Discussion: Economic Analysis

Critical analysis of basic economic markers can be very revealing of an airline’s financial health.
For this assignment, research an airline’s most-current financial data, analyze the data, and report your findings.
Most airlines are public companies (as compared to private companies) and, usually, public companies are required by securities regulators to make financial information available to the public. This gives students and other researchers open access to audited information via annual and other reports. This information is generally available from the airline’s website; look for “About Us” or “Investor Relations” links in your research. For U.S. companies, look for the most
recent SEC Reports. An annual SEC report (called a 10K report) is an audited report containing
all of the company’s financial data.
For this discussion, select a public airline, find its most current annual financial information, and
look for some of the key terms discussed in Activity 5.1. Then, in an essay of 200–300 words,
analyze the figures you found, noting trends and relationships. For example, you might find a
company with high costs (CASM) and low fares (yield), resulting in a very high BLF (near 1.0). A
high BLF will put pressure on marketing to keep seats filled. Another company might have
PRASM less than CASM; meaning ancillary revenue (like baggage fees) will be very important to
maintaining a profit.
For this discussion, you are required to provide at least two responses to classmates’ main
posts. Responses should be thoughtful and include thought-provoking feedback. In other words,
“I agree” or “Great post” are not considered valid responses. Whether you agree or disagree,
explain why and support your response with valid references.
Air carriers, whether passenger or cargo, are in business to make a profit. However, as many
airlines have proven over the years, in a business of traditionally very low margins, this is not
always an easy task; in fact, in just the last decade, over a dozen carriers have declared
bankruptcy. In this module, we are going to analyze air carrier economics and examine their
rather unique product – an available seat-mile (ASM). As you’ll see, the ASM has some unusual characteristics: it’s very perishable, it can’t be stockpiled, and it has extensive fixed production
costs in contrast to very low marginal costs. As a result, airlines must use some rather unique
strategies to stay in business. In this module, you will not only analyze some of those strategies
but also understand and speak in airline economic terms.
Module Objectives
Upon successful completion of this module, you will be able to:
Analyze the competitive strategies of major airlines. (LO 5)
Employ standard air industry economic terms. (LO 5)
Analyze unfamiliar material in the area of air transportation. (LO 8)
Extract pertinent fundamentals and actionable information. (LO 8)
Use qualitative and/or quantitative analysis to analyze patterns in large amounts of data. (LO 8)