Economics Passenger Airline

The Economics of the Airline Industry

Airline Industry : Price Elasticity of Supply and Demand

The airline industry is largely dependent on the supply from the oil industry (Pilcher 2006 . There is too much dependency on oil and at present the industry is inelastic . The increase or decrease of the price of airfare is directly related to the increase or decrease of price of oil to fuel the planes (Pilcher 2006

There is little room for the airline industry to adjust their rates as the oil industry dictates the price and the airline

industry are left with no choice but to yield to the demands of the latter industry . The only way for the prices of airfare to go down is when there is an abundance of the supply of oil and its prices would then go down (Pilcher 2006

Airline Strike Impacts Supply

There are just a number of airliners to service the passengers . There is a demand for the service but the supply is hardly satisfied (Pilcher 2006 . In case of a strike like with what happened with the Cincinnati /Northern Kentucky International Airport , supply would be harder to fulfill (Pilcher 2006 . There are actually two viable airliners , in this case , and the prices of the tickets do no vary much There is a limited option for flying offered to the passengers

There had been labor disruptions in 2006 for both Delta Air Line and Comair . These potential problems were said to occur around the Easter holidays during the spring break . Delta 's situation had been trying to get the pilots union to take the 300 million in cuts a year while Comair had been fighting in bankruptcy court for 8 .9 million worth of concessions (Picher 2006

The airlines have seen de-booking that translates to lessening demand due to the threat of union strikes (Pilcher 2006 . Both airlines released statements for the customers to stay put . Both airlines cannot afford a shutdown or a strike and they looked into a quick resolution

Airlines ' Revival from September-11 Attacks

Another factor that can affect any industry is a tragedy that affects the whole world . It does not help that the airline industry is directly targeted by a tragedy brought about by terrorism . Over the four years from 2001 to 2005 , there had been at least 40 billion dollars worth of losses in the airline industry because of the September-11 attacks of 2001 (Martin 2005 . There had been an expected and significant decrease in the demand for the airline industry services because of the attacks that involved airplane hijacking and crashing into key locations like the World Trade Center and the Pentagon . In the 2005 survey , the passenger traffic is now back to the levels before the said tragedy There had been a six per cent increase in the passenger traffic to go along with the global economic growth (Martin 2005 . The improved statistic has shown that more passengers are taking more flights

Budget airliners account had a 20 increase in...