Airline Industry Financial Viability Report: TOU303A Assessment 2

This report provides an analysis of the airline industry, focusing on Warren Buffett's views, strategic reasons for airline operations, and significant changes that have occurred since 1989. It examines the financial viability of airlines, discussing the factors that influence investment and profitability, including market trends and technological advancements. The report also explores the evolution of the industry, highlighting key milestones and the impact of factors such as deregulation and changing passenger behaviors. Strategic considerations, such as value chain optimization, high-performing finance, and innovation, are also discussed as key drivers for airline success. The report concludes with an overview of the challenges and opportunities facing the airline industry in a continuously evolving global environment, offering insights into its financial performance and strategic positioning.

Running Head: Management
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Airline industry
Airline Management
8/6/2019

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Contents
Warren Buffett’s views of the airline industry.............................................................................................2
Changes occurred since 1989......................................................................................................................2
Strategic reasons involved in airlines..........................................................................................................3
References...................................................................................................................................................4

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Warren Buffett’s views of the airline industry
The views of Warren Buffet in regards with the Airline industry are that he like airline so
he spends his major money on that although airlines had a bad 20th century out of the way. He
said in an interview that he will not rule an entire airline but he loves airline so he has a holding
of $9 billion. He thinks that the airline industry will evolve and will engage in prolonged
kamikaze behavior. Warren Buffet views regarding the airline industry are not valid as to invest
in the airlines is indulging the losses only in the future as the airline's industry will not emerging
rapidly (Rock and Rubinfeld, 2017). In the 21st century, the profit earns by airline companies are
not much and there are very airline companies which are occurring in losses. The investment
made by the Warren Buffet is wrong as it will take two decades to him to recoup with the
investment he had made i,n the airlines. Later on his viewed that he will never invest in the
airline sector again is also not appropriate. So this view that he will never invest in the airline
sector again is not valid as the industry of airline is seeking the growth in future but they in
present they are seeking losses (Barla and Perelman, 2016).
Changes occurred since 1989
After the year 1989, many changes have occurred which operate the environment for
airlines as the number of passengers has increased in the airlines (Cho and Hambrick, 2016).
Since 1989, a series of report has increased the overall contribution to the U.S. economy when
the sponsorship of the aviation industry is attempting to assess the civilian aviation. The air
travel has improved and it is showing the great impact on the environment. Earlier the airline
industry was not that much upgraded but after the 1989, the new level of speed has brought, the
efficiency and the comfort level of the traveler have also increased. But the experience of the air
travel is changing as flying was become common place and piston engine airliners was replacing
the jet aircraft. After 1989, the people started investing in the airline industry but later on after
the year 2005 many losses has been seen in the airline industry and there was not growth seen in
the airline industry so the investor change their outlook. Warren Buffet invest many money on
the airlines but he realized that to recoup with that two decades will be taken so investors do not
invest money in the industry of the airlines (Hazel, 2018).

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Strategic reasons involved in airlines
The financial return in the airline industry is not high and there are also many strategic
reasons due to this many investors stop investing in the industry of the airlines. But in the year
2015 and 2016, the airline industry was creating the value for the investors and gives the
profitability of the invested capital (Moon, et al., 2015). The investors are getting attracted to
invest in the airlines due to the several reasons such as the airline industry is bringing much
innovation and up gradation in the technology. Their strategic assets have been improved as the
passengers are willing to pay for the combination of the hub, geography, and fleet. There are the
five pillars of the airline which attract the customers such as value chain optimization, high
performing finance, smarter regulations, innovation, and the efficient processes so apart from the
financial return this were the reason which was attracting the investors (Alcácer and Çekin,
2015).

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References
Alcácer, J., & Çekin, E. (2015). Turkish Airlines: Widen Your World. Harvard Business School,
9-716, 408.
Barla, P., & Perelman, S. (2016). Technical efficiency in airlines under regulated and
deregulated environments. Annals of public and cooperative economics, 60(1), 103-124.
Cho, T. S., & Hambrick, D. C. (2016). Attention as the mediator between top management team
characteristics and strategic change: The case of airline deregulation. Organization
Science, 17(4), 453-469.
Hazel, R. (2018). Airline capacity discipline in the US domestic market. Journal of Air
Transport Management, 66, 76-86.
Moon, J., Lee, W. S., & Dattilo, J. (2015). Determinants of the payout decision in the airline
industry. Journal of Air Transport Management, 42, 282-288.
Rock, E. B., & Rubinfeld, D. L. (2017). Defusing the antitrust threat to institutional investor
involvement in corporate governance. NYU Law and Economics Research Paper, (17-
05).