Changes in the UK's Economic Structure affecting the Airline Industry

Running Head: Changes in the UK’s Economic Structure affecting the Airline Industry
Changes in the UK’s Economic Structure affecting the Airline Industry
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Table of Contents
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Introduction of Airline Industry in the UK:  PAGEREF _Toc275872439 \h
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Changes in Economic Structure in the UK & effects on Airline Industry  PAGEREF _Toc275872440 \h
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Slow Economic Growth affecting the UK Airline Industry:  PAGEREF _Toc275872441 \h
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Terrorism threats & low Tourism in the UK:  PAGEREF _Toc275872442 \h
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Increased tuition fee resulted in less number of International Students travelling to the UK:  PAGEREF _Toc275872443 \h
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Conclusion:  PAGEREF _Toc275872444 \h
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References:  PAGEREF _Toc275872445 \h
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Introduction of Airline Industry in the UK:
An airline industry is more like a backbone of any economy as it facilitates economic growth, international investment, global trade and tourism which can provide strong foundations to an economic structure of a country (Mark, 2008, p.45). Without an airline industry, a country is likely to be handicapped and deprived of various opportunities to be availed for the betterment of the economic situation. Hence, every nation that exists today has given utmost priority to establish and strengthen their airline industry so that the country is able to get on the track to economic growth as well as attract investors that can consider getting engaged into the trading activities with the country (Mark, 2008, p.46).
The UK’s airline industry has been one of the main reason behind the success and stability of the country as due to its presence the country has been able to trade with rest of the world which results in foreign reserves of the country being raised comprehensively. Apart from that, a lot of students and tourist visit the country almost the entire year which reflects how important airline industry is towards the growth and stability of the UK’s economy. With the introduction of low fare airlines like Ryan Air, it can be analyzed and understood that the future of airline industry in the UK remains prosperous. With the presence of busiest airports like London Heathrow and Gatwick airports, it can be evaluated that the UK has been facilitating businessmen, tourists and students through its airline industry contributing in the best way for the stability of the country’s economy.
Changes in Economic Structure in the UK & effects on Airline Industry
The economic conditions and the structure of a country does not remain the same all the time but it keeps on changing from time to time according to the performance of various sectors that contribute to the overall success and stability of the economy. In terms of economic structure of the UK, the economy was prospering by the year 2000 but since the attack on US (September 11, 2001), there has been decline in the tourism and people travelling to the UK. The war on Afghanistan and Iraq also resulted in traffic loss due to which many airline companies suffered heavy losses. July Bombings (7/7) in the UK left a terrible scar on the airline industry in the UK followed by global economic crises due to which economies of many developed countries like US, UK and many European companies trembled and the after effects are still visible after years since the recession arrived (Davies, 2009, p.107).
Due to Economic recession that has affected global economies, all the sectors and industries have been terribly affected and the airline industry is the one that has seriously come into the fire due to scarce of amount of money being injected into the industry. Economic growth has been very slow since year 2007 when Lehmann Brothers collapsed and due to which businessmen that used to travel to the country have put on hold their plans of any further investment under such economic situations. Due to recession, people all over the world have lost their jobs and their income has been greatly reduced which has led to few people using air transport to reach to their desired destination. In result airline industry all over the world and especially in the UK has taken a serious down turn in terms of their revenue (Davies, 2009, p.106).
The airline sector is facing unprecedented turbulence. According to analysts, airlines could suffer losses of US$9 billion this year. As recently as March, the red ink was estimated at US$4.7 billion for 2009, according to the International Air Transport Association (IATA). IATA has also adjusted its estimates for losses in 2008, from US$8.5 billion to US$10.4 billion. Giovanni Bisignani, director general of IATA, painted a gloomy picture for the industry at the association’s latest annual meeting in Kuala Lumpur, Malaysia, affirming that “there is no modern precedent for today’s economic meltdown. We are witnessing a cataclysm. Our industry is trembling (Airline Industry’s Rising Crises, Wharton Business School, 2008).”
According to IATA, airline cargo revenues will drop 17%. Carriers will transport 33.3 million tons, in comparison with 40.1 million tons in 2008. Similarly, demand by passengers could drop 8% to 2.06 million travelers, in comparison with 2.24 million in 2008. Add to those reductions in profits of 11% for cargo and 7% for passengers. Overall, IATA estimates that revenues will drop by 15%, from US$528 billion in 2008 to US$448 billion in 2009 – numbers that are unprecedented (Low cost for Long Haul, Flightsglobal, 2005).
Slow Economic Growth affecting the UK Airline Industry:
As mentioned earlier, Recession has been the main reason why Economic Growth has been slowed down in the UK affecting adversely many industries and sectors that used to contribute in the stability and growth of the economy. As production, manufacturing and other trade has not been taking place in the UK, the GDP has been falling down from the past few years, inflation and unemployment level has been continuously rising and the government is unable to fund...