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Industry Research

This article “grounded by war” gives the effects of the war in Iraq as presented by Mark Gerchik formerly an employee of the department of transportation. He attributes the 8. 5% drops in the airline bookings to be as a result of the gulf war. In addition he acknowledges that the airline industry was in a far better shape prior to the 9/11. Mark Gerchik envisages that unless the war ends most airlines will either be bankrupt, grounded completely or affect negatively the gas prices. (Donnelly S. (2003) Time to Land The author of the article “Time to Land” suggests that “organization is the key to saving fuel and money” in the airline industry.

The author further elaborates that restrictions and adjustments on the landing and taking off timetable of aircrafts. Ultimately affects fuel prices. This is due to fact that aeroplanes engines will be started before take-off time hence wastage of fuel and hence delays. All these will injure the trust and confidence of the customers leading to reduced bookings and low revenue in the long run. Poor organization also according to the author leads to environmental/air pollution due to the release of large amounts of carbon dioxide (co2) as a result of delays in take-off.

The author gives as solution by asking customers to go online and complain to the governments responsible (Economist Vol 383 pp 19-20). Monetary and Fiscal Policies A monetary policy is responsible in manipulating the available money supply in the country whereas Fiscal policies are those policies in which the “governments influence the economy by changing how it spends and collects money”. This can be through: tax cuts, increased spending, and employment insurance. The president and the legislative dictate these policies.

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These policies in the airline industry have many effects since this industry is very competitive. Effects of Monetary and Fiscal Policies in Employment Rates fro the Airline Industry These policies provide consumers and businesses with confidence and unless customers are very confident with security and arrival and departure times, there will be reduced bookings and hence decreased revenue. Since there are many alternative transport systems like water and road the airline industry will make a lot of losses and hence it may lay off some of its employees or may not recruit new employees for an extended period of time.

These will ultimately reduce/retard the employment rates in the airline industry. Effects of Monetary and Fiscal Policies in the Growth of the Airline Industry Since the airline industry is very complex, competitive and high regulated, these policies could affect its level of competition. Changes in these policies will also have opposite and equal effects. Although air travel is not very critical in domestic travel, it is both a luxury and a necessity. Therefore these policies responsible for the growth of the industry since they give regulations to this industry.

This regulations lead to great fluctuations, which alternatively provide incentives for the firms to be innovative in the response to the changes in demand and costs. These regulations are also responsible in the prices for flights, which also determine the number of bookings in one airline to another. Therefore government policies play a crucial role in the growth and collapsing of the airline industry. Effects of Monetary and Fiscal Policies in the Prices of Airline Industry In the airline industry prices are high there is reduced number of bookings, which translates to decreased flights and low profits.

Since monetary and Fiscal policies are passed by the government in order to influence the economy by altering the way the government spends and collects money. They affect the prices in the airline industry since the price is dependent on the cost of fuel, the number of bookings and the confidence of the travelers. All these factors are addressed by these policies and ultimately determined the prices in the airline industry. Conclusion Government investment in security and public policies (Monetary and Fiscal) promotes confidence in the airline industry.

Confidence is key to the growth, price and employment rate of the airline industry. Regulation and deregulation is very critical in the growth of this industry since it is a very competitive and complex transport industry and therefore the government must move very fast and reduce restrictions so as to operate smoothly.

References:

Donnelly’s. (2003) February 10. Grounded by war? Time Europe Vol. 161 Issue 6. P. 18 Time to Land, (June 16, 2007). Economist Vol. 383, Issue 8542, Special Edition, p. 19- 20, 2p

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