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Essay sample on Economic Factors Affecting the Airline Industry

Economic Factors Affecting the Airline Industry

The airline industry is one that is very dependent on the economy of a country in that, when the economy is not doing so well, there are higher chances that it will also be experiencing difficulties in terms of revenue. The reason for this is because the airline industry has a major role to play in aiding world trade, tourism, economic growth, international investments among others. Thus, it is in order to say that there are lots of economic factors that impact the aviation industry. These factors can either have a negative or positive impact based on each one of them.

Government policies are one of the economic factors that can impact the airline industry. Each and every nation has its own policies regarding the way in which operations in the airline industry should be run. For instance in 2008, the US government issued a $1.5 billion proposal in the aviation security costs. However, the US airlines expressed fears that this would negatively impact on jobs in the airline industry. After the 11 September attacks, airfare fees were increased and this resulted into a decrease in the overall demand. Many employees were laid off and the entire airline industry was negatively impacted.

The issue above also leads us to another economic factor that affects the airline industry, security. When a country is constantly under the threat of insecurity from political uprisings or even terrorist attacks like has been witnessed in the recent past, a lot of people will be scared of traveling. Thus, the airline industry will be starved of the revenue that is should generate. If such a situation prevails for quite a long time, several airline companies may be forced to halt or diverse their operations resulting into great losses.

Another way through which the government policies impact the airline industry is with regard to pricing of certain products used in the industry like fuel. The government is in charge of setting prices of commodities within the country and if those that are used in the airline industry are kept at high levels, the airline companies often find it hard to expand. For example, there are several airline companies with plant to expand but are still held back due to the high costs of fuel.

Competition in the industry is yet another economic factor that can impact the aviation sector. Today, there are quite a number of airline companies that are coming up. These new airline companies that come into the market introduce new technologies and systems that are up to date with the needs of clients. Thus, those airline companies that have been in the industry have to also upgrade in order to beat the competition put up by new rival airline companies. Instead of viewing this form of completion negatively, it should be embraced since its existence in the industry will urge airline companies to offer high quality services to clients. With this, the demand for aviation services will go up, thereby enabling the players in the industry to rake in more revenue.

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