The effects of September 11, 2001 on air travel and tourism

Abstract

This study examines the immediate consequences of the assault on air travel in the context of its effect on the greater tourism industry. Beginning with the initial look at the horrific events of September 11 the study chronicles the resulting impact on air travel through the fall of 2002. The major focus of the study is the sudden change in the air travel business following 9/11 and the failure of the major airlines to respond to subsequent changes. The study also includes approximations in the resulting effects on tourism, the impact of terrorism on this industry, and a brief look at the history of terrorism. The research demonstrates a steady stream of revenue losses sustained by the airline sector during the year following the incident. These losses are due in large part to the reduction in business traffic following the terrorist assaults; combined with dramatically escalating security and insurance costs related to 9/11. The loss of high yield fliers (business passengers who buy the high-priced fares that are highly profitable) disrupted a business model that permitted the airline sector to achieve profits while at the same time providing low priced fares for travelers who would not buy expensive tickets. The business passenger, who valued the convenience of booking tickets on short notice and the readily available flights to choose from, was willing to pay fares that were ten times more expensive than leisure fares, which were booked much more in advance. Then came September 11, 2001, and a significant change in business travelers' flying habits. These changes created havoc for the traditional full service airlines, leaving many carriers in financial peril. The conclusion reached by the study recommends that the airlines adopt the operational model of Southwest Airlines; a low cost airline that is now the most profitable airline in this sector. The company earned over 21 million dollars in the last quarter of 2001 (i.e., immediately post 9/11), when all other major carriers were sustaining horrendous losses due to the drop in the passenger traffic.