Premium Essay

Impact of Global Financial Crisis on Air Transport

In: Business and Management

Submitted By Chisenga2015
Words 1965
Pages 8
Final Project Part One: Impact of Global Financial Crisis on Air Transport in the U.S
Embry-Riddle Aeronautical University
MBAA 522 – Business Research Methods
For: Dr. Barry Bauer
March 15, 2015
Introduction This research paper examines the origins of the 2008/2009 world financial crisis and the impact that the crisis had on air transport in the United States of America. Although the crisis originated in the economies of North America and Europe, its effects were global with particular serious implications for economies of the developing countries including my country, Zambia. The maximum blame of the crisis is pointed at the money lenders who created such problems as it is believed that it was the lenders in the developed nations who lent funds to people with poor credit and a high risk of default. Therefore, in an effort to address the crisis, the American Federal Reserve flooded the markets with increasing capital liquidity in order not only to lower interest rates but to also broadly depress risk premiums as investors sought riskier opportunities to bolster their investment returns (Craig, 2013). As we all know that aviation is one of the most important pillars of the global economy as it provides millions of jobs globally and contributes heavily in the global gross domestic products of a number of countries. To this effect, the aviation sector which is one of the fastest growing industries had to face negative growth rate while some aviation companies were forced to close due to huge losses that they suffered due to the global financial crisis. According to several economists, the crisis of 2008 was the most severe economic contraction, though less than the Great Depression (Craig, 2009). Therefore, in this paper, we will analyze the passenger traffic data for all American and foreign carriers that operated in America before, during and after

Similar Documents

Free Essay

Transportation

...Impact of unstable Economic on Transportation Like many economic activities that are intensive in infrastructures, the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, and the unstable economy hey can have an economic cost such as reduced or missed opportunities. Transport also carries an important social and environmental load, which cannot be neglected. Thus, from a general standpoint the unstable economic impacts on transportation can be direct and indirect: • Direct impacts related to accessibility change where the unstable economy is disabling larger markets to save time and costs. • Indirect impacts related to the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases. Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition. Economies that possess greater mobility are often...

Words: 2736 - Pages: 11

Free Essay

Brazil Tourism Industry

...contributes the world economy with a gross output of over US$7 trillion, employing 11% of globe’s workforce, forming 11.5% of global GDP. While in Brazil, White (2006) found that the industry contributes 3.2% of the total country revenue in year 2005. According to World Tourism Organization (WTO), due to the devaluation of American Dollar against the Brazilian Real has made a favorable trend in International tourist arrival to Brazil to grow dramatically in 2007 and in early 2008. In spite of this, statistic in Table 1 shows that revenue had risen from USD 4.3 billion in 2006 to USD 5.7 billion in 2008. Table 1 Brazil International Tourism Arrivals 1995-2011 Year | International tourist arrivals (x1000) | Annual growth (%) | Total revenue (millions USD) | Annual growth (%) | 1995 | 1,991 | - | 972 | - | 2000 | 5,313 | - | 1,810 | - | 2003 | 4,133 | - | 2,479 | - | 2004 | 4,794 | 16.0 | 3,222 | 30.0 | 2005 | 5,358 | 11.8 | 3,861 | 19.8 | 2006 | 5,019 | -6.3 | 4,316 | 1.1 | 2007 | 5,025 | 0.1 | 4,953 | 14.8 | 2008 | 5,050 | 0.5 | 5,780 | 16.7 | 2009 | 4,802 | -4.9 | 5,305 | -8.2 | 2010 | 5,161 | 7.5 | 5,919 | 11.6 | 2011 | 5,400 | 4.6 | 6,775 | 14 | (Source:World Tourism Organization 2011) However this favorable trend changed in late 2008 and 2009 when both visitors and revenues fell as a result of the global financial crisis and economic recession that has made tourism industry severely affected globally. This economy recession fact is further...

Words: 5336 - Pages: 22

Premium Essay

Management

...environment changes in the last couple of years have had a significant impact on the sectors of the world economy more so the airline sector, with this in mind the term paper focused on the impact of changes in the international business environment on the airline industry. International business environment is viewed as the most contexts for international business and comprehending how forces in this environment impact the business operations is the difference between business failure and success. To this end, the research established various changes in the business environment that have taken place in political, economic, financial and socio-cultural circles. Political changes especially the Arab spring have had far reaching impact on the airline sector with fall in passenger numbers to these destination as well as the rise in fuel prices negatively impacting the growth of the industry, political instability in other areas as well as laws regulating the airline sector have been on the rise as countries seek to protect local airlines, the economic crisis slowed down the growth of the sector but with the recovery process on track, the airline industry is expected to grow into the foreseeable future, issues such a new taxes for example carbon tax in Europe, the unstable foreign exchange market and inflationary pressures continue to impact the industry growth. Financial changes after the 2008 financial crisis have also affected the sector with stringent borrowing terms imposed as...

Words: 3732 - Pages: 15

Free Essay

International Shipping Management

...DLM 12/42 Lecturer: Eddie Tan Module: International Shipping Management Submission Date: 20th May 2013 Name of Student: Teh Jin Hock Assignment Question: What risks and perils are present in global transportation? Discuss how exporters and importers can manage these risks. Table of Contents 1. Introduction 2. Potential Threats and Risks of Global Transportation 3. Manage the Risks 4. Conclusion 5. Reference Introduction Thanks to globalization, lean processes, and the geographical concentration of production, among other factors, supply chain and transport networks are more efficient than ever before. This increasing sophistication and complexity, however, is accompanied by increasing risk. Major disruptions in the past five years—including the global financial crisis, the Yemen parcel bomb scare, flooding in Thailand, and the Japanese earthquake and tsunami—have illustrated the vulnerabilities of finely tuned, closely interconnected supply chain and transport networks. Although risks have increased, there are concerns about the ability of organizations to address this new risk profile. As the recent , New Models for Addressing Supply Chain and Transport Risk, points out, most enterprises have logistics and transportation risk management protocols that can address localized disruptions. Greater supply chain risks outside the control of individual organizations...

Words: 1521 - Pages: 7

Premium Essay

Airline Industry

...and Business Leadership and Policy Seminar Series Sydney, Australia 23 February 2010 Presentation Objectives • Provide background on the global industry • Present a regional analysis • Discuss current and future evolvement of the industry (trends) • Discuss challenges and strategies impacting the industry • Discuss the new breed of airlines • Discuss why airlines fail and how to achieve success Background Section 3 Stages of Development Impacting the Airline Industry • • • • Regulation Liberalization Deregulation “Re-regulation” Phases of Industry Restructuring (resulting from Deregulation / Liberalization) • Expansion • Consolidation • Concentration Past, Present and Future Trends The Global Airline Industry 2012 2010 2008 Time 2006 2004 2002 2000 1998 Survive Adapt Recover Rethink State of Industry “Scenarios” • • • • • SARS 9/11 War Financial Crisis of 2008, 2009, 2010… What to prepare for… – – – – Globalization Change in international political landscape Distribution of natural resources (oil, gas, water) Internal conflicts (shifts in power) and unintended consequences and unintended consequences of good intentions Public and international perception War Terrorism Continued financial issues – – – – Top 5 Frustrations in Aviation 1. 2. 3. 4. 5. Fuel/oil Pollution control Personnel cutbacks Global economic woes Recurring safety lapses Top 3 Costs for Airlines (in any order) 1. Fuel* 2. Labor 3. Maintenance *40% for US airlines...

Words: 1944 - Pages: 8

Premium Essay

Qantas Case Study

...QANTAS is operating mainly domestically and internationally in air transportation company for various types of travelling, such as leisure and business, cargo and logistics facilities as well as support operations which includes: information technology, catering, ground handling, engineering and maintenance (Qantas Annual Report, 2013). Qantas Group also has dual brand strategy. It operates under Jetstar Airline, as a subsidiary. Jetstar is operating under a low-cost business model and it competes with local market airlines, such as Virgin Australia and Tiger. As for the Qantas airlines, it is positioned as a premium full-service carrier, providing hi-end experience for business class and corporate customers. They all have a major influence on the business, its strategy and therefore its performance. This business strategy gives Qantas Group its quite unique and competitive advantage situation of having two well known companies in the superior and low fares segments at the Domestic and International markets (Qantas Annual Report, 2013). The demographics of Australia is taking optimistic atmosphere within the business with the increase of Generation Y and retiring Baby boomers. Schedules become more significant over service quality in current constantly changing business environment around the world. Also, with the rise of ecological concern, consumers are searching for eco-friendly transport methods. However, as the companies are finding methods to solve...

Words: 2349 - Pages: 10

Premium Essay

Lufthansa

...Lufthansa: Going global, but how to manage Complexity? Lufthansa is the leading, probably pivotal, member of the largest alliance, the Star Alliance. If globalisation means complexity, alliances are even more complex to manage than individual companies because they lack the hierarchical conflict resolution mechanisms that individual companies can employ. Important questions to Lufthansa: * Is the current strategy sufficient to maintain Lufthansa’s position as one of the few profitable airline companies, given the uncertainties and dynamics in the highly competitive but cyclical market? * Has Lufthansa done enough to reduce complexity in the right places and survive the competition, especially against the background of customer satisfaction and high value added? * Are all the employees in the corporation embraced culturally? * Is Lufthansa prepared for the sustainability challenges – in particular global warming – which create new uncertainties? Surviving the changes in the airline industry In 1992, due to the first war in Iraq, Lufthansa was close to bankruptcy just like other airlines as international air traffic has been reduced. Therefore Lufthansa has offered point-to-point connections on high traffic density routes. Also they targeted the business class passengers with new offerings such as Virgin Airlines. From the early 1990’s a minimum of 3% reduction in cost was needed every year and likely to continue. The economic and political events had a negative...

Words: 379 - Pages: 2

Premium Essay

Malaysia Airlines Case Study

...Global Industry Trends & Future Outlook The global airline industry basically comprises of air transport service providers of both passengers and cargo. According to the International Air Transport Association (IATA), the global airline industry has doubled its revenue over the last decade, from US$369 billion in 2004 to a projected US$746 billion in 2014 (PwC, 2015). According to the IBISWorld Industry Report (2015), the global airline industry looks set to increase its revenue growth by 1.2% to $783 billion. In the recent 2015 IATA’s Annual Review, we have witnessed good profit in the global airline industry with a strong net profit of US$16.4 billion in 2014. Through the 1980s and 1990s, the emergence of low-cost carriers (LCC) has a big...

Words: 2698 - Pages: 11

Free Essay

Rise of Air Transport and Its Impact

...The Rise of Air Transport and its impact on the Environment [pic] Table of Content 1 Abstract 3 2 Introduction 3 3 HISTORY OF THE WORLD AIR transport 3 3.1 How it all began 3 3.2 ICAO and IATA-history and reality 4 4 Air Transportation and the Environment 5 4.1 Demand for Air Transport 5 4.2 Environmental Impact of Aviation 7 4.3 CO2 emissions per passenger kilometer 7 4.4 Aircraft Water Emission 9 4.5 Nitrogen Oxides 9 4.6 Impact of Aviation on Biodiversity 10 4.7 Noise Emissions and its impact on humans as well as biodiversity 11 5 Cost of Aviation on certain examples 11 5.1 Aviation Cost for exotic flowers 11 5.2 The Berlin Airport Fiasco 12 6 Historical Trends in Aircraft Transport 13 7 Conclusion 14 8 Table of Figures 15 9 Sources 15 1 Abstract The following Assignment has the topic of showing the history of aviation and within this showing the environmental impact of aviation. Due to this the history is shown and in addition different types of problems connected to aviation such as carbon oxide and greenhouse gases are explained. At last there is an introduction in data’s showing aviation in its beginning as a mass transport and now. 2 Introduction Transportation - one of the most important sectors of the economy, performing the function of a kind of circulatory system in a...

Words: 4110 - Pages: 17

Premium Essay

Nestle

...1. Introduction There has been a global crisis in the Airline industry in recent times. This is attributed to the hiking in oil prices, large capital requirements (Capital assets) and stiff global competition within the airline industry, such as, the Gulf airline. The effect of the rising dollar has been significantly contributed to the hiking ticket prices of the Australian airline sector. The main Australian airlines have been impacted by the global crisis. This specific article in the Financial Times Review(Clarke & Smith, 2011), discusses that strategically Qantas was facing hard times due to the environment of the global financial crisis and it had embarked on an implementation plan to decrease internal and external flights to counter the effect of hiking oil prices and operational cost. However, in the United Arab Emirates, has been experienced growth and this has a direct concern to the threat of competition to Qantas (Vesperman, Wald & Gleich 2008, pp. 388-394). All these factors above are a contributed force to Qantas to remain competitive. This paper seeks To address the approaches that should be engaged by Qantas that are necessary to ensure ongoing competitive advantages for the future of the airline industry within this hypercompetitive environment. 2. Strategic Management and Strategic Competitiveness Strategic management is a continuous process that involves reviewing and directing the activities of a business and the environment threats and opportunities...

Words: 1516 - Pages: 7

Premium Essay

Crisis

...THE AIRLINE INDUSTRY is in deep crisis.  Losing over 100,000 jobs since September 11, 2001, and suffering major wage and benefit cuts, workers are in shock and looking for new leadership.  The recent U.S. invasion and occupation of Iraq, the outbreak of the SARS epidemic and the economic downturn exacerbate the impact of the crisis on labor.  Airline workers are in the forefront of discussions about their own industry and more general questions as political and social consciousness changes under the impact of the restructuring crisis.  These experiences are valuable for all workers. While 9/11 and subsequent events greatly worsened the crisis, the dire state of this industry pre-dated the 9/11 attacks.  The major carriers were losing millions of dollars and facing possible bankruptcy filings because of broken business models that were no longer profitable.  In the capitalist system that generally means businesses fold. Bankruptcy as a Weapon Government aid still flows to the airlines, as it did after 9/11.  But Wall Street and Washington are pushing the restructuring process.  Meanwhile some important facts indicate the depth of the crisis and the challenge facing rank-and-file workers and their unions. Last summer US Airways, the seventh largest carrier, filed for bankruptcy and began slashing jobs, wages and benefits.  It emerged from bankruptcy in the spring as a smaller carrier with lower labor costs than most of its competitors, but US Airways is still not out of turbulent...

Words: 5323 - Pages: 22

Premium Essay

Financial Crisis in Tourism

...Alexander Technological Educational Institution of Thessaloniki Course: International entrepreneurship Financial crisis in Tourism |Student: |Professor: | |Mr. Samaras Giannis | November, 2011. Content: 1. Financial crisis in Tourism- Introduction 2 2. How the crisis affects tourism 3 3. A Strategic Approach for the Global Tourism Industry to Overcome the Global Economic Crisis: A 10-Point Plan for Tourism Recovery 5 4. Money-saving trends in tourism 6 5. References 9 1. Financial crisis in Tourism- Introduction Tourism is especially vulnerable to economic uncertainty and volatility for a simple reason. Most travel and tourism involves discretionary expense. During tough economic times people conserve their cash to cover the essentials of life, food, shelter and family necessities. However, this does not mean that tourism stops. The trend that we have learned from past crises whether we refer to past economic crises or the global tourism scare resulting from the events of 9/11 is that people continue to travel but they will travel differently from the way they do during times of economic buoyancy. Those tourism and hospitality businesses which will survive and...

Words: 3345 - Pages: 14

Premium Essay

Malaysian Airlines: a Business Turnover

...operations are run, and recent statistics indicate that it has the strongest influence in East and south Asia regions. However, it is also important to note that its influence is also growing in Europe and Australia, which technocrats believe to be the growing influence in the kangaroo routes leading to Australia and the pacific (Alamdari & Fagan, 2005). The organization has undergone tremendous changes to position itself strategically in the rapidly changing world of air transport. With the increased competition ranging from the swiftly growing carriers including the Emirates, Qatar airways and Etihad airways, and the low cost competitors such as Air Asia and Jetstar to the well-established carriers such as Cathy Pacific and Singapore airlines, the organizations have enacted strategic changes to position itself on the global air transport market. The wakeup call came in 2005 when the airline experienced its worst experience. The Malaysia Airline System achieved success in two years and braced the impact of the financial meltdown that rocked the world at around that time. The underlying success factor behind its swift recovery attributes to the strategic and competitive strategies implemented, and effective decisions made that have since sustained its competitive advantage over other airlines (Alamdari & Fagan, 2005). It is not for any organization, let alone an airline industry to undergo such a dramatic turn within two years and beat established...

Words: 2378 - Pages: 10

Premium Essay

Air Asia & Mas

...Question 1 Analyze the current situation facing MAS and AirAsia using the internal and external strategic environment analysis model. Discuss what aspects and why did their collaboration take place. Answer Background to AirAsia A ‘no-frills’ airline is defined as one “That uses charter and/or scheduled flights to offer bargain-basement fares. Budget airlines usually land at and take-off from secondary airports, do not provide in-flight meals or refreshments, and may not even offer numbered seat allocation. Their ticket prices are fixed and non-refundable in case of a cancellation or no-show”. AirAsia is one of the fastest growing airline companies in the world, with a reputation as a low-cost, ‘no frills’ airline. It was originally a government owned business; yet, due to heavy debt, it was bought by former Time Warner executive Tony Fernandes in 2001, and this is where the real story begins. Their vision, under the slogan "Now Everyone Can Fly", is “To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares”,(ii) and their mission is, under the banner of 'Affordable Airfares', “To attain the lowest cost so that everyone can fly with AirAsia,” without any compromise to Flight Safety Standards, as well as, creating a worldwide recognizable brand with a ‘family’ atmosphere within working conditions for employees. (iii) These statements clearly show AirAsia’s value. Cost advantages...

Words: 2819 - Pages: 12

Premium Essay

Logistics Management

...As a brief description of the subject in the study, the life cycle of logistics can also be maximized through establishing effective management organizing efforts to maintain a certain company’s operational structure that will avoid or prevent errors and mismanagement that can take place within the corporation. In this case, the 360 degree logistics can be found when there will be a capital expenditure that will be carried out to fund materials and human resources that will be helping to manufacture product. As soon as the product will be made and distributed to the market, there will be an exchange of commodity as well as financial trade value. This process will undergo the procedural profit taking to collect the monetary amount of profits that has been sold to the market. The monetary value will be distributed to the accounting department of a certain organization to fund services, raw materials, and salaries to employees that completes the life cycle of the business operating organization. Image is one of the most sensitive factors that should be taken cared in long-term basis for the reason that it can be used for the marketing plan that will promote the company’s products to boost sales to the public as mentioned by Ponstern (2008). Location is one of the most important considerations that will be considered for companies such as Panasonic because it is an electrical distributing company that aims to identify potential target market to maintain their production capacity and...

Words: 2080 - Pages: 9