Summary:
The International Air Transport Association has reported that there has been “alarming” drop in passengers last month all around the world except Latin America. This decline is because of the high fuel prices and the decline in the global economy. This kind of drop in passengers has not happened since the SARS scare in 2003.Latin America saw an increase of 1.7 percent year over year while everyone else in the world saw a 2.9 percent year over year decrease. North American airliners saw a decline of 0.9 per cent during September after a trend of gradual increase of five percent in the previous months. Air Canada has similar troubles as their overall traffic has dropped by five percent last month.
The Operation of a Market: The Concept of Supply and Demand:
This chapter focuses on the concept of Supply and Demand. As you can read from the article, the demand for people who want to travel via airlines has decreased last month. There are several reasons for this. One of these reasons is because of the fact that due to the increase of gas prices, the prices of airline tickets has also increased. The increase in price has deterred people to travel via airplanes. People are either trying to find a cheaper alternative or wait until the gas prices has gone down a bit. Another reason is because of the fact that the global economy is doing so poorly, people are hesitant to spend their money and rather save their money just in case.
Reflection:
Its unfortunate that these two events(poor global economy and rising gas prices) happened at the same time. I predict that this trend of decreasing amount of passengers will continue until the global economy is on solid ground again and when gas prices also go down. Unfortunately it looks like that is not going to happen in the foreseeable future. The airline industry is going to suffer incredible due to this and there is very little that they can do about it. If this continues, they might reduce the amount of airplanes traffic and this in turn will layoff hundreds of jobs in the flight industry.
1 comments:
I think Air Canada had a couple of options. With the Olympics coming up, airlines can look forward to a large increase in the number of flights demanded. No matter what they decide to do now, they have 2010 as a security blanket for guaranteed profit. If they fire a portion of their employees now, they will have to spend time and money to hire new flight attendants later on.
The elasticity of airlines differs from luxury electronic goods (iPhone) because many people need the airlines and have very few options if they want to travel. This is especially true if a Canadian wants to visit family in one of the Asian or European countries, or just needs to go overseas for a business trip, therefore there will always be a steady demand for airlines.
-lnguyen
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