Essay about Risk Management in the Airline Industry

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BACKGROUND
There are few industries that are exposed to such a diverse assortment of risks as the airline industry. Ever since the first powered human flight in 1903, the progress of aviation and air travel has been inextricably linked to economic and political developments. The airlines of today face all of the four major categories of risk; operational, strategic, operational, financial and hazard risks.

During the past 50 years, the airline industry has gone through several major changes. In the 70’s and 80’s, the North American and European airline industries were deregulated. This allowed new airlines to compete more freely with the established major carriers. This put a pressure on the profitability of airlines, and subsequently …show more content…
The one risk that everyone associates with airplanes is the risk of crashing for various reasons. Some people might be surprised that these events, as a group, are the least likely to induce a value-loss, as shown in the study mentioned above. Hazard risks comprise incidents and accidents, sabotage/terrorism, wars and natural disasters to mention a few. Safety is the primary concern for all airlines. There are strict regulatory frameworks in place to ensure that airlines operate safely. In addition, airlines have their own stricter guidelines. To minimize hazard risks, the industry, along with government agencies, aircraft manufacturers and airport managers, have developed standardized maintenance procedures, crew training and airport screening of passengers and cargo.

All in all, operational risk is not easily managed. It is hard to quantify, and is not as well defined as financial risk. It is the job of the risk manager and the risk management committee to try and define these risks and their impact. An increasing number of airlines are using an integrated risk management approach. This involves aligning people, processes and infrastructure to maximize enterprise value, realizing that risk management is an ongoing process, and evaluating individual risks as part of a portfolio of risks. The Finnish flag
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