Civil Aviation

Introduction

The air transport demand has greatly increased in the past decade due to the rapid global economic growth that has taken place (Button, 2008). The increase in international business, search for better life abroad and more international activities have contributed to the number of air trips carried out weekly or even daily to a particular destination globally. In fact, the economic activities level of this industry is being equalized to the economic activity level in the industries it serves. The Australian civil aviation has not been excluded from these findings. Like in other countries, Australian airline market structures, the pricing and the general service management drive the industry to its current economic position.

Market Structures

The airline services can be classified into the domestic trunk, regional and international airline categories (“International Air” 2010). The domestic trunk caters for the domestic travels, the regional cater for the regional travel and the international cater for travels outside the country. With these categories, the airline services are able to categorize themselves appropriately in order to maximize the opportunities and the available resources. In the past, the trunk airline industry was divided into a four-airline structure. It included the Impulse Airlines, Virgin Blue, Ansett Australia and Qantas Airways. It has now been categorized into a two-airline system. These frights can carry from forty passengers to two-hundred and fifty passengers (“Department of Infrastructure” 2009). By incorporating such structures, the companies are able to cater for as many people as possible within a short period thus increasing on the revenue. For, example, the companies are able to carry out both the domestic freights and the international freights without structure interfering with the other.

Price Mechanism

Lu and Chen (2010) identify that the unstable oil prices are making a major impact on the airline industry. Airline services are trying hard to minimize the airline ticket fee without raising much alarm to no avail. The Virgin Blue added more seats in order to feel the gap left by Qantas and to minimize the air-ticket fee increment in order to strike a balance (“Virgin Adds” 2011). These are some of the strategies being implemented by airline companies in order to ensure that they stay in business. Although the companies are still increasing the prices, adding more seats and cutting down on costs, there was a 3.8% contraction noted in the number of sales and economic health between last year and the current year (“Airlines warn” 2011). The prices are discouraging the travelers in using the freight as often as needed and thus preferring other means such as trains or buses. However, the airlines use the price increment in order to cater for increased costs mechanism for it keeps them in business.

Advantage and Disadvantage

One advantage of increasing the prices due to the unstable oil prices, the business is able to meet its costs. It is also an advantage to the travelers, as the services are not cut down in order to cut down on the costs. Although the sales have decreased, they have not been decreased, as it would be expected due to the price increment. The prices have been increased within a reasonable range (Dorman, 2011). The market structures also serve as a great advantage in price differentiation. Those using the domestic trunks do not get so much affected by the price change as those using the international freights. These structures encourage more use of domestic travels thus improving the domestic economy. It also avails an increase in the number of international freights to particular locations. On the other hand, the major disadvantage of the price mechanism is that it reduces the economic growth. As earlier indicated, the growth contracted 3.8% from last year’s growth.

Government Policies

The government, through the bureau of infrastructure and transport, has taken the responsibility of ensuring that the economic activity that does not fall down too low. For example, the four- airline structure was reduced to two in order to maximize the revenue and cut down on costs. It has also put policies to ensure that the oil price fluctuations do not affect the civil aviation industry in a major negative way (“Economic Contribution” 2011). This is why there is a control in the air ticket price. It has also engaged with other departments in order to make sure that the oil prices are stable. It also put policies to ensure that there is consistent monitoring of all the airports in the country. This brings their attention to the most and the least productive airports in order to aide in its decision-making. When there is poor economic activity in the civil aviation industry, the government is at a loss.

Conclusion

The civil aviation industry is of importance to the government as it is to the airline services. The market structures, the pricing mechanisms and the government policies have all been put in place in order to ensure that this industry remains as productive as possible. The management of these airline services must be regularly reshuffled in order to ensure monotony is minimized as much as possible (“Embraer, Bonbardier” 2011). In order to ensure that the right policies and strategies are being implemented, annual global conferences are constantly held by multiple states (ATRS, 2010). It is significant that a balance be struck between pleasing the customers and increasing the profits. Satisfied customers will increase the sales and thus increase the revenue. However, the costs should also be catered for.

References

AIR TRANSPORT RESEARCH SOCIETY. (2010). 2010 ATRS World Conference. Porto, Portugal, Air Transport Research Society.

Aviation Performance in NSW 2010/11. (2011). NSW Tourism Futures International, July

Button, K. (2008). The Impacts of Globalization on International Air Transport Activity. Global Forum on Transport and Environment in a Globalizing World, Nov. 12.

Creedy, S. (2011). Airlines Warn of Slowdown in Freight. The Wall Street Journal, October 19.

Department of Infrastructure and Transport, (2009). Information Sheet 35- Air Transport Service Trends in Regional Australia (2009 Update). Bureau of Infrastructure and Regional Economics, Retrieved from http://www.btre.gov.au/info.aspx?ResourceId=722&NodeId=15

Dorman, C. (2011). Does Tiger Have a Future in Australia? Sydney Morning Herald, Aug. 22.

Economic Contribution of Civil Aviation. (2011). International Civil Aviation Organization, July.

Embraer, Bombardier Announce bizjet Sales Appointments. (2011). Australian Aviation, October 10.

International Airlines in Australia: Market Research Report. (2011). Ibis World: 16401, July.

International Air Services Commission Annual Report 2009-2010. (2010). Australian Government International Air Services Commission. Sep. 16.

LU, J.-R., & CHEN, C.-C. (2010). Effect of oil price risk on systematic risk from transportation services industry evidence. The Service Industries Journal. 30, 1853-1870.

Virgin adds seats to fill Qantas hole. (2011). BigPond, October 19.