AIRLINE BUSINESS controlled flights, shifting his body weight to steer a small

The Air Transport Action Group (ATAG), based in glider.

Geneva, Switzerland, defines the air transport industry as The Invention of Aerial Age - the first successful
“the global network of commercial aircraft operators, airplane
airports, air navigation service providers and Inspired by Lilienthal’s success, Wilbur and Orville
manufacturers of aircraft and their components. It is Wright experiment with aerodynamic surfaces to control
responsible for connecting the global economy, providing an airplane in flight. Their work leads them to make the
millions of jobs and making the modern, internationally first controlled, sustained, powered flights on December
connected quality of life possible." 17, 1903 in Kitty Hawk, North Carolina.
Shaw (2011) in his book Airline Marketing and The first passenger air service - Dirigibles.
Management says that to answer the question - The first passenger air service began in 1910 when
"what business is the airline business in?" one has to look dirigibles operated between several major cities in
at it from the point- of-view of the needs that the firm is Germany. Dirigibles are also called blimps, zeppelins, or
trying to satisfy whether tangible and/or intangible , air ships. Ferdinand Graf von Zeppelin set up the first
namely: commercial airline in 1912, using a form of the dirigible to
• 1) transportation- competing with rail, road and transport more than 34,000 passengers before World War
water transports ; I. Airships were the first aircraft capable of controlled
• 2) communication - assisting people to meet face- powered flight, and were most commonly used before the
to-face, reuniting families, friends and loved 1940s, but their use decreased over time as their
ones, competing with internet communication; capabilities were surpassed by those of airplanes.
• 3) leisure - airlines provides competitive leisure The first significant flight of a powered airplane in
opportunities for people with disposable incomes Europe -First heavier-than-air unaided takeoff
and limited time for holidays, passengers are in In 1906 Brazilian aviation pioneer Alberto Santos-Dumont
need of the best customer experience; made the first significant flights of a powered airplane in
• 4) logistics - providing fast transport of goods Europe with his No. 14-bis. First heavier-than-air unaided
providing lower warehousing overhead for takeoff in Europe.
shippers, and carrying vital supplies to those in The first flight across English channel
need ; The Bleriot XI not only was the first airplane to cross a
• 5) information - specially in the early years of the large body of water (the English Channel), it was also the
business, many airlines found financial support first European airplane to be used for a military campaign
from moving letters and documents ; (1911) and the first ever for aerobatics (1913).
• 6) selling services - successful airlines gives birth First four-engine airplane in the world
to different skills and services, such as aircraft In 1913 –a four-engine plane designed by Russian
engineering, airport ground handling, and data engineer Igor Sikorsky was flying. This was the first plane
processing and management; to have a glass-enclosed passenger cabin, which included
• 7) linking economies - plus the fact that it creates four seats, a table, and a washroom.
other jobs and develop markets and links The world’s first regular scheduled air line
economies. As IATA puts it, airlines is the business The St. Petersburg-Tampa Airboat Line was the first
of freedom. scheduled commercial airline operated with a Benoist
HISTORY OF AIRLINE INDUSTRY Type XIV flying-boat. The flight was conducted by pilot
The Dream of Human Flight Tony Jannus on January 1, 1914. It lasted only three
The development of heavier-than-air flying machines was months.
first envisioned by none other than Leonardo Da Vinci , The world’s first sustained passenger airlines
when around 1490, this inventor who thinks ahead of this The world’s first sustained passenger airlines started in
time have observed birds soaring through the sky, he drew Europe in 1919. In Germany, Deutsche Luft Reederei
plans for a flying machine which he called (D.L.R.), an ancestor of the present-day Lufthansa.
'ornithopthers.' Although it did not work, it certainly was The Beginning of modern airliners
the first attempt of aeronautical designs for machines that The year 1933 was important in the history of air
employed flapping wings to generate both lift and transport, for it was then that the two original ancestors of
propulsion, the beginning of the dream of human flight. the modern airliner appeared. One was the Boeing Model
The First Successful Glider (Father of Aeronautics) 247 which made its inaugural flight on February 8, 1933,
An English baronet, bridged the gap between physical and the other was the Douglas DC-1, which flew later in
theory, engineering research, and the age-old dream of the year in July.
flight. English aeronautic pioneer George The Boeing Model 247 is the first modern airplane, first
Cayley established the modern notion of a fixed-wing all-metal, low-wing monoplane featured retractable
aircraft in 1799, and he designed a glider (shown in the landing gear, can hold 12 people in nan airconditioned
drawing below) that was safely flown by his reluctant comfort, and was one of the first airplanes to have
servant in 1853 in the first recorded successful manned controllable-pitch propellers. The twin engine airplane
flight, however, this glider does not have control. also required two pilots, and from 1933 up until the
The First Manned Flight Boeing 787, they’ve been building aircraft the same way.
Aeronautical pioneer in the years between the DOUGLAS -DC1. In 1933, Douglas introduced the 12-
advancements of the Englishman George Cayley and the passenger twin-engine DC-1. In that summer Douglas
American Wright brothers. Between 1891 - 1896, Otto introduced the 12-passenger twin-engine DC-1, designed
Lilienthal, German aviation pioneer made the first by aeronautical engineer Arthur Raymond for a contract
with TWA. A key requirement is that the plane can take
off, fully loaded, if one engine goes out. In September the regular air services were launched in Iloilo (Central
DC-1 joins the TWA fleet, followed 2 years later by the Philippines), said to be the birthplace of Filipino
DC-3, the first passenger airliner capable of making a commercial air transportation. Jose Tinsay, an Ilongo
profit for its operator without a government or postal aviator, was the first to fly the 43-kilometer Guimaras
subsidy. The DC-3’s range of nearly 1,500 miles is more Strait between Iloilo and Bacolod. The sugar barons kept
than double that of the Boeing 247. As the C-47 it the air service viable with their frequent patronage.
becomes the workhorse of WWII. First Government Airline. On July 7, 1920 , the Council
First Transatlantic Flight of State approved the establishment of the Philippine Air
The first transatlantic flight of Charles Lindbergh in Service (PAS) to fly passengers and mail in the country in
1927, ignited public interest in air travel leading to accordance with a statue passed by the Commonwealth
production of improved airplanes designed for commercial government.
airlines. PAI: 3rd Airline of the Philippines, The Early Roots of
Jet Age Philippine Airlines . In November 1927, Philippine
From late 1930s to late 1950s, growth of larger aircraft Airways Inc. (PAI) was organized. It planned to fly
and airline route network from domestic to passengers and cargo but none of the plans
international were evident. The jet age hit its mark in materialized. The name was changed to Philippine
1958, when commercial jet aircraft were Airlines (PAL) on February 27, 1941.
introduced. However, not until 1960's that aircraft such as 1930: First Airline to launch Scheduled Services in the
Boeing 707s and DC-8s were fully utilized in the US Philippines - PATCO . On December 3, 1930, foreign
travel industry. But the 1970s paved the way for 747 businessmen in Manila incorporated Philippine Aerial Taxi
jumbo jets, the 'Concorde', a supersonic jet, entered the Company (PATCO), the 6th certified airline of the
passenger service. Philippines. PATCO imported German pilots to fly its
PHILIPPINE AVIATION MILESTONES plane. First flight from Manila to Baguio.
During the 1911 Manila Carnival Celebration, several First Filipino-owned private airline - INAEC. In 1932,
aerial troops from the US arrived in the Philippines to Don Eugenio H. Lopez, Sr., a successful sugar planter and
perform a flight exhibition in the Pacific. It was part of businessman from Iloilo, founded the Philippines second
their worldwide tour featuring the two earliest aircrafts commercial airline, which is also the first Filipino-owned
ever to land in the Philippine territory. The aircrafts names private airline - “Iloilo – Negros Air Express Co
were: Shiver’s Skylark and Red Devil biplane, both (INAEC).” Main base was Iloilo aerodrome. Initial routes
designed by US aviation pioneer, Glenn Hammond were Iloilo to Manila, Bacolod and Cebu. Soon after came
Curtis. service to Davao, Zamboanga and Del Monte on
1911: The First Powered Flight in the Philippines Mindanao.
This is an actual photo of the historic first flight captured 1931 : Advent of Commercial Aviation
in a mailed postcard dated March 3, 1911. The pilot was Regulations- Legislative Act No. 3909 – the Air
James “Bud” C. Mars and the aircraft was the Schriver Commerce Act passed by the Congress of the Philippines
Skylark. Todd C. Schriver built the Skylark biplane used on November 20, 1931 created an Office under the
in the first powered flight in the Philippines on February Department of Commerce and Communications to handle
11, 1911. It was flown by Bud Mars A.K.A. James C. aviation matters, particularly the enforcement of rules and
Mars at the opening ceremony of the festival as flight regulations governing commercial aviation as well as
demonstrations for the Governor General. The Carnival private flying -a division that will regulate air commerce
then was held on the 21st to 28th day of February. and faster air transport development in the Philippines. It
This Red Devil biplane was developed by Capt. Thomas was amended by Act 3996 to include licensing of airmen
S. Baldwin, a famous balloonist during the Manila and aircraft, inspection of aircraft concerning air traffic
Carnival. Mars was part of the Pacific exhibition tour rules, schedules and rates and enforcement of Aviation
organized by Captain Thomas Baldwin, who also made an Laws.
exhibition flight on the same day after Mars did, in his 1941: Philippine Airways to Philippine Airlines - In
Baldwin Red Devil biplane. But it was Baldwin who 1936,PATCO moved from air taxi services to scheduled
made the first cross-country flight in the Philippines six services. It went bankrupt in 1940 and Soriano and former
days later, when on Feb. 27, 1911, he flew 10 miles out of senator Ramón J. Fernández acquired the franchise of
Manila in his Red Devil biplane. Philippine Aerial Taxi Company, Inc. and was officially
1919: First Airline of the Philippines, First Airmail incorporated in Feb1941 under the name of Philippine
Delivery Airways, with shareholders comprising a group of
In November 1919, Major Joseph E.H. Stevenot and Filipino, German and Spanish industrialists and
Alfred J. Croft formed the first airline ever in the history businessmen.The carrier was reformed on 13Mar1941,
of Philippine aviation- the Philippine Airways Service when it changed its name to Philippine Air Lines (PAL),
Inc.( PASI). On November 25-29, 1919, Stevenot and starting operations on 15Mar1941. PAL is the oldest
Croft completed the first airmail flight from Manila to airline in Asia operating under its original name.
Cebu, IloIlo and back. 1974 One Airline Policy - Philippine Airlines becomes a
First Charter Service – TINSAY AIR CHARTER monopoly in domestic air travel after President Ferdinand
SERVICE Marcos (by virtue of his powers under Martial Law)
On July 1920, Jose Tinsay started a one-plane charter ordered the foreclosure of two other airlines – Filipinas
service between IloIlo and Bacolod with Curtiss Orient Airlines (FOA) and Air Manila Inc. (AMI) – due to
OSOriole. The Tinsays of Negros and Panay would the fuel crisis arising from a war in the Middle East. PAL
continue to be engaged in local aviation until today. In was told to absorb the aircraft and staff of FOA and AMI.
1925, Jose Tinsay bought two more aircrafts. The first
1995 Liberalization of Philippine airline belts as the major airlines with the financial struggles
industry - Executive Order 219 , under President Fidel also experienced increased competition with low-cost
Ramos in 1995, has established the domestic and carriers (LCC).
international civil aviation liberalization policy in the International Laws
Philippines. This order reduced regulations on tariffs and Purpose:
fares and government control on the entry into and exit 1. Protect air sovereignty (the fundamental right of a
from the airline industry. Prior to this order, Philippine sovereign state to regulate the use of its airspace
Airlines (PAL) solely domestic flights due to and enforce aviation law)
government's one-airline policy. A study by Manuela 2. Uniform or standard rules, regulations and policies
(2007), indicated that airfare lowered after liberalization, 3. Ensure safety and security of passengers/ travelers
and domestic airline passengers benefited as a result of through regulation
competition due to new entrants and higher demand Paris Convention of 1919
Airline Deregulation Act of 1978 - Also known as the International Air Navigation
Since 1938, the Civil Aeronautics Board (CAB) is the Act
federal government body which regulated U.S. interstate - It attempted to reduce the confusing patchworks of
commercial aviation through the mid-1970s; regulating ideologies and regulations which differed by
routes, fares, and schedules. Airlines on intrastate routes , country by defining certain guiding principles and
however, were regulated by governments of the states in provisions, and was signed in Paris on Oct. 13,
which they operated. The CAB was notoriously known 1919.
for its bureaucratic complacency; airlines had to suffer - Allied Forces
from long delays for approval for new routes, or fare Warsaw Convention of 1929
changes, which very often were rejected. This highly - The convention for the unification of certain rules
regulated structure put pressure in the industry in the relating to international air transportation applies to
1970s. This all changed when in 1978, President Carter any international transportation of persons,
signed the Airline Deregulation Act. The Act abolished the baggage, or merchandise by aircraft for
CAB by 1984; the Federal Aviation Administration (FAA) compensation
took over regulation of airline safety. The Act allowed - The Warsaw Convention provided that an air
airlines to set their own routes and in the long run set their carrier was liable for damages in the event of:
own fares. This led to lower fares and increased (1) death or injury to passengers,
competition which later on produced another problem (2) destruction or loss of or damage to baggage or
about congestion and safety. Later, in the 1980s financial goods, or
problems beset the industry leading to major carriers going (3) loss resulting from delay in the transportation
bankrupt while small airline companies and low cost of passengers, baggage, or merchandise.
carriers (LCC) began to increase its share of the market. - Mandates carriers to issue air tickets
The low-cost carriers (LCCs) and small airlines were - Requires the carriers to issue baggage tags for
originally meant to serve smaller markets, however these checked luggage
carriers were able to strategize Chicago Convention of 1944 or ICAO Convention
driving out competition from the major hubs. The growth - The Chicago Convention created the International
of LCCs such as the Southwest Airlines, the pioneer in Civil Aviation Organization (ICAO) in 1947 which
low-cost carriers, has increased point-to-point service back became one of the specialized agencies of the
in U.S. air transport system, and also increased availability United Nations. ICAO, based in Montreal, Canada
of different aircraft types which will suit different kinds of is charged with the administration of the articles
markets. drawn up at the conference.
9/11 Terror Attacks - Provided two significant documents;
The September 11 attacks, referred to as 9/11 were a series o the International Air Services Transit
of coordinated airline hijacking and suicide attacks by Agreement, which became known as the
some Al-Qaeda Islamic extremist group in 2001. In is the Two Freedoms Agreement,
single deadliest terrorist attack in human history and the o the International Air Transport Agreement,
single deadliest incident for fire fighters and law or the Five Freedoms Agreement
enforcement officers in the history of the United States. - To help promote world peace, there should be
The terror attacks of 9/11 affected greatly the air travel in formal and standardized arrangements for airlines
North America and then felt globally. Immediate reaction to be able to fly into and through the territories of
to the attacks and the long-term repercussions negatively other countries.
affected the airline industry; namely - This treaty established the rights of signatory states
1) reduction in passenger demand as thousands of over their territorial air space, and laid down the
passengers cancelled their flights, basic principles relating to international transport
2) large scale layoffs due bankruptcy- due to massive of dangerous goods by air.
financial loses due lack of demand, Montreal Convention of 1999 (MC99)
3) new air security procedures - as a response the - The Montreal Convention 1999 also known as
Transportation Security Administration (TSA) was MC99 establishes airline liability in the case of
established in 2001 to overhaul airport security processes, death or injury to passengers, as well as in cases of
all the airports globally followed suit. delay, damage or loss of baggage and cargo.
4) airline industry overhaul- airlines are seen - The Montreal Convention was signed in 1999 and
renegotiating contracts with unions and tightening their it replaced the Warsaw Convention.
 - The Convention also offers compensation in case - For example:
of a flight delay leading to damages (additional MNL – BKK on PR
expenses) and baggage problems. YTO – LAX on AC
- MC99 modernized the rule by allowing this to be
delivered in electronic form.
International Civil Aviation Organization (ICAO)
- Established in 1947 in response to the
recommendations of the Chicago Convention, 4th Freedom
headquarters in Montreal, Canada. - Allows airlines deliver passengers from foreign
- Responsible for: country to its home country
o Standards and recommended practices - For example:
concerning air navigation, its infrastructure BKK – MNL on PR | LAX – YTO on AC
o Flight inspection and protocols for air
accident investigation
o Facilitation of border-crossing procedures
for international civil aviation
International Air Transport Association (IATA) 5th Freedom
- Founded in 1945 in Havana, Cuba, headquarters in - The right to fly between two foreign countries
Montreal, Canada during flights while the airline may originate or
- Trade association of most of the international end in one’s own country
airlines (290 airlines) in the world in response to - For example:
the perceived need to coordinate international FRA – YVR – NYC on LH
airfares LAX – AMS – DXB on EK
- Two-tier organizational structure:
o Trade Association (technical, legal,
financial, services to its members airlines)
o Tariff Coordination (passenger fares, cargo
rates, and related conditions and charges)
ICAO Codes vs IATA Codes
1. ICAO – 4 letter airport codes and 3 letter airline
designator used in aeronautical publications.
Eg. Bangkok (Suvarnabhumi) – VTBS 6th Freedom
Thai Airways – THA - The right to fly from a foreign country to another
2. IATA – 3 letter airport code and 2 letter airline foreign country while stopping in home country for
designator which can be seen in reservations, E- non-technical reasons.
tickets, boarding pass and baggage tag - For example:
Eg. Bangkok (Suvarnabhumi) – BKK LAX – FRA – MAD on LH
Thai Airways – TG MNL – BKK – LAX on TG
Freedoms of the Air (Legend: HC – Home Country; FC – CEB – HKG – DXB on CX
Foreign Country)
1st Freedom
- Right of the airline to fly over a foreign country
without landing 7th Freedom
- Required to pay overflight fees, because they use - The right to fly between two foreign countries
the country’s Air Traffic Control Service (ATC) while not offering flights in home country.
- For example: - For example:
YYZ – MEX on AC overflying in USA MEX – YTO on AA
DOH – SEL on SQ

2nd Freedom
- The right to refuel or carry out maintenance in a 8th Freedom
foreign country on the way to another country - The right to fly between two or more airports in a
- For example: foreign country while continuing service in one’s
MNL – SFO on PR via GUM for refueling own country, known as Cabotage.
- For example:
CHI – CUN – MEX on UA
CEB – MNL – HKG on CX

3rd Freedom
- Allows airlines to deliver paying passengers from
home to foreign country, (Note: Passengers and
cargo are dropped)
 Association of Asia Pacific Airlines
(AAPA) ,established in 1966, formerly Orient Airlines
Association, Inc.,is a trade association of major scheduled
international airlines based in the Asia-Pacific region
9th Freedom based in Kuala Lumpur, Malaysia.
- Stand alone cabotage, the right to fly to 2 airports Civil Aviation Authority of the Philippines (CAAP)
in a foreign country without continuing service in - an independent Philippine government agency, under the
one’s own country. Department of Transportation, is "responsible
- For example: implementing policies on civil aviation to assure safe,
CUN – MEX on UA economic and efficient air travel. Formerly the Air
CEB – MNL – HAN on CX Transportation Office, it is an independent regulatory body
attached to the Department of Transportation for the
purpose of policy coordination This agency also
investigates aviation accident
Civil Aeronautics Board (CAB) - CAB is an attached
Philippine government agency of the Department of
Transportation . It is the agency of the government
mandated to regulate the economic aspect of air
transportation (cab.gov.ph).
The following shows one of the function of CAB ,i,e,
Impacts of COVID 19 in the Airline Industry lifting of fuel surcharge affecting airfare.
Air transportation in the Philippines dates back to
World War II. Currently (prior to pandemic) the
Philippines ,based on current air operator's certificate
issued by the Civil Aviation Authority, has a number of
registered airline companies but majority are chartered.
The major domestic airline companies competing are
Philippine Airlines and Cebu Pacific. The third domestic
carrier- AirAsia Philippines competes on international
routes. Overall, the biggest market share which was about
61% (pre-pandemic statistic) goes to Cebu Pacific ,
followed by the national carrier- Philippine Airlines at
29%, while AirAsia at 9% share

Organizations and Government Agencies

FAA (Federal Aviation Authority) - an independent
government agency established since 1958, is the main US
government agency tasked to handle regulations ,
certifications, and other activities pertaining actual
operation of the air transportation system . This US agency
has influenced similar agencies worldwide with regards to
air traffic operations.
Transportation Security Administration (TSA)
- another US government agency was created in 2001 as
a response to the 9/11 incident, which has a major role in
the areas of aviation safety and security. The airport
security upgrade done in US , were replicated worldwide.
National Transportation Safety Board (NTSB) - an
independent US government agency charged with
investigating every civil aviation accident in the US, as
well as all other major transportation accidents. PREPARED BY: JOHN LENNARD COSTUNA