The Airline Industry

Paper Summary:

The paper explain why the economic environment of the airline industry is a difficult one in which to operate. The paper examines the elasticity of supply and demand in the airline industry, the positive and negative externalities that affect the airline industry, how the government affects the industry through monetary and fiscal policy and wage inequality in the industry. The paper points out, however, that despite the difficult economics of the industry, new competitors consistently enter the field in the hopes of carving out some of the profits that can be had during economic upswings.

Outline:
Introduction
Elasticity of Supply & Demand
Impact of Externalities
Monetary and Fiscal Policy
Wage Inequality

From the Paper:

"The economic environment of the airline industry is a difficult one in which to operate. The industry is faced with stiff competition, high fixed costs, low differentiation, easy availability of substitutes and low cost of switching. As a result, few airlines are able to maintain consistent profitability.
"Airlines are typically highly-leveraged. This makes them very sensitive to externalities. They tend to see cyclical profitability. In times when externalities are generally positive, they make healthy profits; in times where externalities are generally negative, most airlines will lose money."

Sample of Sources Used:

• Pearce, Brian. (2008). Financial Forecast. IATA. Retrieved June 29, 2008 from http://www.iata.org/NR/rdonlyres/DA8ACB38-676F-4DB1-A2AC-F5BCEF74CB2C/0/Industry_Outlook_Briefing_March08.pdf
• No author. (2008). The Industry Handbook: The Airline Industry. Investopedia. Retrieved June 29, 2008 from http://www.investopedia.com/features/industryhandbook/airline.asp
• Flint, Perry. (2008). 2008 Forecast: Will the Luck Hold? Air Transport World. Retrieved June 29, 2008 from http://www.atwonline.com/channels/dataAirlineEconomics/article.html?articleID=2174
• No author. (2008). Chief Characteristic of the Airline Business. Air Transport Association. Retrieved June 29, 2008 from http://members.airlines.org/about/d.aspx?nid=7955
• McDonald, Marc. (2007). American Airlines to Halt Worker Pay Raises, Even as CEO Pockets Millions. Beggars Can Be Choosers. Retrieved June 29, 2008 from http://www.beggarscanbechoosers.com/2007/10/american-airlines-fights-to-halt-worker.html

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