United Airlines - Essay Example

1. United Airlines-why is it called the 900 pounds gorilla In the United s, the term 900 pounds gorilla is usually utilized to refer to the most dominant player in the industry in terms of shares or market capitalization. United Airlines have undoubtedly referred to as the 900 pounds gorilla because of its high level of market capitalization. Being formed out of many mergers and the Air Mail Act of 1934, this air carrier had already started big. The company is further strengthened because its operation embraces air mail carriers and air craft manufacturers aside from its air passenger services. Its flock includes Boeing Air Transport, Pacific Air Transport, and the Pratt and Whitney Engine Company, Ford Motor Company, Stout Air Services, and Varney Air Lines. It should also be noted that among the Big Four or the four largest air lines in the United States, United Airlines became recognized as the most dominant. 2. Discuss each of the following terms: capital, labor, and consumer. Explain how these elements tie together The terms capital, labor, and consumer can be regarded as the most important variables that airlines should consider in order to ensure the success of their business operations. In the explanation of Adam Smith, these three are like the legs of the three legged stool. In this simple connotation, it can be seen that if any of the legs is shortened, lengthened, or modified, the whole stool collapses. Thus, the operation of an airline should be strongly favorable to these market forces. However, it is also recognized that the current market is not as efficient as it should be because of the imbalance in labor, capital, and consumer. In the simplest sense, capital can be referred to as the human made machines or equipment which business organizations use in their operations. For an airline, the aircrafts undoubtedly represents the highest investment in capital. Nowadays, technological advancements like online ticketing and booking are also considered capital. The ownership of capital gives power to business organizations especially if these resources are not readily available for individual customers. As airlines are generally profit maximizing, they view capital as a way to raise income often at the expense of their employees or the customer. Attributing high value to capital, airlines can undervalue labor and pass on a high price to consumers. Labor is contribution of the human resource to production. In the airline industry, labor represents the services of the flight attendant, pilot, and mechanics. At the extreme, it is advocated that labor should be on top of the production system. However, putting much on labor can be detrimental to the business organization and consumers. Consumers are the market that business organizations serve. Nowadays, the profitability of an airline is strongly linked with its ability to satisfy its consumers through the goods and services it provides. As we can see, airlines should strike a balance between these market forces. They should invest in capital in order to improve their products, value their employees and compensate them according to their worth, and deliver value to customers. 3. What is the effect of economic regulation and the effects on industry "market rationalization" Economic regulation is the participation of the government in order to correct the failures in the market. In the airline industry, government intervention is warranted to bring about economic efficiency, ensure safety, protect the environment, and regulate interstate and foreign commerce. Economically speaking, regulations are used in order to balance market forces. It should be noted that as businessmen do not see things the way consumer does, this necessitates the intervention of the state in order to protect the interest of the consumers. Through this way, market rationalization or the efficiency of market forces are ensured. The Airline Deregulation Act is an example of how the government intervenes in order to bring about efficiency in the airline industry. It should be noted that in the short run, this economic regulation becomes effective are objectives were met. However, huge losses were incurred by the airline industry because of the cutthroat competition from more efficient players. In spite of the huge losses which reached $30 billion from the period of 1999-2004, the deregulation is still recognized as politically successful. The higher number of passenger and load factor are strongly attributed to deregulation. However, these results are overstatement and are distortions of what really occurred. The government warrants its actions by claiming rationalization. 4. Identify and explain the evolution of helicopter. The idea of the helicopter is linked with the Chinese which talks of ox-leather straps fastened to a returning blade which sets the machine in motion. The development of the helicopter can be seen as a response to the emerging needs of the market. It should be noted that initially, helicopters are use for individual mobility. Individuals who wanted to randomly ask the services of a helicopter for special purposes commission helicopters to satisfy their needs. The second phase, helicopter is now use to service personal mobility where users have pre-arranged limousine services which operates on a grid of heliport and helipads. It should be noted that even if these service a wider array of customers flight are still on-demand and unscheduled. Nowadays, helicopters have evolved from being private to provide mass transit services. Like other aircrafts, helicopters are now used or scheduled air carrier service on specified routes within predetermined time of arrivals and departures. 5. Discuss the procedures following September 11 on page 511. The terrorist attack on 9-11 had highlighted the need for more security in the airline industry. In order to restore the confidence of the consumers and prevent the attack from happening, the American government instated changes both organizationally and procedurally. The 9-11 attack prompted the creation of new organizations including the TSA and DHS. The TSA or Transportation Security Agency is created to ensure safety inside the airports and the airline. The creation of this organization is simultaneous with the mandate of 100% screening of all checked bags. The government also requires that airport screening personnel be federally employed. The DHS or Department of Homeland Security is mandated to oversee the TSA and protect the movement of international trade across US borders, maximize security on airports, and engage other foreign countries in programs which eliminate security threats. These efforts to ensure security in air travel are also coupled with the commitment and dedication of airlines to reduce security risks. Companies have started to screen their human resources by modifying their process of selection, training, and retention of employees. Airlines have also been so keen in increasing the use of canine security applications and surveillance methods. New technologies such explosive detection systems at the lobby of the airports have also became important. 6. Explain the airport privatization. Discuss why it is good or bad. Airport privatization is similar to deregulation in the sense that the government is renouncing its power over the airport and passing the control to a private organization. In order to do this, the government typically engages in either of these three actions: contracting out the maintenance, management, and operations of airports to a private firm; allowing the private development of airports which are typically done and overseen by the government; and the sale or lease of the airport which is owned by government and allowing the buyer to operate the facility without the aid of the state. Privatization can be seen as more or less economically justified. The major argument for airport privatization is the increase in efficiency. It should be noted that as opposed to the government which functions to provide public goods, the main motivation of a business organization is the maximization of profit. With this profit motive, a private firm is thought of to be more efficient in allocating its resources and more keen in minimizing wastage. This efficiency is then passed to airline operators and consumers in the form of lower prices of services. However, these theoretical benefits of privatization are not always reaped empirically. There are times when the private entity is less efficient than the government in providing operating the airport. In this situation, the private entity which still seeks profit generates them at the expense of both airline operators and customers. Another way for the airports to maximize profits is through increasing load factor or yield. These efforts are lead to consumer inconveniences because of long queues, flight delays, denied boarding, and potentially lost baggage. Quality of service also declines as there is an over utilization of airport infrastructure. Read More