The American Airline Industry The airline industry is a highly competitive industry with companies operating in domestic and/or international markets. Many airlines are still owned by their respective countries and have treaties between countries to allow airlines to land there. The industry has been on a relatively shaky path as costs are rising and profits are falling. This has further intensified with the recent terrorist attacks on US soil, leading to higher costs as the need for greater security has emerged. Recent financial statements from major airlines showing severe losses reflect the problems the industry is experiencing. Yet amid the storm, some regional airlines like Jet Blue Airlines have managed to focus on specific markets and maintain or increase their profits. There is no doubt that the 5 competitive forces identified by Porter are at play in this sector. These forces are the threat of substitutes, the threat of new entrants, competitive rivalry, the bargaining power of buyers, and the bargaining power of suppliers. Threat of Substitutes The airline industry has been plagued by rising costs resulting in poor profits. The recession negatively affected the industry during the first half of 2001. This was intensified by the September 11 attacks, when two airlines were crashed into the Twin Towers in New York City by terrorists who killed everyone on board and demolished the buildings. This led to an immediate reduction in air travel as customers felt unsafe about flying and an increase in the use of other forms of transportation. Amtrak, a rail company, reported increased passenger volume in the days following the attacks. Although this phenomenon has stabilized with the return to normality, train travel is a substitute for air travel that will be used by customers if they are looking for cheaper travel and if they are looking for a leisure trip that does not take too much time. Automobiles are also a form of travel that replaces air travel. This is especially true when a family travels, as costs are kept to a minimum and schedules are coordinated with travelers' schedules. Threat of New Competitors Historically, market entry has been relatively easy for airlines. When the economy was booming, people traveled more for leisure, and companies used this opportunity to enter the...... middle of paper ......from Hoovers Online) Revenue (in millions) September 2002 September 2001US Airways 1903.0 2493.0 American 4494.0 4816.0Southwest 1391.2 1335.1Net Profit (in millions) September 2002 September 2001US Airways (248.0) (24.0)American (924.0) (414.0) Southwest 74.9 151.0Total assets (in millions) September 2002 September 2001US Airways 7 705.0 9564.0American 31502.0 31840.0Southwest 8954.3 7994.9 Total debt (in millions) September 2002 September 2001US Airways 10808.0 10106.0American 2 8991.0 25609.0Southwest 4631.6 4045.3EPS (in dollars) September 2002 September 2001US Airways (3.64) (.36)American ( 5.93) (2.68)Southwest .09 .19Revenue Passenger Miles October 2002 October 2001US Airways 2,965,753 2,802,967American 3,048,000 2,851,000Southwest 3,258.0 17 2,590. 610Load Factor (%) October 2002 October 2001US Airways 66.9 61.7American 63.2 57.8Southwest 56.8 53.4