Economic Impact on Aviation Industry

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The economic situation has proven to have impacted the airline industries in many ways. For instance, changes in price of an airline industry may also change the demand and elasticity of the services offered by the airline company. In this regard, the outlook of the airline industry can still be considered to have strong growth in spite of changing economic conditions. For airlines, the economic situation for prices, wage inequality and even monetary aspects will hold many challenges and only those airlines which continue to tackle their costs and enhance their services will remain in the market.

The rapid development of the global trade in terms of goods and services as well as the foreign direct investments has also influence the way airline industry operates. It can be said that the economic situation and condition affects airline industries’ growth. In the first half of the 90s, the airline industry has suffered not only from world recession but also in terms of the context that travel was further depressed by the existence of the Gulf-War. For instance, in 1991, the number of international passengers has experienced major downturn. Herein, the financial stabilities were worsened by the airlines over-ordering aircraft in the boom years in the latter part of the 1980s, which leads to significant surplus in the airline market. During this time, International Air Transport Association’s member airlines have already suffered cumulative net losses of $20.4 billion from 1990 to 1994. Because of this, the airline industries have had to give emphasis on the need for radical transformation to make sure that they will be able to compete in the fierce competition and to regain their prosperity and survival. Many airline industries have tried to aggressively cut costs, to be able to lessen capacity growth and to enhance their load factors. During the period of the renewed economic growth, such activities have returned the airline industry...
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