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World trade, let it be the
transportation of goods or people moving from one place to another to conduct
business, is highly supported by the air industry and it is considered to be
the most efficient way of commuting since it is the fastest means of transfer.
There have been several improvements in regards to air transport, and one is
the formation of a proper Airline system with ports and infrastructure.
Formation of Airlines has benefitted both the government and private sector. An
American company named Boeing recently manufactured Boeing 747, which has
revolutionized the way people travel by including luxury onboard
It has also been observed that
industry is changing quickly and so many changes are happening with time. The
experts believe that global airline industry will witness more changes in the
future as technology is getting better every day. The travel experience for air
travelers is also getting better with the passage of time. It has been assumed
that profitability of the airline industry will be dependent on fuel prices,
but facts are quite opposing to this assumption, because demand is the real
factor, which can have its viable impact on profitability of airline industry. The
other important factor for global airline industry is global economy. If
economy is on the right track, and people have enough money in their pockets to
buy luxury, then they may afford air travel. Otherwise, a common man struggling
with financial issues may not be able to travel on airlines. The trends are not
that obvious, but still it can be predicated that industry will keep changing with
new trends
It is a fact that airline
industry profits and revenues have been highest in the history, but it does not
mean that there are no problems faced by them. The industry is changing in so
many ways, which means that airline companies are dealing with various problems.
There are various factors, which have played their part in making an impact on
global airline industry, but few of them have been more critical than others. For
instance, it has been observed that shift in political as well as economic
climate played its most significant part in changing the dynamics of airline
industry at global scale. The political rift between nations can have large
adverse impact on the industry, because when trade relations are banned, then number
of travelers also decreases with such decisions. The airline companies are
trying their best to come up with cheap prices, but still giving premium
services to its customers. The customers do value low prices, but they also
value their comfort on plans. So, airline companies have to make considerable decisions
with regards to satisfaction and better experience of their passengers
The beauty of airline industry is
that it not only plays its part in growth of global social-economic, but it
also helps in creating an environment, which develops the economy at a rapid
pace. The more economic development and activity comes due to various positive
trends in the global airline industry. The other trending factor for airline
industry is its ability to create employment opportunities on global scale, and
it also stimulates the process of investment and local businesses to look
towards international trade. The trends have shown that growth of air traffic
has been more than the overall growth of world’s economy. The GDP of world
economy has been measured to grow at a rate of 2.8% since 1995, and growth rate
for air traffic since the same period has been 5%, which is almost double from
the growth of world economy. Many trends changed across time as industry also
faced various economic recessions’ issues, but every time it did recovered from
such situations.
Following figures are important to have a look at trends for airline industry for past few decades in general as well as past few years in particular:
Following are the challenges that
occurred in the Airline industry as a result of globalization and its relevant
trends:
Political and Geopolitical Challenges in the Airline industry
As far as one could tell, the
political situation impacts the airline industry more than any other factor.
For example, if you have aircrafts ready to be flown in from a certain country
to another but just as your flight is about to fly away there has been a
political statement releasing war orders between then the aircraft could not be
flown or even if it is about to land, but there has been a war declared, the
aircraft might have to return. But there have been times when the Airline
Industry was impacted by politics; one of them could be the very initial stage.
It is a well known fact that airlines work in a global environment, which means
that industry does rely on political as well as geopolitical changes happening
across the globe. One recent example is of China and United States. Due to
ongoing trade dispute between China and United States, the threats with regards
to geopolitical challenges are increasing. If this trade rift continues between
China and United States, then it will have a negative impact on global GDP,
which will make a negative impact in air traffic growth as well, because both
are related to each other
One of the most important issues in
the last few years is Brexit. A quite weird conclusion which is turning out to
be pitching people in whole over the British Isles, destructive the British
economy as well as disturbing business decisions globally. Right after the
British government declared for the Brexit, economically, airlines were smashed
hardly. On mediocre, the airline companies that were listed in the United
Kingdom have to experience their loss at
On the issue published on June
2017, in IATA magazine has an article that discussed the globalization and the
airline industry. In the article, they talk about how well the travel industry
is linked with the airline industry, that even though travel benefits are
nationwide only, but airline benefits are seen across the borders. Further on,
in the article, they have discussed how a 70-year-old convention prevents the
ownership and control rights of airlines to be owned by foreign entities,
suggesting that it is time to change this law or abolished for good. Even
though the issue was still in discussion but it was only in CAPA Airline Leader
Summit in Dublin in May 2017 that they finalized the decision to be made. The
participants were quite surprised by how quickly this issue escalated, and a
solution was proposed.
The requirements to have control
of the airlines handled by the nationals of the same country as the airlines
registered is not only limited to India. For example, the Delta Airlines owns a
49% share in the Virgin Atlantic and even though it may want to acquire more
since 72% of the revenues of the Virgin Atlantic come from the flights made to
the US. So, then the Delta started registering itself, and Virgin Atlantic as
Virgin Atlantic JV, which then gave the airlines 75% of the revenues on the
flight made to the US by JV. This also gave Delta an Effective but yet indirect
control over Virgin Atlantic and none of the government has made any issues
with it up till now. Etihad Airways owns minority stakes in a few airlines,
including 49% shares in Air Serbia, almost 30% share in Air Berlin and 49%
stakes in Alitalia. Even though these investment does not give Eithad many
rights in voting, but one thing Eithad has made clear with many of its
investment companies has senior executive to be chosen from it representation
in the board, giving it a strong influence
Economic Challenges in the Airline industry
Like anything else, the airline
industry is affected directly by the economic condition of the world. Economic
variables happen to affect the operations of the airlines the most; the
airlines are therefore made to develop strategies to protect themselves from
losses. The three major economic factors influencing the airline's Dollar
exchange rate, oil prices, and the growth in GDP. A study, done by Gernetzky,
shows that whenever there was a boost of 10% in the GDP of South Africa the
passenger that used airlines increased by 8% and cargo transportation had a 15%
growth as well. Hence the economic index has a significant impact on the
airline's operation
Another example of the impact
comes from South Africa; the exchange rates of Rand faced almost 40% of the
decline against Dollar during the early 2000s'. There was also a rise in the
GDP in the given period, making an increase in CPI but the combined effect of
both the above came as negative since the prices of the tickets were still over
the budgets of the primary class and made the cost of flying have an increase.
Hence made it very difficult for the passenger to believe that flying is
expensive. This further led to the demand for low-cost air flights since people
became budget conscious and causing the legacy carrier like SAA to face a
further loss. The exchange rates not only impacted the fares but the oil prices
as well making it harder to operate at a low cost. An IATA based study shows
that the change in exchange rate amounts to shift in the total cost could be
about 30% generally, another study under Campbell also suggests that change in
the exchange rate that further cause the change in oil price have huge impacts
on returns and profits of the airlines. The above situation cost SAA eight
hundred million Rand, there was a drop back in the international sales revenue
of the airline.
In the case of Jet Airways, when
the company faced a major setback in the revenues, it strategized to cut costs
by firing people and since the company was a private entity the worker could
not do much about it. But, one thing that they were legally allowed to do was
to go on a strike and hence they did. The strike made the airlines to reverse its
decision of firing employees and therefore saving jobs and facing a decrease in
returns.
One way that the economy might
impact the airline operations, other than the three mentioned above, is when
the government imposes taxes. For example, recently the government of different
countries-imposed taxes on a passenger that were landing on different
international airports which then made the passenger to take flights and routes
with lesser connecting flights so that there is the lesser cost of travel.
Another example came from the
2008 recession when many airlines faced a shutdown or even bankruptcy. During
the past two years the airline industry has shown a decline in the matter of
airlines that are not well established and hence have started firing the employees,
even though the pressure faced by the government-owned airline does not have
the same escape strategy as the privately-owned airlines, but they are even
considering strategies to bring back the profits, one of which is
privatization.
Sociology-Cultural Challenges in the Airline industry
The research survey reveals the
fact that the people have been considered to be more willing to make a
compromise on food and also related to some other services. The Malaysian
airline has been prominently focusing on the pricing of tickets and has made it
the most notable consideration that could influence the decision of the
passenger anyway. This has been
presented as an opportunity for the airline company to enhance its revenues as
the customers have obtained high offering for travelling. In addition, this has
also lead to increase the competition for the full services in Malaysian
Airline thus the airline company have also segmented the target market and have
divided the services as per the social class
Technological Changes in the Airline industry
It has been noted that by the
idea of globalization, there has been a major technological advancement that
includes the formulation of various services that includes the internet, the
use of several telecommunication services. The Malaysian airline has brought
into major changes in the technological aspect as they have been introducing
new arenas to increase their sales, and it has been done by the introduction of
new technology. The airline has also started to use the internet-based
activities and e-Commerce that involve the activities like reservation of the
seats, buying tickets online; thus, this helped the airline to obtain ancillary
revenues. The advancement in the technology aims to make up the reduction in
the operational cost and also become a saver mode for the travel agents
In addition, the major changes in
Malaysian airline have been seen into the empowerment of the supply chain
partners as technology has been helping the company to shorten the product life
cycle and have made the suppliers to make up quick decisions on the new
products. This has made up major pressure on entire Malaysia to keep up the
relationship with the suppliers and to encourage various products. The changes
concerning the use of the latest technology could bring in major innovations,
and this could help in modifying the business model in an efficient way. While
there is also a major change in the formulation of the 5G and its potential as
it could help the company in captivating more and more customers by enhancing
the user experience thus it has completely transformed the user experience in
the airline industry. The innovation in the technology has been vastly
disrupting the business model, especially to the Malaysian airline as the
competitors are gaining more access to the information. Research narrates that
the Malaysian Airline does not only aim to offer more services to the
customers, but it could also help in gaining much revenue from other services.
Malaysia has been considered as a greater talent pool, and Malaysian airlines
are constantly working to utilize the talent
In addition to that some
challenges faced by the managers in the Airline Industry are
Passengers’ safety in the Airline
industry
The passengers’ safety is
supposed to be the top priority of the Airline Managers to be consider. A
report in 2013 mentioned that there were about 36.4 million flights along with
16 fatal accidents. For this reason, it is the responsibility of Airline
Managers to make sure the passengers’ safety on each flight.
The Internet Technology in
the Airline industry
The internet technology has
expressively grown over the years. Hence, there is a requirement for business
organizations to involve their customers and even transfer and bring the
business activities online with them. The innovative Airline Managers need to exploit
this opportunity to involve, connect and trade their services to attract the customers
throughout their websites.
Overcapacity in the
Airline industry
Overcapacity is considered to be a
main challenge disturbing airlines along with some airports presently. There is
a growth in air travel services demand lately has provoked numbers of airlines
to obtain more airplanes with a purpose to efficiently provide accommodations
for the customers. Thus, the Airline Managers need to scope on this challenge
to make sure the sustainability of the airline company itself.
Impact of
digital technologies and digital transformation on the airline industry
The first air flight took place
over a century ago, transporting twelve hundred people only in a period four
months, it was a mode of transport for the elites and the first ticket sold was
for $400 which amounts to up to $10000 today. No one could think it could
transform so much such that one-third population would use it. The popularity
of airline has increased the number of passengers using airlines showing growth
in economics, amounting to 5% profit growth overall. With the growth comes to
the challenges as well. One of the challenges for the industry is aligning the
technological sector with the airline industry.
Airline maintenance could be
treated with a blockchain, having an online system for the manufacturing and
repairs of the aircraft rather than manual bookkeeping could help access them
wherever it is needed. Blockchain will help for the virtual data-keeping. It is
making sure that information about all the procurement, maintenance history, or
even the person who previously handled the aircraft. All this information
available at the right time could help in protecting the industry.
AI has gained popularity around
all the industries. Artificial Intelligence has become more and more flexible
to accommodate different industries to develop a better consumer experience.
Different airline companies are using AI to create and develop offers and
services personalized for every individual
A report
from IOTA white paper in 2018, on artificial intelligence, describes
AI as "computer programs that exhibit human-like intelligence such as
logical reasoning, problem-solving and learning"
The focus of AI has transformed
from providing humble dull chores to learning, as well as imitating the
behaviors of human along with its chores. The recitation revolution of AI has
potentially weighty effects intended for the entire business procedures,
comprising customer interface, business processes, the supply chain, and
sustenance roles.
AI could deliver the benefits
both from the optimization and also the replacement of current processes and schemes.
It is fixed to function as a disrupt or within the labor market place, as it would
lead to important modification in the actions which carried out by the people
and also those chores more suitable to machines.
Technological advancement would
able to make the Malaysian Airline to develop well and turns out to be more
vital in backing up the global tourism events. This is aligned with the fact
that the airline industry is now considered as a key player in the global
economy since it is one of the basics of worldwide business. This role also
directly identifies the airline's industry as the heart of globalization meant
for other main industries.
Conclusion
on the Airline industry
The course of the travel industry
was changed when Wright Brothers introduced the world to the flying machine.
Today a century later, the airline industry has grown by leaps and bound.
Digital technologies are changing the landscape of every industry, and the
digital revolution in the airline industry has just begun. In times to come,
the airline travel experiences are set to become more personalized, valuable,
and memorable for the flyers. In addition, the study made focus on highlighting
the major political, technological, legal, technological, and socio-cultural
factors. Thus it has also made a notable consideration on the challenges faced
by the managers and the impact of digital technologies on the success level.
References
of the Airline industry
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