Lizzy Bits asked:


Turmoil in the Airline Industry
Even before the September 11 terrorist attacks, the major airlines were flying into stiff head winds. Slim to nonexistent profits, bankruptcies and buckets of red ink, poor service, late arrivals, overexpansion, frequent air-traffic control breakdowns, some of the worst labor-management relations in business, high fuel costs, a full-blown economic downturn, and the collapse of business travel had cast this industry into one of the worst periods in aviation history.
Road Warriors Get Smart
For years, the major airlines had succeeded in getting business travelers (road warriors) to pay premium fares by pampering them with special business-class seats and other perks. Business travel was their lifeblood. Sales of unrestricted fares and last-minute tickets generated about two to three times as much as economy fares and contributed about 70 percent of a major airline?s revenue. But with corporate profits hitting the skids in late 2000, companies put the brakes on travel spending.
The corporate exodus hit the major airlines hard. Resourceful business travelers used substitute products such as videoconferencing or other transportation modes ? even if it meant putting up with inconveniences ? to reduce travel expenses. Some turned to the Internet to find cheaper airfares. Others moved their business downstream to discount airlines such as Southwest and Jet Blue. Major airlines tried to raise round-trip leisure tickets to make up for their lost business revenues, but fierce competition from discounters prevented them from doing so.
Air Travel is ?Wal-Marted?
Just as Wal-Mart did in retailing, the discounters of the air such as Southwest and Jet Blue are squeezing the major airlines from all ends. Low-cost carriers now account for nearly 20 percent of the U.S. domestic air capacity, up from 6 percent in the early 1990?s. They can afford to sell travel tickets for less because they have many cost advantages over full-service rivals. To begin with, they have younger fleets, which require less maintenance, and younger labor forces that aren?t tied to complicated, inefficient labor contracts. Moreover, low-fare carriers typically fly one airplane model, thus minimizing maintenance, operating, and training costs. By contrast, big carriers typically fly six or seven types of aircraft. And unlike the big guys, the discount airlines don?t operate expensive hub-and-spoke systems.
Caught Between a Hub and a Hard Place
Using a hub-and-spoke route system, major airlines scoop up traffic from smaller cities (the spokes) and funnel it through a few gathering points (the hub). This practice allows airlines to serve small markets and offer passengers more destinations and more frequent flights. But is also presents a logistical nightmare. It forces major airlines to schedule lots of flights to arrive and depart within narrow windows of time in order to minimize passenger layover times. This means that ground crews, such as gate attendants and baggage handlers, often sit idle between waves of connecting flights. By Contrast, point-to-point carriers, such as Southwest and Jet Blue, schedule flights as if passengers are moving to their final destinations. Instead of having planes and crews sit around and wait for passengers, point-to-point carriers maintain fast-paced schedules, which means minimal downtime for aircraft and fewer personnel on the ground.
Turbulent Skies for the Bid Carriers
Today, one in four tickets sold is on a discount airline. As pressure from low-fare carriers mounts, major airlines are reevaluating every aspect of their operations. The major carriers are undergoing radical change just to stay in business. They are experimenting with changes in costs, capacity, pricing, and product features in ways they haven?t seriously contemplated since the industry was deregulated in 1978. They are stripping billions of dollars from their operations by revamping their hub system, cutting jobs, eliminating flights, ending food service, and removing first-class seats, and by simplifying their fleets to cut training and maintenance costs, Some are replacing agents with self-service kiosks. Others are wrangling concessions from unions for huge pay cuts to reduce labor costs ? a major differentiating factor when you consider that in 2002 a United Airlines captain earned $9,000 to $11,000 more a month than a Jet Blue captain. Still others, such as U.S. Airways and United Airlines have filed for Chapter 11 bankruptcy protection to reorganize their outstanding debt and lower their operating costs.
In spite of their efforts, questions loom as to whether all the major airlines can survive. Even with huge cost cuts, all airlines remain susceptible to possible terrorist attacks, economic turns, or employee unrest. As experts claim that this is just the beginning of an industry-wide shakedown. After all, no airline can fly forever losing billions of dollars.
Critical Thinking Questions
1. What s
1. What supply and demand factors have changed the equilibrium point for airline tickets?
2. How has information technology affected the airline industry?
3. How are complimentary products affected by problems in the airline industry?
4. Take a closer look at the airline industry by logging on to http://www.hoovers.com, and type in Airlines for your search. List six domestic (U.S.) airlines and their locations and six international (global) airlines with their locations as well.
5. Why do U.S. airlines form alliances with overseas partners?

Love Scout

Benedict Hunter asked:


Every morning, Tian Wen Qui leaves his home under a bridge in Beijing to rummage through city trash cans until nightfall for empty pop bottles, plastic cooking oil containers and soy sauce bottles which he places inside two sacks he carries over his shoulder. On a good day, Tian normally makes $3 after selling his find to one of the city’s numerous garbage recycling stations. The “good days” are now getting few and far between.

A vast empire of rubbish and junk

Trash recycling used to be a multibillion dollar business in China until it was shut down by the worldwide economic crunch and ensuing drop in commodity prices. Empty bottles are now sold at half of last summer’s price.

The decline in the recycling industry has affected the lives of people like Tian, the persons who pay him for his collected waste products, and the manufacturers who convert these recyclables into usable items to be sold in stores and construction areas worldwide. That is why trash from the U.S. and Europe being sold in China are sent back after being refused (no pun intended) by potential clients.

Since the Chinese people consume less than Westerners, 70% of the trash that enter the country to feed its recycling business should come from the outside, said China National Resources Recycling Association spokesman Wang Yong Gang.

Chinese lifestyle basically adheres to thriftiness and austerity, and they will resort to repair things many times over before throwing them away, added Mr. Wang.

The plunge in item prices was very sudden that steel and metal recyclables which arrived in container ships in China’s ports were priced way below than what was tagged when they left the wharves of Los Angeles, New Jersey or Rotterdam.

Garbage devaluated

The port in Hong Kong is now the home of numerous containers full of trash waiting to be claimed and picked up by its owners, said Mr. Wang.

According to the China National Resources Recycling Association, copper scraps, which used to sell for $8,000 a ton in 2007, is now down at $3,000. Tin is now down at $5 per pound from $300 while paper price sank by as much as 80%.

People in the recycling industry used to make money from getting other nations’ trash but hard times are now threatening China’s recyclers from every angle. Gao Zuxue owns and manages a small garbage collection depot with his family.

Gao revealed his depot used to bring in about $450 a month in 2007 when business was booming. Nowadays, $80 is something to be thankful for, Gao said as he stood in a nearly empty room that was once filled with used radiators, old magazines and empty soda bottles.

People now refuse to sell their junk to them because of their buying price which most think as ridiculously low, Gao said.

Who’s taking out the trash?

While some recycling industrialists say that copper and plastic prices have slightly improved, they are still expecting tougher times ahead due to the worsening economic crisis worldwide.

The sentiment is likewise shared by the residents of Bajia Khun, a small town built entirely on trash on Beijing’s outer fringes. Staring at a virtual ghost town surrounded by mountains of stockpiled schoolbooks, magazines and notebooks, Chen Xiaorong, a resident, recalls when hundreds of her neighbors used to make a living here out of other people’s garbage.

According to Chen, people lost quite a fortune on recycling and have decided to return to the countryside. Her family who used to earn $735 a month will still weather it out here on $360.



Ghost Hunting Equipment