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The privatization of significant airlines while maintaining their independence is essential to all stakeholders. Currently, the Chicago department of aviation is in charge of O’Hare International and Midway Airport. The number of flights has declined due to a lack of efficiency and a rigid decision-making process. Moreover, customers have complained about the quality of the services and indicated they would consider their choices. There is a need for a change of control systems for effectiveness and enhanced productivity. Privatization of the two airports will address social welfare and quality concerns. Although unifying them would enhance their economies of scale and limit competition, its management would be complex. The task force should consider retaining the independence of the two flight industries after privatization. The oligopolistic market enhances fairness and the competitive multi-airline sector by availing freedom of entry. Generally, the industry will exhibit all forms of competition through price, service quality, and frequency.
Background and Methodology
Management attributes an increase in a deadweight loss to higher operational costs which destabilized market prices. Due to the price ceiling from the ministry of finance, the airport management found it difficult to make decisive progress. At the moment it is hard to estimate the welfare effect of privatization on the airline. Apart from the policy environment, several other factors in the market contribute to declining revenue. However, a similar exercise by the British airways resulted in a strong welfare impact (Edwards, 2017). The customers, on the other hand, are expected to incur higher prices as a result of the measures. Generally, the overall aim of privatization is to improve the financial position of the airlines.
Change of control is vital because it can address efficiency in personnel and streamline the operations of the organization. First, a substantial reduction of employees offering redundant services will lower the wage bill. Second, modernization of the airport services through the acquisition of new and bigger crafts increases the capacity of passengers. Third, open market access allows the airlines to fly between any two territories in different states. Furthermore, an increased customer base will lower the costs of fares because empty seats lead to losses. The airlines will further optimize their operations by reducing maintenance costs. Technological advancements have affected the aviation sector due to varying customers’ decision-making. Customers benefit from the availability of options and transparency in the price. The aviation sector can leverage reduced costs due to online booking innovations. Airline competition has resulted in substitute technology used by new entrants. Major airlines can become more efficient and transparent in their pricing by introducing small and innovative aircraft.
The airports are expected to continue dominating the aviation sector due to the ownership of massive resources. Liberalization of the independent airlines will grant them competitive pricing, which is beneficial to consumers. Further, price controls will reflect increased revenue to sustain the operations at the airport. Limited competition is beneficial and will improve operations in the aviation sector. The dominant players should forge collaboration and partner in price settings. Midway international airport can capitalize on sustainable costs and maximize returns. O’Hare International airport can benefit from high capital investment thus, attaining economies of scale.
In summary, privatization is essential in commercializing state-owned airlines to increase productivity. Change of state influence in pricing is necessary to ensure the airline industry operates competitively. Efficiency in airport management provides incentives for customers to choose from a wide range of service providers. Addressing operational costs will effectively reduce deadweight debts, thus, providing relief to the aviation industry. Dominating airports will seek partnership and collaboration to avoid price wars. Noninterference by removing price ceilings is critical in decision-making due to market fluctuations. Finally, control systems can retain an efficient staff to enable the airline sector to minimize possible losses.
Edwards, C. (2017). Margaret Thatcher’s privatization legacy. Cato Journal, 37(6), 89-97. Web.