Transportation: Aviation, Road, Ship And Rail Transport

Transportation Industry
Student’s Name
Institutional Affiliation
Transportation Industry
Introduction
Transportation is a competitive industry featuring various forms of transport including aviation, road, ship and rail transport. The industry sector is made of logistic services, Air and express delivery services (EDS), freight rail, trucking and maritime transport. According to report file by Plunkett Research LTD, Transport Industry recorded an aggregate global revenue of $ 4.7 Trillion as at 2016. This amount translates to 6% of the world’s gross domestic product (GDP) (International Transport Forum, 2009). Locally, the U. S transport industry generated an average revenue of $1.48 trillion in 2015 and $ 1.65 trillion in 2016 and the latter represented 8% of the US GDP. The 2016 revenue statistics indicates that there was huge investments in the sector especially in the trucking transport, which generated up to $ 787 billion globally and 211 billion in the US only (Plunkett, 2009). From the growth, both the international and domestic companies in the industry benefited from the availability of affordable and skilled workforce. However, the revenue generation largely depends on the consumers’ Disposable Personal Income (DPI) position. DPI refers to the available amount of money for an individual to spend after savings and paying for taxes. The amount of disposable income available affects a consumers’ spending habits, and this is always a major concern for companies (Flatters, Paul, & Willmott, 2009). In a global perspective, consumer’s disposable income are negatively affected by factors such global financial crisis, negative taxation policies, high interest rates and consumer confidence respective to their level of income and wealth. Theoretically, it is argued that an increase in the average annual income will encourage consumers to increase their expenditure on goods and services. Therefore, the paper seeks to validate the relationship the annual sales in the transport industry (dependent variable) and consumer average annual income (independent variable) through regression analysis.
To demonstrate the nature if transportation industry, the papers uses United Service Parcel (UPS), company as the case study, UPS sales data is compared against the global per capita annual income in the last 10 years. UPS provides a good representation and insight of the industry because it is a U.S. based multinational company with the biggest market share of 36.48 % in the industry beating other big players such as FedEx, DHL and USPS (Plunkett, 2009).
UPS Revenue Data and Global Global Average Income between Fiscal Year 2006 and 2016 (Plunkett, 2009)
Year/Revenue Revenue in Millions Dollars Global Average Income per Annum200711,90638,571200812,67540 026200910,93839 573201011,72840 320201112,58241 885201213,136 43 553201313,43443 368
201413,77945 184201513,97746 509201614,41847 231
Hypothesis
H0: There is no close relationship between annual sales and the global average disposable personal Income per annum.
H1: There is a strong relationship between annual sales and the global average disposable income per annum.
A Histogram Showing A Relationship Between UPS Annual Sales And Average Disposable Personal Income in the Last 10 Years.

Based on the histogram, H1 is true as any significant increase in household income translated to an increase the UPS annual sale. This indicates that when the customers’ purchasing power is high, they tend to spend more as they have enough money after saving and paying taxes. Same results is evident in the transport customers will book flights to travel for vacations, honeymoon when they have enough disposable personal income. According to the modern consumption theory, fiscal stimuli of spending increases when consumers enjoy shielding on their income such as tax rebate that leads to a higher disposable personal income (Alpizar, Carlsson, & Johansson-Stenman, 2012). Similarly, consumers ‘propensity to consume increases with an increase in DPI, thus boosting the aggregate demand, In relation to supply and demand in the market, it will increase because a strong DPI after tax rebates increases the rate of consumptions. However, the theory has some gaps because it may fail to apply in the modern consumption pattern especially when the global economy is in a crisis. In spite the fact that the elimination or reduction of taxes provides a significant caution that boosts the disposable income, the demand on consumption will be strong if the the tax cut was credible.
Based on the data gathered, both global average income and UPS sales have been increasing from 2006 to 2016. Particularly, the steady increase of the Company’s in sales suggest that the market is characterized by consumers who have a high purchasing power. Notably, there was a slight decline as in both sales and disposable personal income after the 2008 financial crisis. Particularly, UPS sales dropped from 12,675 million in 2008 to 10,938 million in 2009. Similarly, the DPI dropped from $ 40 026 in 2008 and $39,573 in 2009. This is a reflection of the impact brought by the 2008 global financial crisis that not only affected companies but also many household around the world. In an explanation of the incidence, Flatters, Paul, and Willmott, (2009), argued that the consumers have a tendency of increasing their savings during period of economic crisis. Therefore, the 2008 financial crisis caught many households by a surprise and they responded by saving in the succeeding year. As a result, the consumers disposable reduced hence affecting UPS annual sales. The threat of financial crisis will always prompt consumers to cut their spending buy saving more even if there is a favorable tax rebate.
At recession, many business suffer in terms of sales due to the sloping market that makes sales to fall far less than the forecasted. For UPS in the transport industry, all its services do not fall on the category of consumers’ basic needs (Flatters, Paul, & Willmott, 2009). Therefore, the sales will always be affected more by recessionary market compared to a foodstuff oriented companies. Flatters, Paul and Willmott (2009), revealed the impact of the 2008 economic crisis affected the service oriented industries more because consumers cut their expenditure in such pro...