Custom «The Airline Industry» Essay Paper
The Airline industry is a seasonal industry that is highly labor intensive and also capital intensive. The labor and capital intensiveness’s is directly proportional to the season at high season.The seasonality of supply and demand in the industry causes the industry to have quite an unstable income and so are the pricing rate variable depending on the season at high season, rates will be higher to travel and transport using air while at low season rates will be lower. Thus the GDP contribution by the airline industry to a country is variable depending on the season and the prices at tha season.
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Pricing in the airline industry:
All airlines have a break –even cost factor which is the number of seats in percentage of the number of seats the airline must sell at a given rate for it cover its costs. This is what takes care of the seasonal nature of the airline industry. Revenue costs and the break –even load factor are not equal in all airlines. It is averaged that the recent approximate breakeven load factor is at 68%. The operating cost of an airline and its breakeven load factor has a very small difference margin making the iindustry a risky one in terms of profit and loss.
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Pricing in the airline industry can be affected by the its seasonal nature but it does not mean that at low demand the airline is pout of business but rather that they have to plan their schedule in accordance with the demands of their services. In the case of too few passengers, it may seem as a crisis but the industry has its clients at their best interest so they would have to give the same service but have their priorities set out well like maybe have a smaller airplane than normal.
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