Essay on Airline Business Example | Topics and Well Written Essays - 2250 words

On Airline Business - Essay Example The three leading flag carriers in Europe, Lufthansa, Air France-KLM and IAG have been demonstrating high operating costs and failure of their short and medium haul flights. The project analyzes the present position and future prospects of these airlines against the European crisis which shook the industry to a considerable extent. Based on the past trends of performance, future performances are estimated for these three airlines and their comparative positions in the industry too. A comparative analysis of the airlines against the emerging airlines in other parts of the world is also provided in the project (Bloomberg, 2012). ... The UK government has levied some of the hardest taxes on the aviation industry. The airfare passenger duty in UK is approaching ?100 on certain tickets. However it fundamentally does not consider adding capacity in London where it is most required. This issue would not have been very prominent if there was no competition. The low cost carriers have grown stronger over the years. Although they are confronted with the same government issues, they have lower operating costs as compared to the legacy airlines and can make higher profits at lower fares (Alemanno, 2011, p.35). International Airlines Group (IAG) joined the ranks of its full service peers Air France KLM Group and Lufthansa Group reported an operating loss with a high cost of fuel which was consequently responsible for nullity of the rise in passenger traffic along with rise in unit costs. The results show a deteriorating condition for IAG as compared to the other two airlines. The deteriorating results of IAG demonstrate a two tier performance inside the group. The Spanish unit of IAG incurred a huge loss amounting to ?170 million from its operating activities in the first 3 months of the year 2012. In the previous year the loss was ?100 million. The financial highlights for the 3 airlines is provided in the below table. (Source: CAPA, 2012) Fuel burden also seems to have taken the maximum toll on IAG as compared to the other airlines. Its operating expense grew by more than 11.5% to ?4.2 billion against a fuel price increase of 7.5%. The fuel costs of the organization during the first quarter of 2012 rose by 24.9% year on year which was driven by higher prices and the reduced impacts of emission charges and hedging (CAPA,