The airline industry is influenced by both internal and external factors, and profitability can significantly change due to the impact of these variables. From the external perspective, customers, suppliers, alliance partners, creditors, unions, communities, and the media contribute to the airline industry. From the internal perspective, employees, stockholders, and board members provide their contributions. In this discussion, the focus will be placed on the role of external stakeholders as their number is large and the possible impact can be broader and less controllable. It can be hypothesized that to improve the airline industry as a whole, external stakeholders should be managed.
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In the airline industry, governments and alliance partners play the most important roles in influencing the overall operations and increasing profitability. Governments have influenced the development of air transportation for centuries, ever since 1783 when the king of France ordered the Montgolfier brothers to show him their invention of the air balloon. During World Wars, governments invested in the rapid progress in the airline sphere to gain military advantage against rivals, thus facilitating an exponential leap in development, which shaped the industry as it is known today.
According to the Working Paper of the International Civil Aviation Organization, governmental policies can positively influence the economy of the airline industry. For example, governments should impose fewer constraints on companies in terms of financial repercussions, taxes, and charges. When governments make airline carriers pay extremely high fees, the prices of tickets increase disproportionately, thus adversely influencing the demand for air travel (“Government Policies and Their Economic Impact on Airlines”).
Another recommendation for governments to have a positive impact on the airline industry is enforcing stronger security measures to prevent the consistent threat of terrorism. For air travelers, safety is the main priority, and the assistance of government enforcement agencies is vital to minimize the rates of terrorist attack occurrence. Overall, governments should decrease the financial pressure on the airline industry, such as increasing taxes and charges on services as air navigation. These increases result in air travelers encountering high prices on tickets and considering other modes of transportation to save money.
Airline alliances offer multiple benefits to companies operating in the industry. For instance, customers can gain the advantages of stronger airline networks, the increased efficiency of travel, and the ability to book flights using the same airline networks. In regards to companies, alliances can take multiple collaborative forms ranging from price cooperation for the sharing of airline facilities, all of which add to efficiency and reduced costs (Khan and Khan 64).
For alliances to positively influence the airline industry, they should focus first on providing high-quality services to customers through creating large air networks and then consider different methods of cutting costs (“Effects of Airlines Alliances and Mergers on Fair Competition”). Also, it is advised for alliances not to viciously compete against each other but rather create unique service propositions that will differentiate them from others. This strategy is more likely to benefit the airline industry because it will focus on providing value to customers, which, in exchange, will pay for the services offered to them.
To summarize, the airline industry is expected to improve when governments consider the economic implications of their policies and when alliances work toward collaboration. The mentioned recommendations point to the volatility of the airline industry and the need to shape an environment in which air travel will be safe, inexpensive, efficient, and stress-free.
“Government Policies and Their Economic Impact on Airlines.” ICAO. 2013. Web.
Khan, Usman, and Noreen Khan. “Customer Satisfaction in Airline Industry.” International Proceedings of Economics Development and Research, vol. 76, no. 12, 2014, pp. 63-67.