AIRLINE INDUSTRY ISSUES

Major Issues Facing by the Airline Industry

Major Issues Facing by the Airline Industry

Introduction

The Airline Industry throughout the decade has faced several challenges. These challenges become severe in 2011-12. It has been analysed that in the past year these challenges includes oil price, threat of low cost airline to full service airline, and bankruptcy and merges of airline. The paper mainly focuses on these three issues. There is a vast change occurring after September 11, 2001 incident and it impacts on each and every business industry, especially the airline industry that faces many problems because of fear in the people to travel by air. Also, the economic recession of the last decade impacts a lot on every business industry globally. The whole airline industry is divided into four segments national, international, regional and cargo.

Main Issues Facing by the Airline Industry

For any country's state income, state owned airline contributes major part in it. Because people prefer to use their country's state owned air line for travelling as they give low fare. The whole airline industry is competing on the basis of low fares. But now, this situation is changing and it is becoming difficult for every airline company to continue its operations on full capacity and expands its operations. This is due to the following factors that airline industry faces globally.

Fuel Factor

The increased oil prices are vulnerable to the airline industry. Not only airline industry it has affected whole transportation system of the world. However, the airline industry has been fighting with this challenge for the whole decade. The problem becomes severe in the year 2011-12. Many economists have identified this problem to be the collapse of airline industry. According to the International Air Transports Association has reported that the airline industry downgraded from 9.1 billion Dollars to 8.6 Billion Dollar. This reduction in change reported in the year 2010-2011. It reported that total 46% net profit was deduct in 2011. The net profit of the industry reported 15.1 billion Dollars which was 16 billion Dollar in the year 2010. This increased price is due to the political unrest in the Middle Eastern countries has increased these prices. However, the demand is significantly increasing in the country. 1,400 new aircraft introduced in the year 2011. However, the business travel is also a major contribution in the airline industry. It is also increasing significantly in the industry, global businesses expansion is the cause of this increased demand. The United Kingdom airlines industry shrank by 3.4% in 2010 to reach a volume of 104.9 million passengers (Page, 2011, p.14).

Usually, companies do not hold any burden of additional cost to themselves. They pass it on to their customers and as the cost increases, companies have to increase their retail prices which ultimately pass all additional costs to their customers. Today, every country is focusing on their oil supply or resources in order to make their economy stable. The increase in oil prices impacts on each and every business ...