Managerial Economics - Traded Firm and the Global Competition Research Paper

Managerial Economics - Traded Firm and the Global Competition - Research Paper Example In the leisure market due to the availability of large aircraft like Boeing 747 has made it very convenient and affordable for the common people for travelling and exploring new destinations for luxury purposes as well as business needs (The Airline Industry, 2012). With enormous growth in the airline industry the governments of many developing countries are reaping mammoth benefits and utilizing those benefits in spurring massive development in different sectors of the economy (The Airline Industry, 2012). But with this extensive growth many new potential competitors (airlines companies) are infiltrating the industry and there exists cut throat competition. The companies who are thriving in the industry are developing and implementing strategies on a daily basis for gaining competitive edge over one another. The company who loses its edge comes out of the market and has to shut down its business operations. The airlines industry is almost a perfectly competitive market where each pl ayers influence is minimal. The paper will discuss the market dynamics of Etihad airlines which is an Asian airline with the price elasticity of its products, cost structure, strategic decisions and recommendations which will allow the company to strive in this highly competitive airlines market. Propulsive expansion in the Asian airline industry As Etihad airline is an Asian airline and so highlight will be entailed on the current Asian airline industry. The Asian airlines industry despite of some exceptions have encountered tremendous recovery from the year 2008/2009 which was predominated by deep recession which adversely affected the global demand for air travel and air freight. There has been an escalated expansion in the numbers of passengers, premium travels and so on. The load factors of Asia Pacific airlines have recovered and have surpassed the peak levels of 2007. A large part of this can be attributed to the cautious move made by these airline companies in reinstating th e capacities cut during the economic downturn. This has led the industry to either raise ticket or the cargo charges or that of reducing the discounts previously offered. The rise in the number of passengers and higher traffic has yielded positive results reflecting in the operating profits for most of the airlines. Although the hike in the jet fuel prices have been a symptom of worry for the airlines. Since the year 2009, the price of the jet fuel has multiplied around two times keeping in line with the rise in the price of the crude oil. Higher fuel prices are indeed an important constraint which hampers the present profitability as well as the future growth trajectory of the companies (Seah & Yusof, 2010, p.1). Etihad airways -Legacy Etihad Airways is a national airline of United Arab Emirates. In eight years the airline company has been able to establish itself as one of the world’s leading airlines company. The airlines company was established by Royal (Amiri) Decree in July 2003 and has been able to establish itself as fastest growing in the commercial aviation history. The airline’s fleet of around 66 aircrafts has the operation capacity of 1000 flights per week. The airline provides serves unparalleled network of around 84 passengers and cargo destinations in areas like Middle East, Africa, Asia, Australia and North America. The company also owns around 30 percent of airberlin which is the sixth largest carrier and 40 percent of Air Seychelles. The