COMPETITION'S IMPACT ON AIRPORT AND AIRLINE BUSINESS

Competition and its Impact on Air Transport Industry

Competition accommodates various decisions made by distinctive management levels in a business environment. Most organizations opt to maintain and improve their standards. The choice made by the authority causes the companies stay in the competitive field. The essay focuses on the impact of competition to an agency whose primary business is providing transport offerings through the air. Losses are the eventual outcome to some institutions wheres different enterprises maximize on the opportunity to make supernormal profits. The study highlights the consequences associated with stiff competition especially in groups that are not monopolies. They offer similar products that require differentials to make the company improve its performance. Products and services supplied vary from one airline to another since they want to take advantage of the market.

The Impact of Fuel Prices on Airline Competition

According to Andrew et al., 2014 fuel is a contributor of competition. The prices of gas will determine the performance of the airlines. The increased rates create a margin between various carriers. Those that manage the costs and diversified their operation have a higher chance of reporting huge returns. They purchase fuel in advance (a scheme that focuses the future needs and performances) to allow the company operate even when there is a crisis (Budd, Ison, and Budd, 2016). The strategy helps maintain customers and attract more to use the airlines and avoid the smaller carriers. When there are a lot of players seeking the same market due to the same products and services offered creates a difference in their operations. Since the services provided are similar, the management tends to price their products differently. Companies that recently venture into the air transport business tend to underprice to attract customers (Lucy et al., 2013). Sometimes it is impossible to retain customers due to products that are upcoming. Therefore, the high cost of maintenance, insurance, and fuel costs lead to winding up of the companies at an early stage. The companies will not be able to meet the specifications and requirements of their customers. It depends on the kind of passengers they interact with, whether economy, business, and first class. Airlines that handle more than forty-million passengers tend to provide extra services to its clients (Timmis, Hodzic, Koh, Bonner, Soutis, Schäfer, and Dray, 2015). They provide the services to gain mileage from their competitors, but in return, such have effects that are dangerous to the human body. Due to different gasses emitted by the cars, diseases contracted by the travelers are quite harmful. Thomas Budd et al., 2014 explains how various motors emit carbon dioxide.

The Role of Low-Cost Carriers in Airline Competition

Competition creates the desire of low-cost carriers to insist on modifications to maintain the competitive nature (Francis, Humphreys, Ison, and Aicken, 2006). The companies have an aim of meeting the demands of the client's and attract more people to transact with the carrier. The low-cost carriers categorized into different categories tend to have different characteristics. The central aspect is cutting the costs. Therefore, the carriers tend to charge a low fare to be attractive and have clients that complete a one-way.

Innovations and Airline Competition

Innovations accelerate competition in the air transport sector. The creativity employed by open-minded persons give room for expansion and new developments. The aircrafts used by different carriers have distinguished capacities and capability. Large corporations tend to change from old to modern fashioned planes in the twenty-first century (Budd, 2011). The objective is to sustain the business.

Challenges and Risks in Airline Competition

Competitions make venturing into air transport a nightmare. It makes the initial capital requirements intensive, and thus very few people can reach the limit. The conditions set are guidelines to anybody willing to venture into the business (Budd, Francis, Humphreys, and Ison, 2014). Nothing can buy life hence the life needs protection by underlining substantial capital requirements and insurance costs. The industries are very competitive and require skilled personnel to manage them. Lack of expertise may lead to the experience of massive losses that may make investors withdraw their investment. Competition captures the operation of the airlines. Most of the carriers will employ qualified and competent staff to compare itself with the other carriers with the same services. Quality standards and mechanical policies formulated complicate the procedures followed within the industry (Francis, Dennis, Ison, and Humphreys, 2007). Many organizations tend to advance to incorporate technology that manages to help in the reduction of fuel costs. The need for airlines to use cabs that help to pick-up and drop-off customers expose many people to risks. The company presents the customers to polluted environment hence, may lose customers.

Effects of Competition on Airlines' Diversification and Investments

Some of the airlines due to competition diversify to various investments rather than carrying goods and passengers. The reason is to help the company improve the wealth of the shareholders. Most of the investment is in shares, real estate and other long-term opportunities available to the public. The investment helps small corporations to reduce risks and improve chances of making steady profits (McDonald, Oates, Thyne, Timmis, and Carlile, 2015). The competition is sometimes investing other companies impossible. When investing in shares, some shares are attractive, and others are not. The reason is due to the supernormal profit made by the companies. The risks created by competition have long-term effects on airlines since they end up not meeting their obligations hence provision of services to its customers is of poor quality.

The Impact of Competition on the Viability of Airlines

Competition can lead to the closure of some of the airlines since the companies are unable to meet their costs. The operation activities are expensive hence the companies cannot afford (Francis et al., 2006). Taxes keep piling, and at long last, the companies cannot pay their taxes. The tax rates are enormous and require the businesses to strain and spend a significant portion of their profits. Therefore, some companies opt to wind up or diversify their operations (Gegg, Budd, and Ison, 2015). Avoiding closure may be through reducing unnecessary expenses of the company and channeling the funds to settle other activities.

Conclusion

In conclusion, competition has positive and negative impacts on airport and airline business. The race bores either good or bad performance. To measure the performance the company uses the income statement prepared. Similarly, the balance sheet will measure the position of the airlines regarding assets and liabilities. Profitability ratios used will give a reasonable estimate of the performance of the business. Competition helps the industry to maintain its health status and improve its profit over time. It means that the company compares with other institution to improve on the weaknesses. The companies should adopt new technologies developed to curb pollution and help maintain the health of the passengers and the entire world. The manage should undergo continuous training at various levels to help them retain and supports the expectation of the shareholders. The policies developed should aim at enhancing the goodwill of the company and not oppressing the employees.

References

Budd, L., Francis, G., Humphreys, I. and Ison, S., 2014. Grounded: Characterising the market exit of European low-cost airlines. Journal of Air Transport Management, 34, pp.78-85.
Budd, L., Ison, S. and Budd, T., 2016. Improving the environmental performance of airport surface access in the UK: The role of public transport. Research in Transportation Economics, 59, pp.185-195.
Budd, L.C., 2011. On being Aeromobile: airline passengers and the affective experiences of flight. Journal of Transport Geography, 19(5), pp.1010-1016.
Budd, T., Ryley, T. and Ison, S., 2014. Airport ground access and private car use: a segmentation analysis. Journal of transport Geography, 36, pp.106-115.
Francis, G., Dennis, N., Ison, S. and Humphreys, I., 2007. The transferability of the low-cost model to long-haul airline operations. Tourism Management, 28(2), pp.391-398.
Francis, G., Humphreys, I., Ison, S. and Aicken, M., 2006. Where next for low-cost airlines? A spatial and temporal comparative study. Journal of Transport Geography, 14(2), pp.83-94.
Gregg, P., Budd, L. and Ison, S., 2015. Stakeholder views of the factors affecting the commercialization of aviation biofuels in Europe. International Journal of Sustainable Transportation, 9(8), pp.542-550.
McDonald, S., Oates, C.J., Thyne, M., Timmis, A.J. and Carlile, C., 2015. Flying in the face of environmental concern: why green consumers continue to fly. Journal of Marketing Management, 31(13-14), pp.1503-1528.
Timmis, A.J., Hodzic, A., Koh, L., Bonner, M., Soltis, C., Schäfer, A.W. and Dray, L., 2015. Environmental impact assessment of aviation emission reduction through the implementation of composite materials. The International Journal of Life Cycle Assessment, 20(2), pp.233-243.