Airline Industry in Hong Kong
I. EXECUTIVE SUMMARY
The Airlines Industry was originally initiated in USA as a fastest and luxury mean of travel in the 30s¡¯. With the tremendous development on technological, we have numerous airlines in the world. Yet, just like any industry, there are always winners and losers in the long run. This paper is use to analyze the factors from an economics perspective that drive the industry prospect and their threats in the recent years.
In the report, we have analyze, based on the data from industries and also their associates, the impact on the followings,
6¦1 Supply and demand ¨C regional and global
6¦1 Technological advancement leading to economies of supply ¨C reduction in production cost
6¦1 Profit maximization ¨C price discrimination vital for the Airlines Industry
6¦1 Government intervention ¨C deregulation and liberalization.
6¦1 Trends ¨C formation of alliances
Along the process, we have adopted the principles from both microeconomics and macroeconomics in evaluating the influence to the internal (the firms) and the external (whole economy). Based on the analysis, we have observed that the industry environment is changing, from Oligopoly to a more competitive environment (oligopoly still exists but at a lesser effect), gradually even after the evolution of ¡°hub and spoke¡± because of deregulation. In the end, local airlines need the support from the government in dealing with agreement. II. Introduction
The Airlines Industry has evolved in the past decades. To travel in an airplane from one place to another used to be a big event involving a high sum of money which was only attainable by the privileged few. In contrast, Airlines now are accessible to most levels of society with reasonably affordable fares. Hence the number of air travellers has grown and naturally the number of Airlines has grown too. But some Airlines have survived longer than others. From the surprise collapse of Pan Am in 1970 to the emergence of
The Airlines Industry was originally initiated in USA as a fastest and luxury mean of travel in the 30s¡¯. With the tremendous development on technological, we have numerous airlines in the world. Yet, just like any industry, there are always winners and losers in the long run. This paper is use to analyze the factors from an economics perspective that drive the industry prospect and their threats in the recent years.
In the report, we have analyze, based on the data from industries and also their associates, the impact on the followings,
6¦1 Supply and demand ¨C regional and global
6¦1 Technological advancement leading to economies of supply ¨C reduction in production cost
6¦1 Profit maximization ¨C price discrimination vital for the Airlines Industry
6¦1 Government intervention ¨C deregulation and liberalization.
6¦1 Trends ¨C formation of alliances
Along the process, we have adopted the principles from both microeconomics and macroeconomics in evaluating the influence to the internal (the firms) and the external (whole economy). Based on the analysis, we have observed that the industry environment is changing, from Oligopoly to a more competitive environment (oligopoly still exists but at a lesser effect), gradually even after the evolution of ¡°hub and spoke¡± because of deregulation. In the end, local airlines need the support from the government in dealing with agreement. II. Introduction
The Airlines Industry has evolved in the past decades. To travel in an airplane from one place to another used to be a big event involving a high sum of money which was only attainable by the privileged few. In contrast, Airlines now are accessible to most levels of society with reasonably affordable fares. Hence the number of air travellers has grown and naturally the number of Airlines has grown too. But some Airlines have survived longer than others. From the surprise collapse of Pan Am in 1970 to the emergence of
References: 1. Fettered Flight: Globalization and the Airline Industry, Yergin et al, November 2000 2. The Theory and Practice of Revenue Management, Gryzin, 15 October 2003 (www.hbs.edu-units-tom-seminars03-04-gryzin.pdf.url) 3. The Reality of ¡®open skies¡¯ & its Relevance for Hong Kong research done by HK Policy Research Institute Ltd. By Dr. C K Law and Dr. Raymond Yeung 4. Airline Business dated 24Oct05 5. Airline from Wikipedia last modified 8Nov05 6. Liberalisation Outlook 2005 issued by Centre for Asia Pacific Aviation 7. Report on 2003 Annual Survey of Transport and Related Services, Census and Statistics Department 8. Understanding chaos of Airline Industry by Alex Kons, 2000 (www.titan.iwu.edu~econ-ppe-2000-alex.pdf.url)