Title
1.232/15.054/16.71
The Airline Industry

Departments
Aeronautics and Astronautics (Aero/Astro), Civil and Environmental Engineering (CEE), Management

Principal Instructors

  • Peter P. Belobaba SM ’82, PhD ’87, principal research scientist, Aero/Astro
  • Arnold I. Barnett PhD ’73, George Eastman Professor of Management Science, MIT Sloan
  • Cynthia Barnhart SM ’85, PhD ’88, chancellor and Ford Professor of Engineering, CEE
  • R. John Hansman SM ’80, PhD ’82, T. Wilson Professor in Aeronautics, Aero/Astro
  • Thomas A. Kochan, George Maverick Bunker Professor of Management, MIT Sloan
  • William Swelbar, research engineer, Aero/Astro; executive VP, InterVistas Consulting

Fall 2016 Enrollment
40 graduate students, representing:

  • MIT Sloan School of Management (17)
  • School of Engineering (18)
  • School of Architecture and Planning (2)
  • School of Humanities, Arts, and Social Sciences (1)
  • Harvard University (2)

Benjamin Sanchez, CEE graduate student: “It helps to have a large number of students from different backgrounds. The engineering students and the management students often approach the same problems from different perspectives.”

From the Catalog
Overview of the global airline industry, focusing on recent industry performance, current issues, and challenges for the future. Fundamentals of airline industry structure, airline economics, operations planning, safety, labor relations, airports and air traffic control, marketing, and competitive strategies, with an emphasis on the interrelationships among major industry stakeholders. Recent research findings of the MIT Global Airline Industry Program are showcased, including the impacts of congestion and delays, evolution of information technologies, changing human resource management practices, and competitive effects of new entrant airlines.

Caitlin Bradbury, MBA Candidate: “I’m interested in working in the airline industry after Sloan, so I thought this class would be helpful in preparing me.”

Sanchez: “I worked in the airline industry for three years before coming to MIT. Whenever you work for a company for a significant period of time, you tend to look at the industry through the perspective of that company. I wanted to take this class to get a broader understanding of what is happening in the industry from a global perspective.”

Origins
The global airline industry today generates hundreds of billions of dollars in revenue; it comprises more than 2,000 airlines operating more than 23,000 aircraft and providing service to more than 3,700 airports. The Global Airline Industry Program was founded in 2000—under the umbrella of the Sloan Foundation’s Industry Studies Program, and supported by the MIT Airline Industry Consortium—to develop a body of knowledge for understanding development, growth, and competitive advantage in this critical industry. The program spun out this graduate-level offering in 2001, aiming to educate future leaders of the airline industry while providing practical solutions to its most pressing problems.

Format
Many different faculty members and guest lecturers—all participants of the Global Airline Industry Program—teach the class. Belobaba coordinates all the lectures and also teaches a wealth of material related to air transportation economics, airline planning, and competitive strategy. Over the course of the term, students hear from about 10 scholars and industry experts. In Fall 2016, for example, MIT Sloan’s Barnett, an expert in applying mathematical modeling to problems of health and safety, taught students how to estimate the mortality risk of commercial air travel. Aero/Astro’s Hansman, a specialist in aircraft design, flight information systems, and air traffic control, introduced students to airline operations and provided an overview of current surveillance and communications technologies. And Kochan, co-director of the MIT Sloan Institute for Work and Employment Research, taught a class on labor relations.

Belobaba: “It’s a very unusual course in which you are getting world experts in each of the different areas. No single faculty member could possibly provide that level of expertise.”

Guest Speakers
In addition to tapping MIT experts, The Airline Industry typically features one or two lectures by an industry leader. This year, the former CEO of Spirit Airlines, Ben Baldanza, discussed the impact of competition on the evolution of the airline industry. Previous speakers include:

  • Montie Brewer, former president and CEO, Air Canada
  • Scott Nason SM ’77, former CIO, American Airlines
  • Bill Brunger, retired senior vice president for network planning, Continental Airlines

Sampling of Lecture Topics

  • Airline Pricing Theory and Practice
  • Fleet Planning and Aircraft Acquisition
  • Airline Operations
  • Human Resource Management in Airlines
  • Overview of Air Traffic Control
  • Environmental Impacts of Air Transportation
  • Aviation Safety and Security

Bradbury: “This class has been extremely useful in introducing me to aspects of the industry that I was not as familiar with, like operations and the regulatory environment.”

Belobaba: “You can use mathematical models to optimize networks and schedules, but none of that is operationally possible without people. Labor relations and human resources can make or break all optimization.”

From the Textbook
Belobaba, P., Odoni, A., and Barnhart, C. (eds.), The Global Airline Industry, 2nd Edition, John Wiley & Sons Publishers, 2015.

At the time of this book’s publication, the airline industry is about to enter yet another phase in its continuing transformation, with the development of global networks served by new airlines from emerging regions and by new alliances of existing carriers. Mature (North America) and maturing (Europe and parts of Asia) markets will test the extent to which new capacity can continue to be added. Energy costs will play a large role in the development of markets and service, as inevitable increases in ticket prices will begin to test the elasticity of air travel demand as never before in many regions of the world. As the industry evolves, the airline planning process will not undergo dramatic change, aircraft fleet decisions will remain long term, route planning decisions will remain medium term, and short-term decisions will continue to be driven by unpredictable events. What will change is how the global airline market develops, as many new route opportunities will emerge. Global alliances, and possibly even global mergers, will present different decision-making challenges for airline management.
—Chapter 16, “Critical Issues and Prospects for the Global Airline Industry”

Belobaba: “The textbook is based on the lectures developed for this course.”

Assignments
Students are asked to conduct a variety of analyses related to airline traffic and financial performance, market share models, operating costs and route profitability, and revenue management. Their final project is a team assignment to evaluate the performance and business model of one specific international airline and assess its current challenges and future prospects.

Belobaba: “Sometimes these are so good that I forward final presentations to colleagues at the airlines.”

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