In the current essay I am going to analyze the international airline business, the management of the international airline business, the main economic characteristics of the international airline industry, the ways to forecast the business cycle in this particular industry and future prospects of the airline business under the conditions of the world economy recession.
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As every sphere of life and the industrial area, the airline business has its specific marketing strategies, competitions and advantages before the other companies. Thus one of the main economic characteristics of the airline industry is the diversity of the spheres embraced by the airline business: transportation, leisure, logistics, communication, information, selling services (Shaw, 2005). It involves a great number of different organizations in its business in order to combine all the advantages of different spheres and make a perfect product which would be safe, useful and affordable.
“Airline deregulation serves as a useful point from which to review recent trends in commercial aviation service and safety because it significantly reduces the role of government in regulating the service provided by the industry” (National Research Council, 1991). The companies that are owned by the private companies are more profitable and successful than the state-owned ones.
Thus we can make a conclusion that nowadays the airline business is an independent industry which is responsible for providing services. One of the main economic characteristics of the airline industry is the form of ownership, because “most of the state-owned airlines belonged” to the group of airlines that “have been unable to generate profits even in some of the years when the industry as a whole has operated profitably” (Doganis, 2006). Thereby the economy of the airlines industry is closely connected to the world economy.
Understanding the main economic characteristics of the airline industry helps to forecast the way industry reacts to the business cycle. The airline industry is a cyclical and marginal industry; it depends on the world economical growth and recession. The cycle includes several years, some of them are more profitable and others are less profitable due to the range of factors. “When growth in the world economy slows down, the growth in demand for air traffic and for air freight also slows down, though there may be a time lag” (Doganis, 2006). Thus when the main characteristics of the world economy are understood, the influence of it can be predicted for the sphere of the airlines.
The prospects for the airline industry in the conditions of the world economy recession can be described in a great number of different ways. The world economic recession is the result of the economic policies of the countries which were involved into the lending. Thus the most obvious prospects for the airline industry are very slow growth of profits; though many financial analysts claim that the world economy is not likely to recover in the next several years.
The prospect for the airline industry is the avoiding of the panic, because “a lower-than-anticipated growth in demand for air transport means over-capacity and lower yields as fares and tariffs are slashed to try to fill empty seats or cargo space” (Doganis, 2006). Thereby the companies of the airline industry are trying to make everything possible in order to return to the profit level of the pre-crisis period. The recovery of the airline business can happen even later than the world economy recovery; because according to the tendencies of previous years and previous recessions the economic changes occur in the airline industry with some delay.
National Research Council (U.S.). Transportation Research Board. (1991). Winds of Change: Domestic Air Transport Since Deregulation. Washington: Transportation Research Board.
Rigas Doganis. (2006). The Airline Business. New York: Routledge.
Shaw, Stephen. (2005). Airline Marketing and Management. England: Ashgate Publishing, Ltd.