Airlines were responsible for the large USD17 billion of economic losses globally. The returns generated by airports are weighed down by the US, where airports are owned by local governments and funded by tax-efficient municipal bonds. They are not run to generate a return in their own right, but to bring wider economic benefits. Outside the US, airports generally produce higher returns, often aided by price regulation.” (CAPA,
QUESTION 1. Analysis Political, Economic, Legal, Socio-cultural, Environmental and Technological 1) POLITICAL Political factors have a great effect on the operating environment of the aviation industry. For Virgin Atlantic, it is compulsory for them to work within an operating restriction that determine the services offered, where the airlines can fly, taxes for landing, fuel taxation, security legislations. In recent years, the terms of terrorism attacks become a serious issue and have a negative effect on this market. 2) ECONOMIC During the last decade, the global economic environment experienced a sharp downturn in the amount of economic activity, and this issue has a strong affect the air travel demand.
The federal government’s absolute control over the TSA makes airline travel inefficient because adjusting the administration’s budget for more screeners, technology, and research is difficult and slow to develop. The security lines in airports are more often than not long and slow and there is no obvious solution that would make the TSA more efficient. Author Julia Zorthian of Time magazine claimed that the TSA blames passengers: “They carry on too many bags, which causes delays, and sometimes ignore small steps like having their IDs and boarding passes ready what would expedite the security process”. There is an unfortunate distribution of blame between the federal government and the consumers. The federal administration of airport security isn’t beneficial to either party; the federal government is responsible for drafting a budget of $7.4 Million dollars which adds to the national debt and the consumers are being subjected to inconvenient and intrusive screening processes (Zorthian 1).
The company revisits and analyzes its technical and financial processes to be prepared for mitigating the competitive threats. The main drivers in United Technologies’ customer relationship are delivering the products of the best technology on time to ensure smooth purchasing process for its customers and provide products with excellent quality. Any issue coming up in the process requires immediate action for United Technologies. The company has signed an 80-year long partnership with Boeing Company that is a step forward compared to the previous one. Boeing Company needs the investment and expertise of United Technologies and by this long-term contract it ensures a stable relationship with one of the main customers of the industry.
As for Ryanair Holdings, their primary method is using the cost control which leads by using secondary airports. The drawback of using secondary airport is that it is far from the city center. It brings hassle for the customer to travel again to the city center. The other bad things happened to this airline as in 2009, The Air Transport Users’ Council claimed that Ryanair had the most complaints. The top complaints include cancellations, missing bags, and denied boarding.
Traditional economics cannot model this because many of these decisions are not financially optimal, so behavioral economics must be used. A downside of only operating the Boeing 737 aircraft is that smaller airports cannot be reached. Additionally, Southwest faces a tough market in which Delta has long standing contracts with major cities. In fact, Southwest was given landing rights at Atlanta Hartsfield-Jackson Airport, the world’s busiest airport, in only 2010 (Economist). Because Southwest can only reach metropolitan airports, many consumers who live outside of the city will choose to fly Delta in order to fly into a regional airport; those that live in the city may fly Delta simply because they offer more flights to their destination.
Since Nok Air positions itself as “premium low-cost airline”, the firm is now facing the high cost. The costs include fuel engine price, the premium onboard service, foods and beverages, the cost of offering high weight of baggage, and so on. Also, as Nok Air has to hedge fuel engine from Thai Airways International Public Company Limited, it mainly drives Nok Air to have the higher cost, and it results in decreasing the profit (“Broken Wing Nok Air,” 2008). However, the firm cannot increase passenger ticket price. Otherwise, it will be inconsistent with Nok Air’s position.
The Judge in the case stated that it was “clear social dumping” and “an issue of unfair competition against other airlines that respect national legislation”. Sourcing Revenue from Outside the Airline: Ryanair earned €602 million in profits in 2014 but 20% of this was earned through sources outside of actual airline tickets. This is due to excessive charges on such items as name changing to boarding passes, boarding pass fees, luggage fees per kilo, credit card charges, reserved seat fees, bulky item fee such as wheelchairs, buggy’s, musical instruments along with items such as water, food and scratch cards. Cutting
However, research has indicated that Virgin Atlantic has encountered stiff competition from other companies in the industry, for instance, they were once forced to lower the rate of their flight which follows a review of prices for air travels by their major competitors which include British Airways, Fly emirates, and Qatar Airways. "Economic indicators for example GDP, exchange rates and inflation are important to management of Virgin Atlantic. They can tell when it is a good time to
Political and legal factors Airlines operate in a political environment that is strictly regulated where government intervention over the performance of the company is necessary from time to time. Economic factors Qantas has faced the heat of lower demand that caused in declining revenue and huge losses mainly due to declining economic performance of the Australian economy Social and demographic