Travel is not new. People have always travelled, and although the term ‘globalisation’ has been coined as a somewhat new-age 1980s buzzword, the concept has been traced back as far as the early expansion of Islam in 622 AD.
Just a hundred years ago, people were astonished at the mere thought of ‘going by air’. But sure enough, the Wright brothers roared ahead and proved it was possible with their first flight in 1903- which lasted 12 seconds and covered 120 feet. Less than half a century later, air technology had ascended so rapidly the sound barrier was broken in 1947, and by the time the Beatles hit the scene in 1962 jumbo passenger jets were already in production.
The climb to the forefront began in 1945 when many ex-military carriers were converted for commercial use. Post-war development of airlines revolutionised the movement of people and cargo worldwide, and it was at this point that globalisation began lift off.
Global travel was on the rise. Holidaying abroad became not just a luxury of the very rich or those with friends in high places- Ordinary people could now see the world and it opened up a whole new opportunity for commerce.
At this point, trade was seriously looking up. Aviation was like gold dust for business- suddenly, ease of transportation of goods and peoples meant that outsourcing was fully possible to even the smaller businessman. The rise of transnational corporations (TNCs) came about with the rise of air transport: one could headquarter and manufacture in any nation; saving costs on labour, taxes and production whilst avoiding a host of laws and trade restrictions.
Over the years, the aviation industry has had to clear many mountains, and has been shaped by the combined forces of sovereignty, nationalism and protectionism. Most countries established their own airlines, which have been protected from foreign competition by policies such as stability of supply and subsidies.
The industry itself possesses a rather sad irony- instigating globalisation which empowered many million corporate giants, the aviation industry, burdened by a history of regulation and government involvement is itself far from globalised.
Privatisation played a huge part in the shaping of the aviation industry in the 1980s; we now see higher consolidation between airlines in the form of mergers, and vertical alignment of smaller companies with leading companies, which creates few, powerful airlines that dominate the market.
Hard to believe, but 70% of all new airline companies never take off. There were 146 new market entrants between 1979 and 1993 and out of those, 122 failed. Examples of low cost airlines that went bankrupt between 2003 and 2005 include companies such as Go Fly, Buzz Away and Dream Air; although judging by the names it’s not surprising. Perhaps ‘Dream On’ would have been more appropriate.
Boeing to the high costs involved, the success of most Airlines is through Global Alliances. This benefits both parties- Star Alliance was formed in 1997, where six major carriers joined forces to offer a common brand.
Getting an airline up and running is a bit of a long haul. Small airlines that fail to be taken under the wing of major companies are often the targets of rogue market competitiveness, where larger airlines drop their prices to undercut smaller market sharers and nip them in the bud before they grow.
Even for the big boys times have been tough. Even if you’re a market leader, owning an airline company isn’t a smooth ride. Global events have played a huge part in the loss of profits for airline companies. Aviation took a nose dive and worldwide bookings plummeted after the 2001 9/11 terrorist attacks and during the 2008 recession. More recently, the share price of Malaysia Airways crashed in 2014 after two major incidents that sparked global concern.
And they’re not the only ones. Business at British Airways has been turbulent since the takeover by budget airlines and foreign new-leaders such as Emirates. Sadly for BA, they never soar it coming.
Reshaping constantly is a key component for staying at the top of your game. Companies such as British Airways strive constantly to implement ways to regain their place at the top, but are constantly criticised for high prices, lack of terminals and shoddy service. On the other hand, companies such as Ryan Air have built a very successful business on bad publicity.
Now, one of the biggest challenges the industry faces is the rise of oil prices. Aviation is a costly business. Airlines spent $140 billion on fuel in 2010 and oil accounts for a third of operating costs. An oil prise rise of just $1 per barrel adds $1.6 billion to airline’s expenditures. Despite their huge success within the marketplace, at times airlines have become so strapped for cash it’s a wonder they don’t charge extra for emotional baggage.
It is no surprise that companies are desperate for developments of more fuel efficient aeroplanes. The next major step is to increase carbon efficiency and to begin to develop ‘greener’ technology in preparation for the future. Peak oil reserves have already been met and demands for more eco-friendly operations are rising. Though air travel is only set to grow in future, the industry has committed to reduce its net carbon footprint to 50% what it was in 2005 by 2050.
Despite all the challenges that airlines face, passenger airline use is projected to increase three and a half times by 2030 and the world fleet is expected to double by 2032. And the reason for this is plane and simple. Globalisation and aviation feed one another. In an ever globalising world, business for airlines can only grow higher. Now try and find another industry like that.
Geogger 