue only when it is flying with freight and/or passengers
aboard.
It is vital to an airline’s financial success that aircraft are properly maintained.
In addition to large maintenance facilities, airlines typically have inspection
and repair capabilities at hub or focus-city airports.

Sales and Marketing

This division encompasses such activities as pricing, scheduling, advertising,
ticket and cargo sales, reservations and customer service, including food
service.
While all are important, pricing and scheduling, in particular, can make or
break an airline, and both have become more complex and a source of
competitive advantage since deregulation. Airline prices change frequently in
response to supply and demand and to changes in the prices of competitors’
fares.

Schedules change less often than fares, but far more often than when the
government regulated the industry. Airlines use sophisticated global
distribution systems (GDS) and their own Web sites to market and distribute
their schedules and fares directly to consumers and to intermediaries such as
travel agents. Travel agents, who sell approximately 70 percent of all airline
tickets, use GDS systems to research flight schedules and available fares,
book reservations, and issue electronic or, decreasingly, paper tickets for
travelers.

Reservations and Ticketing

Major changes in air transportation have simplified the process for airline
passengers to make a reservation and to purchase a ticket. Electronic
commerce is playing a rapidly growing part in today’s airline industry. In
addition to the paper tickets issued in the past, all of the major airlines now
offer electronic ticketing for domestic and international air travel.

Today’s E-tickets allow an airline to document the sale and track the usage of
transportation. Passengers worry less today about carrying flight coupons or
losing their tickets. They have the ability to shop for the lowest priced
transportation, make or change a reservation, select a seat assignment,
request refunds, and perform other functions, not only through their travel
agent but also from a personal computer or telephone. The number of air
travelers shopping, making reservations and purchasing electronic tickets
using the Internet is increasing daily.

Airlines continue to adapt new technologies to automate check-in procedures .

Customers now have the ability to verify their itineraries, select seat
assignments, obtain cabin class upgrades and print their own boarding
passes, at their own discretion. Electronic self-service check-in kiosks are
now prevalent at all major airports for use by passengers holding E-tickets.
Internet check-in functionality is now available on many carriers’ own Web
sites.
 Management and Administrative Staff
This area includes specialists in such fields as law, accounting, finance,
corporate real estate, network planning, revenue management, governmental
affairs, employee relations corporate communications and public relations.
Their function is to plan, manage and support the firm’s operations and
employees, so that the airline runs efficiently and profitably.
Staff personnel typically work out of corporate headquarters and fall into
several broad corporate job categories: finance and property, purchases,
information technology, personnel, medical, legal, communications, public
relations and planning.

Finance and corporate real estate divisions handle company revenues,

finances and assets. They oversee all company property and the purchase of
food, fuel, aircraft parts and other supplies needed to run an airline.
Information technology designs and maintains the company's internal
computer systems used to store and analyze data needed for operations and
planning.

Subcontractors
While major airlines typically do most of their own work, it is common for them
to outsource certain tasks to other companies or individuals. These tasks
could include flying operations and customer service, aircraft and engine
maintenance, cabin cleaning, catering and reservations. Airlines might
contract out for all of this work or a portion of it, keeping the jobs in house at
their hubs and other key line stations. However, whether an airline does the
work itself or relies on outside vendors, the carrier remains responsible for
meeting all applicable federal safety standards.

Chief Characteristics of the Airline Business

Service Industry
Because of all of the equipment and facilities involved in air transportation, it
is easy to lose sight of the fact that this is, fundamentally, a service industry.
Airlines perform a service for their customers –transporting them and
their belongings (or their products, in the case of shippers) from one
point to another at a published or negotiated rate.

Transport airline from point A to point B like: ex MNL-CEB-DAV

Airline ticket agreement obligado to hatod destination, passenger obligado on
time and rules

In that sense, the airline business is similar to other service businesses

like banks, insurance companies or even barbershops.
There is no physical product given in return for the money paid by the
customer, nor inventory created and stored for sale at some later date.
Capital-Intensive
In contrast with many service businesses, airlines today need more than
storefronts and telephones to get started. They need an enormous range of
expensive equipment and facilities, from airplanes to flight simulators to
maintenance hangars, aircraft tugs, airport counter space and gates.
Consequently, the airline industry is a capital-intensive business, requiring
large sums of money to operate effectively.

Most equipment is financed through loans or the issuance of stock.

Increasingly, airlines are also leasing equipment, including assets they owned
previously but sold to someone else and leased back. Whatever
arrangements an airline chooses to pursue, its capital needs require
consistent profitability.

Stockholders/ shareholder: investment of a business

palit tubo sa stocks: dividends
profit margin airline is low like 5%

airlines own large fleets of expensive aircraft that depreciate in value over
time, they historically have generated a substantial positive cash flow (profits
plus depreciation). Most airlines use their cash flow to repay debt, acquire
new aircraft or upgrade facilities. When cash flow is significant, airlines may
also issue dividends to shareholders.

New technologies have enabled airlines to automate many tasks and operate
more efficiently but, because airlines are a service provider where customers
require personal attention, human capital will retain a prominent role
within any airline’s operations.

Automate: w/out human intervention

Most of time airplane flying it is really computer autopilot

More than one-third of the revenue generated each day by the airlines
goes to pay the wages, benefits and payroll taxes of its workforce, and labor
costs per employee are above average compared to other service industries.

Airline is capital intensive and labor intensive

Airline employees have extensive contact with the customer, particularly in

passenger transportation. Many airline employees belong to unions,
making it one of the most unionized industries in the country.

Labor Union protects the rights of employeers from company

CBA collective bargaining agreement ex: Union and management negotiation
if disagree Labor will strike (hunong work) Power labor union
In 2004, according to the U.S. Bureau of Labor Statistics, about 50 percent of
all workers in the air transportation industry were union members or were
covered by union contracts, compared with 14 percent of workers throughout
the economy.

Airline Profitability
Airlines, through the years, have earned a net profit margin consistently below
the average for U.S. industry as a whole.
Also, customer demand is highly seasonal.
The summer months are extremely busy, as students are out of school and
many individuals and families take vacations. Winter, on the other hand, tends
to be slow, with the exception of the Thanksgiving and Winter holidays.

Acc,, passenger traffic and revenue rise and fall throughout the course of any
given year. Airlines have responded by adjusting their schedules periodically
to realign their scheduled capacity to better fit this ebb and flow (airline high
tide or low tide)

Revenue (kita): total income expenses (gasto) profit (ginansya)

revenue – expenses = profit
profit margin = + P/R x 100%

Airline Revenue - Where the Money Comes From

On average, 80 percent of a U.S. passenger airline’s revenue comes from
passengers purchasing tickets. Of the balance, the majority comes from cargo
and other transport-related services. For the all-cargo sector, of course,
freight, express and mail is the sole source of transport carriage revenue.

Forward compartment and forward compartment aft

Cargo/cargoes sometimes called freight

Approximately three-fourths of all U.S. airline passenger revenue is

generated from domestic service while a fifth comes from international
passengers.

The majority of tickets are processed by travel agents, most of whom rely on
global distribution systems to keep track of schedules and fares, to book
reservations and to print tickets for customers.

Similarly, freight forwarders book the majority of air-cargo space. Like travel
agents, freight forwarders are independent intermediaries that match shippers
with cargo suppliers.
Airline Costs - Where the Money Goes
According to reports filed with the Department of Transportation in 2005,

37%Flying Operations – essentially any cost associated with the operation of

aircraft, such as fuel and pilot salaries – 37 percent

10%Maintenance – both parts and labor – 10 percent

14%Aircraft and Traffic Service – basically the cost of handling passengers,

cargo and aircraft on the ground and including such things as the salaries of
baggage handlers, dispatchers and airline gate representatives – 14 percent

6%Promotion/Sales – including advertising, reservations and travel agent

commissions – 6 percent

6%Passenger Service – in-flight service, including such things as food and

flight attendant salaries
– 6 percent

17%Transport Related – outsourced regional capacity providers, in-flight

sales – 17 percent

6%Administrative – 6 percent 5% Depreciation/Amortization – equipment and

plants – 5 percent

Labor costs are common to nearly all of these categories. When looked at as
a whole, labor accounts for a fourth of the airlines’ operating expenses and
three fourths of controllable costs. Fuel recently overtook labor as the airlines’
largest cost (about 25 to 30 percent of total expenses), and transport-related
costs are third (about 17 percent). Transport-related costs, in particular, have
grown sharply in recent years, and many airlines have outsourced a
substantial portion of their flying needs to smaller regional carriers to align
supply and costs more closely with demand.

Break-Even Load Factors

Every airline – indeed every flight – has what is called a break-even load
factor. That is the percentage of the seats the airline has in service that it
must sell at a given yield, or price level, to cover its costs. Since revenue and
costs vary from one airline to another, so does the break-even load factor.
Higher costs raise the break-even load factor, while higher fares have just the
opposite effect.

On average, the break-even load factor for the industry in recent years has
surpassed 80 percent, thanks principally to higher fuel prices and lower fares.
Airlines typically operate very close to their break-even load factor. The sale
of just one or two more seats on each flight can mean the difference between
profit and loss.
Seat Configurations
Adding seats to an aircraft increases its ability to generate revenue at a low
marginal cost. However, an aircraft’s optimal seat configuration depends on
the operator’s marketing strategy. If an airline is targeting price-sensitive
consumers, such as leisure travelers, an airline will seek to maximize the
number of seats to keep prices as low as possible.

On the other hand, a carrier that is targeting service-oriented business

clientele may opt for a less dense seat configuration with either a larger
premium cabin and/or an economy cabin with greater seat pitch. In reality, the
key for most airlines is to strike the right balance as most serve a broad mix of
both business and leisure customers.

Overbooking
In seeking to maximize revenue across their networks and serve as many
passengers as possible, airlines sometimes overbook flights, meaning they
book more passengers than they have seats on a given flight. This in part is
done to account for passenger “no-shows.”

The practice is rooted in careful analysis of historic demand for a flight,

economics and human behavior. Historically, some travelers, especially
business travelers buying unrestricted, full-fare tickets, are no-shows and
have not flown on the flights for which they have a reservation.

Changes in their own schedules may have made it necessary for them to take
a different flight, maybe with a different airline, or to cancel their travel plans
altogether, often with little or no notice to the airline.

At other times, they may simply be caught in traffic or perhaps in lengthy

airport security lines. Some travelers, unfortunately, reserve seats on more
than one flight.

Both airlines and customers benefit when airlines sell all the seats for which
they have received reservations. An airline seat is a perishable product and if
a customer fails to show up for a booked reservation, that seat cannot be
returned for future use as in other industries. This undermines airline
productivity, which otherwise contributes to lower airfares and expanded
service.

Consequently, some airlines overbook flights. Importantly for travelers,

however, airlines do not do so haphazardly. Rather, they examine the history
of particular flights to determining how many no-shows typically occur, and
subsequently decide how many seats to authorize for sale. The goal is to
align the overbooking with the eventual number of no-shows.
In most cases the practice works effectively. Occasionally, however, when
more people show up for a flight than there are seats available, airlines offer
incentives to passengers to relinquish give way their seats.
Travel vouchers are the most common incentive, with volunteers getting re-
booked on another flight.

Normally there are more than enough volunteers, but when there are not
enough, airlines must bump passengers involuntarily. In the rare cases where
this occurs, federal regulations require the airlines to compensate passengers
for their trouble and help them make alternative travel arrangements. The
amount of compensation is determined by government regulation.

Pricing
Since deregulation, airlines have had the same pricing freedom as companies
in other industries. They set fares and freight rates in response to both
customer demand and the prices offered by competitors. As a result, fares
change much more rapidly, and passengers sitting in the same section on the
same flight often pay different prices for their seats.

Although this may be difficult to understand for some travelers, it makes

perfect sense, considering that a seat on a particular flight is of different value
to different people. It is far more valuable, for instance, to a salesperson who
suddenly has an opportunity to visit an important client than it is to someone
contemplating a visit to a friend.

Page 6

The pleasure traveler likely will make the trip only if the fare is relatively low.
The salesperson, on the other hand, likely will pay a higher premium in order
to make the appointment. For the airlines, the chief objective in setting fares is
to maximize the revenue from each flight, by offering the right mix of full-fare
tickets and various discounted tickets.

Too little discounting in the face of weak demand will result in a flight
departing with many empty seats, a lost revenue opportunity. On the other
hand, too much discounting can sell out a flight far in advance and preclude
the airline from booking last-minute passengers who might be willing to pay
higher fares and therefore generate incremental revenue.

The process of finding the right mix of fares for each flight is called revenue
management. It is a complex process, requiring sophisticated computer
software that helps an airline estimate the demand for seats on a particular
flight, so that it can price the seats accordingly. And it is an ongoing process,
requiring continual adjustments as market conditions change.
Scheduling
Since deregulation, airlines have been free to enter and exit any domestic
market at their own discretion and have adjusted their schedules often, in
response to market opportunities and competitive pressures. Along with price,
schedule is an important consideration for air travelers. For business
travelers, who typically are time sensitive and value convenience, schedule is
often more important than price. A carrier that has several flights a day
between two cities has a competitive advantage over carriers that serve the
market less frequently, or less directly.

Airlines establish their schedules in accordance with demand for their services
and their marketing objectives. Scheduling, however, can be extraordinarily
complex and must take into account aircraft and crew availability,
maintenance needs and local airport operating restrictions.

Contrary to popular myth, airlines do not cancel flights because they have too
few passengers for the flight. The nature of scheduled service is such that
aircraft move throughout an airline’s system during the course of each day. A
flight cancellation at one airport, therefore, means the airline will be short an
aircraft someplace else later in the day, and another flight will have to be
canceled, rippling costs and foregone revenue across the network.

If an airline must cancel a flight because of a mechanical problem, it may

choose to cancel the flight with the fewest number of passengers and utilize
that aircraft for a flight with more passengers.

While it may appear to be a cancellation for economic reasons, it is not. The

substitution was made in order to inconvenience the fewest number of
passengers.

Fleet Planning
Selecting the right aircraft for the markets an airline wants to serve is vitally
important to its financial success. As a result, the selection and purchase of
new aircraft is usually directed by an airline’s top officials, although it involves
personnel from many other divisions such as maintenance and engineering,
finance, marketing and flight operations.

There are numerous factors to consider when planning new aircraft

purchases, beginning with the composition of an airline’s existing fleet. Are
any potential aircraft purchases related to replacement of existing aircraft or
are they intended to drive service growth? What are the potential cost impacts
on a carrier’s fuel and maintenance programs, its crew resources and its
training requirements? These are some of the issues that must be examined.
In general, newer aircraft are more efficient and cost less to operate than
older aircraft, as a result of new airframe and engine technologies.
A Boeing 737-200, for example, is less fuel efficient than the 737-700 that
Boeing designed to replace it. As planes get older, maintenance costs can
also rise appreciably.

However, such productivity gains must be weighed against the cost of

acquiring a new aircraft. Can the airline afford to take on more debt? What
does that do to profits? What is the company’s credit rating, and what must it
pay to borrow money? What are investors willing to pay for equity in the
company if additional shares of stock are floated? A company’s finances, like
those of an individual considering the purchase of a house or new car, play a
key role in the aircraft acquisition process.

Marketing strategies are important, too. An airline considering expansion into

international markets, for example, typically cannot pursue that goal without
long-range, wide-body aircraft. If it has principally been a domestic carrier, it
may not have that type of aircraft in its fleet.

What’s more, changes in markets already served may require an airline to

reconfigure its fleet. Having the right-sized aircraft for the market is vitally
important. Too large an aircraft can mean that a large number of unsold seats
will be moved back and forth within a market each day. Too small an aircraft
can mean lost revenue opportunities.

Since aircraft purchases take time (often two to four years if there is a
production backlog), airlines also must do some economic forecasting before
placing new aircraft orders. This is perhaps the most difficult part of the
planning process, because no one knows for certain what economic
conditions will be like many months, or even years, into the future.

An economic downturn coinciding with the delivery of a large number of

expensive new aircraft can lead to deep financial losses. Conversely, an
unanticipated boom in the travel market can mean lost market share or
operating-cost disadvantages for an airline that held back on aircraft
purchases while competitors were moving ahead.

Sometimes airline planners may determine that their company needs an

aircraft that is not yet in production or even in design. In such cases, they
approach the aircraft manufacturers about developing a new model, if the
manufacturers have not already anticipated their needs.

Typically, new aircraft reflect the needs of several airlines because start-up
costs for the production of a new aircraft are enormous and, consequently,
manufacturers must sell substantial numbers of a new model just to break
even.
They usually will not proceed with a new aircraft unless they have a launch
customer, meaning an airline willing to step forward with a large order for the
plane, plus smaller purchase commitments from several other airlines.

There have been several important trends in aircraft acquisition since

deregulation. One is the increased popularity of leasing versus
ownership. Leasing reduces some of the risks involved in purchasing new
technology. It also can be a less expensive way to acquire aircraft, since high-
income leasing companies can take advantage of tax credits.

In such cases, the tax savings to a lessor can be reflected in the lessor’s
price. Some carriers also use the leasing option to safeguard against hostile
takeovers. Leasing leaves a carrier with fewer tangible assets that a corporate
raider can sell to reduce debt incurred in the takeover.

A second trend in fleet planning, relates to the size of the aircraft

ordered. The development of hub-and-spoke networks resulted in airlines
adding flights to small cities around their hubs. In addition, deregulation
enabled airlines to respond more effectively to consumer demand. In larger
markets, this often means more frequent service.

These considerations increased the demand for small- and medium-sized

aircraft to feed the hubs. Larger aircraft remain important for the more heavily
traveled and capacity-constrained routes, but the ordering trend is toward
smaller jet aircraft.

The third trend is toward increased fuel efficiency. As the price of fuel
rose rapidly in the 1970s and early 1980s, the airlines gave top priority to
increasing the fuel efficiency of their fleets. The most recent run-up in fuel
prices in the 21st century has renewed focus on this issue by both airlines and
airplane manufacturers, leading to numerous design innovations on the part of
manufacturers. Today, airline fuel efficiency compares, on a per passenger
basis, favorably with even the most efficient autos.
Page 9

Similarly, the fourth trend has been in response to airline and public
concerns about aircraft noise and engine emissions. Technological
developments have produced quieter and cleaner-burning jets, and Congress
produced timetables for the airlines to retire or update their older jets.

A ban on the operation of Stage 1 jets, such as the Boeing 707 and DC-8,
has been in effect since Jan. 1, 1985. In 1989, Congress dictated that all
Stage 2 jets, such as 727s and DC-9s, were to be phased out by the year
2000, and many were replaced by Stage 3 jets, such as the Boeing 757 and
the MD-80.
ACTIVITY: SELFEEL
Significance of the Study

This study is beneficial to the following:

Students. The result of this study will help the students to understand their

classmates and have a teamwork in helping those who are in need. By that

they will create strong friendship at the same time practice a good value which

is a good opportunity to have a bright better future.

Teachers. This study will give the teachers a big help in guiding their

students; in which is to consider their concerns and considering those who

really struggles enough just to continue their learning. And by having good

connection with their students, the teaching process will be easier and lighter

for everyone.

Guidance teachers. In counselling the students, this study would help them

to know what are the struggles and situations of students and will also give

them ideas on how to connect and understand more , also on how to help

them in giving motivations and giving wise decisions for their concerns for

them to continue despite the hindrance’s of their learning.

Parents. This would be a best guide for them in helping their child on how to

adapt and adjust this new set up of learning also to the siblings or other family

members to understand and help the situation of their family member.

Future researchers. This can serve as a reference to those who are

interested of developing this study.

Scope and Limitation

This study will be addressed by the grade VII students of Cordova

Catholic Cooperative School, municipality of Cordova, province of Cebu under

the age of (11-13). The research is only allowed to the freshmen students who

continue their high school journey using the new set up of learning. The

research is also limited on what the respondents say to the research study

whether it is their opinion; the study accepts any form of reaction and

expression given by the respondents.

Views or opinions of the psychiatrist, psychologist, and other experts are

included in this study.

Research Title:” The Psychological impact of modular and online classes

to the freshmen students of Cordova Catholic Cooperative School S.Y.

2020-2021”