economic profile of the US airline industry

Undergraduate
Research Paper
Macro & Microeconomics
Pages 7 (1757 words)
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The industry witnesses bankruptcy as well as M&A activities every decade. The airline industry of United States is currently standing a space from where the future does not seem to be bright. The estimates of the International Air…

Introduction

The crisis of the Eurozone acted to be the catalyst in adding the woes to the sector. To combat the problem of high exposure to oil prices the airline companies have come up with some tactics like hike in ticket rates, replacement of the airplanes that were fuel efficient and various other strategies of fuel hedging. Some of the major operating companies have already cut capacity with the aim to increase profits. The open skies agreement between United States and the European Union has provided the opportunity to the commercial airlines to begin operating flights between the countries of the European Union and the United States (Department of Transportation, 2012).
The airline industry is dependent on the conditions of the market. The industry is on the unstable path since 2001. The demand for the industry was greatly influenced by the terrorist attack, the global financial crisis and the fluctuations in the oil prices. It is a competitive industry as many players have emerged into the market. The other modes of transport provide competition to the industry. Yet it can be argued that the industry faces competition only within itself and the intensity of competition from other modes of transport are less. But in terms of transportation of cargo, train services can pose a serious threat to the industry. The consumers can avail the opportunity to send their cargos through many other transport modes other than flights. Therefore choices are limited for the airline industry. Some of the diseases like swine flu or avian flu forced many passengers not to travel through flights. This had negative impacts on the industry. The elasticity of demand is affected by the reason the passenger travels. Three reasons that can be accounted for travelling by airplanes are business necessity, time saving and pleasure. The financial crisis forced many travelers to opt for other modes of transport leading to loss of ...
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