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Economic Profile Essays Of Airline Industry

Economic Impacts On The Airline Industry

Economic Impacts on the Airline IndustryOver the years we have been able to see how airline travel has changed. From the deregulation in 1978, to the terrorist attack of 2001, government regulations have created much of the changes (2007). How has these changes affected the supply and demand in the airline industry? Has this created positive or negative externalities? How has this changed the wages for the workers? Have monetary and fiscal policies affected the changes?With airline industry being a luxury to most of its customers the supply and demand shifts as prices change. At the present time the price elasticity of demand has been very elastic. We can see this when the prices of an airline ticket goes up, the demand for airline travel decreases, and in contrast when prices of airline tickets go down the demand for airline travel increases. But the price elasticity of supply is inelastic. This is due to the long time it takes to increase the amount of planes within the airline. With the understanding of how prices can affect the airline, we can see why over the past few years the airline industry has been taking losses. According to the Air Transport Association the airline industry has been trying to find ways to cut cost to increase profits (2007). One way the airline increased sales was by lowering standard passenger ticket rates. The airline then increased the rates of the first class and business customer to cover the cost of the decrease in the standard passenger ticket rate. The business class customer had seen the highest rate increase since they require airline travel to meet business requirements. But the increases in the economy have other effects.

The airline has many positive and negative externalities that also affect cost in the airline industry. The increase in security after the 2001 terrorist attack both had a positive and negative externality. The increase security makes airline travel safer for the customers but in turn increases the ticket price for customers (2006). The negative externality for the airline industry would be the increase price of oil. When the oil prices increase, this also increases the cost of airfares on customers, thereby impacting the economy because fewer customers will fly due to increase cost. With this the airline industry can be affected both ways by externalities.

So how does this affect the wages? The wages inequality in the airline industry has been around since before the deregulation. With the turmoil that has been evident with bankruptcies, poor financial performance, and corporate restructuring the airline management has been focused on labor costs (2000). When the airline was regulated the government set the wage standards. Ever since the deregulation, we hear in the news about strikes because the airline can’t find an equal ground on wages with the unions. With the new regulation by the...

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The Airline Industry Essay

1551 words - 6 pages Airline 1Final Project:Industry Research CompletionWIU/AXIA UNIVERSITYECO 301June 3, 2007Airline 2The U.S. airline industry has been in a chaotic state for a number of years. According to the Air Transport Association, the airline industry trade association, the loss from 1990 through 1994 was about $13 billion, while from 1995 through 2000, the airlines earned about $23 billion...

Industry Overview of the Airline Industry

1562 words - 6 pages Surviving all odds could be considered a slogan for the U.S. Airlines Industry.Through inflation, depression, terrorist activity and much more the Airline Industry has taken several set backs and still managed to survive. While profits have fluctuate a great deal, the U.S. Airline Industry can be characterized by it steady growth, falling prices and overall...

Economic effects on the Home Building Industry

1862 words - 7 pages The manufacturing of homes has been going on for thousands of years and has gradually evolved into a large market for those looking to entertain a wide variety of interests ranging from a steady paycheck to large real estate income, or from those looking for their first place to live, to those becoming a landlord of a rental property. Home building is one of the strongest fields to examine when studying the overall economy of a nation. The...

Modelling paper on airline industry - management system

2979 words - 12 pages Table of ContentsExecutive Summary 21. Dilemmas facing CoolJet 32. Report Focus 33. The Taco Bell Model 33.1 Focus - The Key Factors 43.2 The models within the system 43.2.1 Forecasting 43.2.2 Simulation ...

The Structure of the Airline Industry

2577 words - 10 pages IntroductionFor several decades, the amount of air transportation activity has been growing consistently at about double the rate of world production due to globalization, the rise of world GDP, liberalization, etc. These growths was equally fuelled by an increase in business person's mobility and therefore demand for air travel, by a surge of world...

An Analysis of the Airline Industry

1132 words - 5 pages My industry analysis will be about the airline industry. Nature of competition The airline industry is in a state of oligopoly, bordering onto the state of imperfect competition. The various aspects that have a bearing on the nature of competition will be covered subsequently. Imperfect information. There is imperfect information about the airline market. This can be gauged by the fact that airlines are never sure as to what is the exact...

Analysis and Recommendations for the Airline Industry

3119 words - 12 pages The United States airline Industry is a complex business that is affected by many internal and external factors. The successes and failures of this industry are constantly fluctuating over time. While deregulation brought great triumph and positive change, the tragedy of 9/11 was the initial factor leading to the downward spiral of failure that the current airlines face today (Siddiqi, 2009). Currently, the International Air Transport...

Promotion tactics in the Airline Industry

981 words - 4 pages Promotion has become a big aspect after the tragic event of September 11. The way this industry has attracted people to them has changed. Airline companies have struggled with making new ways to market their products. Especially since most US airlines stayed off television for months after September 11. This was one of the key ways off attracting customers to the industry. Some companies even stopped Domestic E-Fares (Konrad & Sandoval,...

The Airline Industry After 9/11

2113 words - 8 pages The airline industry has seen drastic changes since September 11, 2001. The government ordered a complete shutdown for three days of not only all commercial aircraft but such carriers as domestic flights and emergency aircraft. For days after September 11th, all aircraft stayed on the ground. Even military aircraft had to receive special clearance to fly. In a ripple effect, the entire economy of the United States and the world was put on...

The impact of world war one on the homefront - social, political and economic impacts.

1561 words - 6 pages The First World War impacted significantly on the homefronts of the participating nations in many different social, political and economic areas. There was a widespread restructuring of primary industry with a large orientation towards militarism. There was massive political change where new systems of power were introduced that gave governments a range of new powers...

The Impacts of Fast Fashion and Technology on the Fashion Industry

1677 words - 7 pages This essay will discuss Fast Fashion and the Impact of Technology. I will focus on the different levels of the market, the effect of fast fashion on fashion design, how copying effects high end designer brands and the impact of technology on the fashion industry. There are three different sectors in the fashion industry. These are Haute Couture, Prêt- à-Porter (Ready to Wear) and High Street (Mass...

Economic Profile of the Airline Industry Essay

2195 Words9 Pages

Economic Profile of the Airline Industry

Airlines use a formula of combining their yield and inventory costs to determine ticket prices. While it is imperative to focus on the idea of being profitable, the focus is to maximize the cost of the flight revenue. One huge factor that encourages an increase in the cost of tickets relates to a customer ordering a ticket close to the departing date, define this as a risk factor because they need to make up for all unsold seats. A high percentage of the revenue is dedicated to overhead costs such as fuel and labor. When a ticket price is higher with one airline than the other, the customer interprets this as being an excessive cost. The demand is greatly affected by the external market…show more content…

Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998). In the long run however, if there is persistent low demand, there can be job reductions in the airline industry and even the number of planes can be changed. So there is inelastic price elasticity of supply in the short run. This leads the airlines to reduce rates they charge to passengers when there is a lean season. In the long term the price elasticity of supply is elastic. The long term in this industry is defined as the time taken to reduce the fleet of planes and the time taken to re structure the workforce. The airline industry is interpreted as being very unstable due to the immediate reaction to tragedies. The airline industry was affected following the September 11th tragedy and it affected other industries indirectly. The airline industry plays a key role in

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