Market Structures of the Airline Industry

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Airline market structures are primarily based on geography, and who or what is being transported.
Airline market structures are primarily based on geography, and who or what is being transported. (Image: yellow jet airliner image by Stephen Kirkby from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Airlines take passengers across the country and across the world. They service business passengers, tourists and leisure travelers, as well as commercial enterprises. Airlines are structured to service the types of passengers and products they transport. The structure of the industry is based on the geography, the people, the types of products that the airline is in business to transport and the revenue potential.

International

Airlines must have stringent licensing and approvals in place to travel across borders. In the United States, an airline must obtain approval from the Department of Transportation (DOT) and the Federal Aviation Authority (FAA) to cross U.S. borders. The airline must also receive permissions, licenses and approvals to fly and conduct transportation business from the governing agencies of the respective country where they plan to land. Obtaining international licenses and permissions to market international air transportation services can take years for a new or non-established carrier to achieve, if at all.

National

In the United States, an airline must receive approvals and pass testing to transport passengers to and from states, coast to coast. Once approved, an airline has “national” status. The FAA and DOT are the governing bodies to grant licensures and approvals. The airline must meet a comprehensive base of requirements, including passenger seating and safety, to become a national airline. In addition, the airline must obtain, license and purchase “gates” from the airports that it plans to arrive and depart from. Typically, a national airline must have airplanes that seat between 100 to 150 people and generate revenue of $100 million to $1 billion annually to qualify as “national” airlines, and market themselves as such.

Regional

Airlines with revenues less than $100 million are categorized as regional airlines. Local airlines are often developed to offset travel and provide alternatives to major carriers. Major airlines will often acquire regional carriers or set up partnerships with other airlines to complete routes, thus servicing cities and markets outside of their major hubs.

Commercial Cargo

Transporting cargo is a major revenue source for airlines. Companies, such as FedEx and United Parcel Service, rely on air transportation to provide overnight delivery services to businesses and consumers. In addition, cargo capabilities are important revenue sources for airlines. Companies rely on airplanes to transport everything, from imported flowers, parts and supplies, to animals. Companies develop and market their facilities for cold storage, customs inspections, FDA and USDA certification to market these additional services to commercial enterprises for importing and exporting products, perishables and even livestock.

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