Economics and the airline industry

The airline industry is tied to the economy in virtually every single way. It is influenced by people’s disposable income, leisure time, business travel, etc. When people have more disposable income, it allows them to be more flexible in traveling. Furthermore they are more inclined to spend money when they arrive at their destinations. Travel is increased by business. As the economy is increasingly global, it requires more travel between countries. As a result, companies must send their employees across the globe. This creates a benefit on all ends because the airlines benefit from increased travel, while the economy is benefited because of increasing business. According to Airlines for America, the airline business creates $1.5 trillion of economic activity in the United States and supports upwards of 11 million jobs.¬†The number of flights and flight prices are also affected by season meaning there are peaks seasons of travel such as spring break, Christmas, and summer. When the economy is good, airlines flourish raking in more profits and as a result they can increase their investments and give good returns to their shareholders. Another factors that influences air fare is oil prices. One of the largest costs an airline has is the cost of fuel.¬†However they have to be strategic in the way they change their prices because of the competition they face with other airlines. If they increase their prices too much they can put themselves at a disadvantage because other airlines may be more conservative with their price jumps. At the same time, airlines need to be conscious of their profit margins and ensuring that they are making enough profit after they deduct the overhead costs involved such as employee wages and benefits, air plane maintenance, and airline space.