Airline Certification and Structure
Airline Certification
U.S. airlines are classified by the government based on the amount of their annual operating revenue. These classifications are major, national and regional. All airlines hold two certificates from the federal government: a fitness certificate and an operating certificate. The Department of Transportation (DOT) issues fitness certificates – called certificates of public convenience and necessity – under its statutory authority. A fitness certificate typically authorizes both passenger and cargo service and establishes that the carrier has the financing and the management in place to provide scheduled service. Some airlines, however, obtain only cargo-service authority.
Operating certificates, on the other hand, are issued by the Federal Aviation Administration (FAA) under Part 121 of the Federal Aviation Regulations (FARs), which spell out numerous requirements for operating aircraft with 10 or more seats. These requirements cover such things as the training of flight crews and aircraft maintenance programs.
Majors
Major airlines generate annual operating revenue in excess of $1 billion. Once known as trunk carriers, they generally provide nationwide, and in many cases, worldwide service. Also included in this category are the largest feeder carriers who operate regional aircraft for their hub-spoke network partners.
Nationals
National airlines generate annual operating revenues between $100 million and $1 billion. Many of the airlines in this category serve particular regions of the country, although some provide long-haul and even international service. Among the nationals are some of the former local service lines that, prior to deregulation, were licensed by the Civil Aeronautics Board (CAB) to operate between major cities and the smaller surrounding communities. Also in this category are some of the former supplemental carriers, previously licensed by the CAB to operate unscheduled charter service, which supplemented the capacity of the trunk carriers.
Regionals
As their name implies, regional carriers are airlines whose service is often limited to a single region of the country, transporting travelers between the major cities of their region and smaller, surrounding communities. This has been one of the fastest growing and most profitable segments of the industry since deregulation.
Cargo Carriers
DOT has a special fitness review procedure for all-cargo carriers, but most of the large ones hold a certificate of public convenience and necessity. Among the largest cargo carriers are companies that began in the small-package and overnight document-delivery business. These are the integrated carriers, so called because they offer door-to-door service, combining the services of the traditional airline and the freight forwarder.
Much of the cargo that moves by air is carried in the bellies of passenger jets. Other aircraft principally in use by all-cargo carriers, called freighters, carry only freight, mail and express packages. Oftentimes, freighters are passenger jets that have been stripped of their seats to maximize cargo-carrying capacity. In addition, their decks are reinforced to accommodate heavier loads, and they typically have other cargo-handling features, such as rollers built into the floors, extra-large doors and, sometimes, hinged nose and tail sections.
Airline Structured
Operations
Operations personnel are responsible for operating an airline’s fleet of aircraft safely and efficiently. They schedule the aircraft and flight crews and develop and administer all policies and procedures necessary to maintain safety and to meet all FAA operating requirements. They also oversee all flight-crew training – both initial and recurrent training for pilots and flight attendants – and establish the procedures that crews are to follow before, during and after each flight to ensure safety. Dispatchers release flights for takeoff, following a review of all factors affecting a flight. These include weather, routes the flight may follow, fuel requirements, and both the amount and distribution of weight onboard the aircraft. Weight must be distributed evenly aboard an aircraft for it to fly safely.
By keeping planes in excellent condition, maintenance programs keep aircraft in safe, working order; ensure passenger comfort; preserve the airline’s valuable physical assets (its aircraft); and ensure maximum utilization of those assets. An airplane costs its owner money every minute of every day, but generates revenue only when it is flying with freight and/or passengers aboard. In addition to large maintenance facilities, airlines typically have inspection and repair capabilities at hub or focus-city airports.
Sales and Marketing
This division encompasses such activities as pricing; scheduling; advertising; ticket and cargo sales; reservations; and customer service, including food service. While all are important, pricing and scheduling, in particular, can make or break an airline, and both have become more complex and a source of competitive advantage since deregulation. Airfares change frequently in response to supply and demand and to changes in the prices of competitors’ fares. Schedules change less often than fares, but far more often than when the government regulated the industry. Airlines use sophisticated global distribution systems (GDSs) and their own Web sites to market and distribute their schedules and fares directly to consumers and to intermediaries such as travel agents. Travel agents, who sell more than half of all airline tickets, use GDS to research flight schedules and available fares, book reservations and issue electronic or, decreasingly, paper tickets for travelers.
Reservations and Ticketing
Major changes in air transportation have simplified the process for airline passengers to make a reservation and to purchase a ticket. Electronic commerce is playing a rapidly growing part in today’s airline industry, with approximately half of all itineraries booked through direct or indirect online channels. Today’s electronic tickets, fast approaching 100 percent of all trip segments, allow an airline to document the sale and track the usage of transportation. Consequently, passengers worry less today about carrying flight coupons or losing their tickets.
The number of air travelers shopping, making reservations and purchasing electronic tickets using the Internet is increasing daily and has surpassed traditional means of securing and modifying itineraries. In fact, air travelers have the ability to shop for the least expensive transportation, make or change a reservation, select a seat assignment, request refunds, and perform other functions, not only through their travel agent but also from a personal computer or telephone. Meanwhile, airlines continue to adapt new technologies to automate check-in procedures. Customers can verify their itineraries, select seat assignments, obtain cabin class upgrades and print their own boarding passes, at their own discretion. Self-service check-in kiosks are now prevalent at all major airports for use by passengers holding e-tickets. Internet check-in functionality is widespread on airline Web sites.
Management and Administrative Staff
To help support the operations, sales, marketing and customer service personnel, airlines employ specialists in such fields as law, information technology, finance and accounting, corporate real estate, governmental affairs, employee/labor relations, human resources and corporate communications. The latter typically includes internal employee communications as well as media relations and civic affairs. Their function is to plan, manage and support the firm’s operations and employees. Finance divisions tend to include financial planning and analysis, financial reporting, fleet planning, purchasing and pensions and payroll.
Subcontractors
While major airlines typically do most of their own work, it is common for them to outsource certain tasks to other companies or individuals. These tasks could include flying by regional partners, as well as maintenance, airport services, customer service, reservations, frequent-flyer program service, into-plane fueling, catering, cabin cleaning and others. Airlines might contract out for all of this work or a portion of it, keeping the jobs in house at their hubs and other key line stations. However, whether an airline does the work itself or relies on outside vendors, the carrier remains responsible for meeting all applicable federal and international safety standards.
Chapter 2
Chapter 4