Airline industry has played an important role in progress and growth of economies around the world. It has gone through many ups and downs in the past. Airline industry is particularly sensitive to law and order, economic situation, that has resulted in difficult situation for commercial airline despite increasing popularity growth of air passengers. (Shankman, 2014) This report is based on analysis of Political, Economical, Social, Technological, Legal and Ecological factors that may affect airline industry.
There are number of different political factors that are currently affecting the airline industry like:
Airline industry has adversely affected by increased security measures especially after 9/11 incidence. The number of people travelling to other countries is decreased due to fear of their safety and security, (iata.org, 2011) Furthermore the Strict visa policy and border control as an effort to combat terrorisms has caused inconvenience and has resulted in decreased number of people travelling to other destinations.
However different governments around the world are investing heavily on making new airports and expanding the existing ones, to be able to handle larger number of air travellers. These investments are an effort to make their country as preferred destination for not only passengers but also airlines to stopover. (Lexology.com, 2015)
Freedom of movement and travel is another factor that has resulted in increased number of passenger travelling abroad especially with in EU. As a result inters Europe air travel increased 44% as compared to intra Europe travel. There were 879 million passengers travelled by air in European Union in 2014 that was 4.4% more as compared to 2013. Many countries are allowing visa free travel to citizens of specific countries that is resulting in growth of air travel.
Airline industry is highly dependent on economic situation. The economic instability has resulted in increased demand of low cost airline like Ryan air and Easy Jet etc. (Timms, 2013) Many airlines gone through difficult times due to effects of 2009 down turn. Furthermore increased fuel prices also resulted in increased costs of operations that lead many airlines to adopt different strategies to reduce their operational costs. (Shankman, 2014) .People around the world are now becoming more used to low budget airline and their business is grooming. The economic down turn and increased fuel prices has taught many valuable lessons to airline industry like to ways to survive in tough economic conditions, becoming more productive and reducing costs. Currently fuel prices are at its lowest point of last decade and that is helping many airlines to not only recover their losses but generate profits too.
Figure 1.1 Demand and Supply Budget Air Travel Source: – Aviation economic
The culture of travelling for holidays is getting popular around the globe and people are getting aware of different tourists attraction through media that is resulting in growing demand of holiday packages. Furthermore the growing income of middle class in different parts of the worlds with decreased costs of air travel with the time that has increased affordability of people. As result tourism is becoming larger and more diverse customer market. (Shankman, 2014)
Globalization has resulted in cross border expansion of businesses that has resulted increased travel of CEOs and business managers. This trend is expected to increase further with the time. The maiden age of air travellers is increasing that mean many older people prefer to travel by air due to different reasons. That means there will be growing number of older passengers who will prefer air travel for shorter distances for increased comfort.
Figure 1.2 Air Passenger Growth Rate Source. Iata.org
Technology has huge impact on air line industry as well. Especially increased use of internet has made it possible for customers to purchase tickets from their homes. Furthermore the ability and access of airlines has increased as passengers can get latest information about airfare and travel. (Shankman, 2014) Many airlines are increasingly making use of technology to facilitate their customers for example Airlines has introduced mobile phone applications to facilitate customers. Furthermore social media has made it easy for airlines to interact with customers.
The Aero planes are becoming more fuel efficient day by day helping airlines to reduce travelling costs while new technology has also enabled airlines to introduce more safety measures.
Many countries had introduced different rules, regulation, and quality standards for airlines in order to ensure safety and security of passengers. The compliance to these rules and regulations is compulsory for any airline travelling to and from these countries. This has increased the costs for many airlines and they have to maintain certain level of services and standards. It is also difficult for new airlines to get operating licence in some countries due to different legal restriction and requirements. (Lexology.com, 2015). The different types of law suits against airlines has increased in last few years that means customers has very higher expectations and law is becoming more strict against these airlines. This has also become a bigger challenge for airlines.
Customers are becoming increasingly aware and concerned of environmental issues. Airline industry is responsible for 3.5% of weather change that may grow up to 15% in future. (Eurocontrol.int, 2012) Therefore customers increasingly prefer eco friendly airlines. Airlines are developing corporate social responsibility programs to address this issue. While Air travellers and environmental organizations are keeping an eye on the ways airlines are dealing with this issue. Many companies are trying to bring environmentally friendly aeroplanes in the market. The test flights of eco friendly aeroplanes that use bio fuel has been successful that is appreciated by many organizations working for environment protection.
Eurocontrol.int,. (2012). Environmental issues for aviation | Eurocontrol. Retrieved 29 December 2015, from http://www.eurocontrol.int/articles/environmental-issues-aviation
iata.org,. (2011). The Impact of September 11 2001 on Aviation. Retrieved 29 December 2015, from http://www.iata.org/pressroom/documents/impact-9-11-aviation.pdf
Lexology.com,. (2015). Government plans further investment in airports | Lexology. Retrieved 29 December 2015, from http://www.lexology.com/library/detail.aspx?g=1f8a4493-38cb-4bfa-94d3-ca5f5bce8d9d
Shankman, S. (2014). 3 Biggest Challenges Facing the Global Aviation Industry. Skift. Retrieved 29 December 2015, from http://skift.com/2014/10/14/3-biggest-challenges-facing-the-global-aviation-industry/
Timms, M. (2013). Rise of the low-cost airline. Business Destinations – Make travel your business. Retrieved 29 December 2015, from http://www.businessdestinations.com/move/rise-of-the-low-cost-airline/