AIRLINE MANAGEMENT

REPORTER: ALEX G. GONEO MPA – 603: ADVANCED AVIATION EDUCATION

 INTRODUCTION:
THE IMPORTANCE OF AIR TRANSPORT
• Aviation has made travelling across the globe convenient and time saving.
Figuratively “shrinking” the planet.
• Aviation is a means of connecting economies and cultures, stimulating
social and cultural cross-fertilization, economic growth and diversity in
an increasingly interdependent global environment.
• Trade and tourism are heavily reliant on this most modern means of
transportation. Whole economic sectors (e.g., hotels, automobile rental
firms, convention business, and tourist destinations) depend on safe,
secure, dependable, efficient and reasonably priced commercial air
transportation.
WHAT IS AN AIRLINE?

o An organization that owns and operates

aircrafts to carry passengers and cargo to
different destinations.
o Ownership can be private, joint, or public.
o It can be small (domestic) or large
(international).
o Airline includes its equipment, routes,
operating personnel, and their management.
TYPES OF AIRLINES

1. FULL SERVICE CARRIERS

2. LOW COST CARRIERS
3. CHARTERED
STARTING AN AIRLINE BUSINESS: PROCEDURAL
AND DOCUMENTRAY REQUIREMENTS
 FOR LOCAL/DOMESTIC CARRIERS

- A legislative franchise or a certificate of public convenience and

necessity from the Civil Aeronautics Board (CAB)

- An air operator certificate from the Civil Aviation Authority of

the Philippines (CAAP)
STARTING AN AIRLINE BUSINESS: PROCEDURAL
AND DOCUMENTRAY REQUIREMENTS
 FOR FOREIGN AIR CARRIER

- Foreign air carrier’s permit from the Civil Aeronautics Board;

and

- A foreign air operator certificate from the Civil

Aviation Authority of the Philippines
OWNERSHIP AND CONTROL

 DOMESTIC AIR CARRIER

- At least 60% of its equity ( including at least 60% of its
voting equity should be owned by Philippine nationals);

 FOREIGN AIR CARRIER

- Not subject to domestic air carrier requirement and is only
allowed in foreign air transportation (i.e. air transport
between the Philippines and any place outside its territory)
INSURANCE COVERAGE

Aircraft used in air carrier operations must have a valid insurance policy covering:
• the aircraft hull;
• each person, freight item and any mail onboard; and
• liability in favor of third parties.

In the absence of these requirements, the aircraft cannot be operated.

 ENVIRONMENTAL OBLIGATIONS

• Air carriers must comply with the following environmental laws and regulations
a. Republic Act 8749 (the Clean Air Act), which requires operators of aviation fuel storage tanks
(which are considered a possible source of air pollution) to obtain a permit to operate air
pollution source and control installations from the Department of Energy and Natural Resources;
b. Republic Act 6969 (the Toxic and Hazardous Waste Management Act), which requires a permit
from the Department of Energy and Natural Resources for the storage, treatment, transport,
export, processing, reprocessing, recycling and disposal of hazardous waste; and
c. Republic Act 9003 (the Ecological Waste Management Act), which provides for the mandatory
segregation of solid waste to be conducted primarily at the source (eg, household, institutional,
industrial, commercial and agricultural sources).
FINANCIAL REQUIREMENTS

Domestic Air Carriers

- A minimum paid-up capital ranging from Php10 million (for
carriers with domestic non-scheduled flights) to Php50
million (for carriers with domestic and international
scheduled flights)
FINANCIAL REQUIREMENTS

Foreign Air Carriers

- Must have paid-in equity capital of at least the equivalent
of $200,000.
 CHALLENGES IN AIRLINE MANAGEMENT:
IMPACT OF OTHER PLAYERS IN THE INDUSTRY
a) Government – Airlines must comply with regulations from its home country and governments of other
countries where the airlines fly to and from.
b) Airports – Airlines should carefully consider the terms of their agreements with the airports like
available infrastructures (gates, runways, baggage handling, etc.), expected traffic, airport charges, and
incentives.
c) Customers – Consider the needs and preferences of potential customers.
d) Alliances – Participate in one or more alliances to expand network coverage or sharing of resources.
e) Suppliers – Provides aircraft, fuel, spare parts, meals, employee uniforms, etc.
f) Unions – Can disrupt airline operations if not handled properly.
g) Competition – Strict competition forces an airline to evaluate its strategies continuously.
CHALLENGES IN AIRLINE MANAGEMENT:
LEVELS OF INTERACTING DECISIONS
CHALLENGES IN AIRLINE MANAGEMENT:
SURROUNDING EVENTS
• Economic and social changes:
a. Wars
b. Civil unrest
c. Terrorist actions
e. Increasing fuel prices
f. Epidemics
CHALLENGES IN AIRLINE MANAGEMENT:
NETWORK STRUCTURE
• Choosing the right network
a. Hub-and-spoke
b. Point-to-point
c. Combination
CHALLENGES IN AIRLINE MANAGEMENT:
FLEET ASSIGNMENT
• Fleet assignment is the process of assigning the different flights in the schedule to the
different fleet types. The process matches the characteristics of the aircraft and the flight
to minimize the total cost of the flight to the airline

- example: match the aircraft’s travel range with the distance between flight origin and
destination
CHALLENGES IN AIRLINE MANAGEMENT:
REVENUE MANAGEMENT (RM)
• RM is defined as “selling the right seat to the right customer at the right price and at the right
time”.
- Airlines effectively manage their revenue by selling the right seat at the right customer at
the right time.
AIRLINE’S STRATEGY TO GENERATE REVENUE

1. Airline taxes and fees

2. A la Carte pricing policy
3. Add on services for travel
4. On-board sale
5. Advertising sales
REFERENCES:

Introduction to Airline Management

https://www.tutorialspoint.com/aviation_management/aviation_management_quick_guide.htm
 ASPL614-Business-.pdf
 RA No. 776, “An act to reorganize the Civil Aeronautics Board and the Civil Aeronautics
Administration to provide for the regulation of civil aeronautics in the Philippines and authorizing
the appropriation of funds therefor”
 Aviation in the Philippines, Sycip, Salazar, Hetrnandez & Gatmaitan