Airline Industry Has Had a Very Tough Essay

Airline industry has had a very tough last decade where growth rate was consistently slowing down and profit margins were shrinking every year. This year too, the industry does not mean to have very favorable outlook because macro-environmental factors are not very encouraging. The government on its part has been trying to improve conditions for airline industry which has resulted in more privatization. This means the government itself has lower involvement directly in airline industry thus allowing private sector to have higher control on prices. This helps in improving profit margins because price control measures are not very stringent. However the government has announced that from now on, ticket agents will not be allowed to advertise prices without taxes and other fee. They will have to mention the whole price that would include everything from taxes to various surcharges.This means that airline industry can no longer try to attract customers with very low fares that usually did not include various taxes and when customers finally checked the total price, they were in for a big surprise. This kind of hook and bait strategy was in practice for a very long time but it appears that with new government announcement, airlines will have to change the way they try to attract customers to new deals and packages.

Rising costs are still the most serious problem for airline industry. Fuel prices continue to cut into profits and in 2010, the fuel cost reduced profits by 30% and this is a major change since 2001 when this effect was at 13%. There appears to be no respite in sight for airlines in this connection which means that slashing ticket prices.....