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The Airlines Industry And Economic Indicators Forecast

1428 words - 6 pages

After 911 many people question the survival of the airline industry. Tragically many businesses suffer loss and some even close as a result of the horrifying events of 911. Government grant and subsidies played a major role in why we are still able to fly the friendly skies. A walk through any airport today will show the many changes put into place after 911. A good way to determine the possible stability and growth potential would be to look at a few economic indicators and their forecast of future trends.Managers, investors, stockholder and stakeholders usually review the forecast of economic indicator before making a business decision. The unemployment rate is a prime indicator of that effects many businesses today. In the airline industry when unemployment is at an all time high it forces airlines to reduce ticket prices to affordable rates to attract people to take more vacations it can increase it business rate as many businessmen have to travel anyway. According to a recent prediction of the Financial Forecast Center, they predict the unemployment rate to decrease a little.In contrast to that claim is also another well known company for providing news releases CNN moneys quotes Mark Vitner as saying, the improvement in the unemployment rate has been very steady, which looks very believable." The downward trend of the unemployment rate appears very promising for the airline industry. While economist Mark Vitner sees the unemployment rate as steady, and the Financial Forecast Center show a downward trend the degree of variance is less that 1% which could be seen as very little change so basically the information is similar.We believe that the Financial Forecast Centers prediction of a slight decrease in the unemployment rate. Many airlines have already shown an enthusiasm and soon the days of the fare wars might be limited. According to a recent article in the Sacramento Bee, Southwest Airlines has already started to eliminate the free seats, thereby increasing their revenue. (Sacbee.com 2005) United Airlines has eliminated fee meals on flights over 2.5 hours, and charging five dollars for snack meals, also increasing revenue. Another indicator that is very important for the airlines to consider is the inflation rate.Inflation can be defined as the overall movement of the price or good and services in the economy. According to markervector.com the inflation rate will fluctuate over the next couple of months. It is predicted to decrease in October 2005, then increase in November 2005, and continues to increase more in December 2005, the plunge again in January 2006. As inflation rises it will force ticket rate to decrease a little and create fare wars as the airlines compete for the consumer's purchases. However in contrast with the rising oil price the ticket will increase to adjust for the increase in gasoline before the decrease to make it seem as though the prices were discounted.High energy prices have continued to a broader rise in the...

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