Mba 510 Business Problem

Running head:   BUSINESS PROBLEM

Business Problem
Learning Team
University of Phoenix

Business Problem
      The Air Transport Association of America is the premier trade group of the principal airlines in the United States. ATA airline members and their affiliates transport more than 90% of U.S. airline passenger and cargo traffic (ATA, 2009). The Airlines Transportation Association of America (ATA) played a major role in the creation of the Civil Aeronautics Board and the Federal Aviation Administration. The ATA reported in 2009 that “In 2008, every dollar increase per barrel (42 gallons) drove an additional $464M in fuel expenses for U.S. passenger and cargo airlines; every penny increase per gallon drove $195M in annual expenses.” The rising cost of fuel affects the operating costs and profits of commercial air carriers forcing airlines to find creative ways of saving and recouping costs. “Domestic aircraft size increased in 2008 by 0.4 seats to 120.8 seats. The increase was partly caused by an unprecedented jump in aircraft size by the regional carriers (up 2.9 seats) and the grounding of older, fuel inefficient aircraft (i.e. MD-80’s and 737-300/400/500) by the mainline carriers. The increase in regional aircraft size was caused by the retirement of 50-seat jet aircraft as larger 70-90 seat jet aircraft entered the fleet” (Federal Aviation Administration, 2009). Other cost cutting measures in addition to increases in aircraft size and retiring less fuel-efficient aircraft were consolidation of flight schedules, use of lightweight, low-density aircraft parts, and assessment of baggage fees, frequent flyer incentives, and the reduction of free passenger amenities.
      Commercial airlines have struggled for years with the rising cost of fuel. Historically, According to the ATA, “… fuel expenses have ranged from 10 percent of U.S. passenger airline

operating costs, but averaged more than 35 percent in the third quarter of 2008” (Federal Aviation...