Airline Industry Essay 15

Topics: Airline, Southwest Airlines, Airport Pages: 6 (1960 words) Published: July 27, 2008
The airline industry is a large and growing industry. Air travel plays a very important role in economic growth and world trade. It is expanding for either of the following reasons that is for business purpose or leisure travel. It helps in increasing the international investment as well as tourism. The airlines have made it more comfortable to travel from one place to another, and now are offering reasonable rates. Affordable rates encourage people to travel further to new places. As a result, people have started traveling to new exotic destinations. Billions of passengers are traveling every year by way of the airline industry. The airline industry is not only growing in developed countries but it is growing in developing countries also. As the economy of developing countries is growing, the citizens of the developing countries are becoming the new tourists. In the future, the citizens of the developing countries would become the new tourists at the international level. Government of developing countries has also realized that tourism is one of the important factors which help in the growth of economy. Developing countries realized the benefits of tourism to their national economies so they are paying attention to the infrastructure development and the development of resorts. They are trying to provide convenient air travel services. Improved air travel services help in increasing the tourism and as a consequence, it supports their economy. It helps in the growth of the airline industry.

More companies are doing their business at an international level. Nowadays companies are not only targeting the local citizens but are also targeting the customers’ world wide. Many companies of the developed countries are now moving towards the developing countries in search of new markets for their product. Companies are becoming global in the terms of investment, supply, production chain etc. As the companies are becoming global, business travel has also grown. In the growth of business travel, rapid growth of world trade in goods and services has contributed a lot. International direct investment also contributed in the growth of business travel at an international level.

Last year, scheduled airlines carried 1.5 Billion passengers. In the last ten years, growth of air travel is satisfactory. The air travel has grown by 7% per year in the last ten years. According to the forecast of the IATA, International Airport Transport Association, at the end of the decade, the air travel will grow by an average of 6.6% per year. IATA also forecasts that from 2000 to 2010 the growth is over 5% a year. Forecast rate given by, International Airport Transport association is almost similar to the rates of the last ten years. Air travel market is highly developed in Europe and North America so the expected growth rate in air travel business is slower in both countries. It is estimated about 4% to 6%. Asia-Pacific Region is the center of the growth of air travel market. There are several reasons behind this. It is happening because of the rising prosperity in domestic market of this region. It has resulted in fast growing trade and investment. In 1997-1998, financial crises affected the growth of air travel business in Asia. In this region, it has been rising up to 9% a year. Continuous fast growth is estimated in this region. According to the International Airport Transport Association (IATA), the international airline is projected to report a profit of $5 billion throughout this year. According to Director-General of International Airport Transport Association, this profit is very small. According to him, the airlines are a $470 billion industry and this profit is only a peanut in front of this. Debt of the industry is about $200 billion. To cover the cost of capital, the industry needs $40 billion. Although the industry has been changing very fast in the last five years, still the financial hole is deep because of a large amount of debt....
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