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Write a 3 page essay on 3: Written Paper 2 (Week 4).In addition, this paper offers an evaluation of what the fuel costs does to the industry and how they affect the ticket prices and the patrons flyin
Write a 3 page essay on 3: Written Paper 2 (Week 4).
In addition, this paper offers an evaluation of what the fuel costs does to the industry and how they affect the ticket prices and the patrons flying occurrences.
The costs experienced by the airline industry differ according to regions or countries. According to Wensveen (2011), most of the costs and expenses in the industry are in terms of fuel, labor and maintenance. For instance, fuel accounted for forty percent of total operating costs in the United States air industry in the year 2010. This figure is according to a methodical investigation conducted by the IATA. Wensveen (2011) further identifies other costs in the airline industry as postulated by the Air Transport Association (ATA) in the US. These costs include "aircraft rents and ownership, non-aircraft rents and ownership, professional services, food and beverage, landing fees, maintenance material, aircraft insurance, non-aircraft insurance, passenger commissions, communication, advertising and promotion, utilities and office supplies, transport related, and other operating costs" (p. 6).
There are a lot of risks associated with the airline industry some of which are random. An example of these random risks include jet oil prices. Since jet fuels accounts to one of the highest expenses or costs in the industry. an increase in price with have a direct negative effect on the earnings. The unstable condition of jet fuel prices makes it difficult for airlines to plan their future activities (Wensveen, 2011). In other words, airlines have inadequate and ineffective alternatives to changing fuel prices as its happens within a very short period.
Subsequently, rising jet fuel prices affect the network structure of the industry. A study conducted by Morrison, Bonnefoy, and Hansman (2010) showed a drop or decline of total airline departures by 2.8 percent between 2004 and 2008 in the US airline industry. There was also a decline in the number of services offered within the industry at the same
