Political Factors Affecting Airline Industry
Political factors affecting airline industry refer to a variety of government interventions that may hinder or enhance the operations of air transport. Considering the vast regions that many airlines operate, the business environment is often regulated by on the political atmosphere in a particular market. The factors may be necessary for the protection of the interests of passengers and safety measures of airline operations. For an airline company to survive, the political environment must be conducive for its operations.
The Key Political Factors Affecting Airline Industry
It should be noted that the political factors affecting airline industry vary depending on the market, among other elements. Besides, not all factors may have a direct impact on the industry. However, the following are some of the main factors that can have significant impacts on the operations of the airline sector.
International Trade
The airline industry has played a critical role in the growth of the global economy. However, there are still various places across the world where airline transport has not been extensively exploited mainly because of government restrictions. For instance, it is not easy for the airline industry to expand into foreign markets, which are not trade partners with their respective countries. If the USA does not trade with maybe a country like Russia, it will be difficult for American airline companies to expand into the market even if it looks so lucrative.
International trade may also involve agreements between countries regarding airline transport. In such a situation, airline companies have to meet those provisions in order to conduct business. Some of these agreements may end up hindering air operations in some countries, impacting the entire sector.
Tax Policy
The tax rates vary from one economy or market to another. This means there are some countries where airline companies have to pay more taxes in order to operate. As a result of this, their operational costs are stretched, hence, decreasing revenue base. On the other hand, the tax policies may also be favorable to the airline industry, encouraging business and profitability.
War, Terrorism, disease outbreaks
War, terror and outbreak of diseases like Ebola are also some of the main factors that can significantly affect airline transport. In countries ravaged by war, it becomes difficult for airline companies to operate due to the risks imposed. Besides, terrorism is also another new threat to the airline industry. In fact, there are nations where some major airline companies have discontinued their operations due to the risk of terrorism.
In countries where such events are experienced, it is always in the interest of passengers and airline companies to suspend or stop air transport. However, there are also cases where politicians have made situations look worse than the actual conditions on the ground. Such utterances may also hurt the airline industry by curtailing business when the environment is not quite bad.
Competition
Due to the growth of the airline industry, competition has also gone a notch higher, with many players coming into the game. Competition in the industry can be regulated by the activities of politicians in the sense that, they are responsible for formulating laws. For instance, the Deregulation Act of 1978 lifted all the limitations in airfares, airline routes among others. As a result of this political move, many commercial airline companies began coming into the industry, pushing the competition level even higher. More low-cost carriers were introduced in the market, plunging airfares lower than expected.
In fact, low airfares is one of the greatest nightmares facing many companies in the airline industry now since it goes against the increasing operational costs.
Conclusion
Among the various political factors affecting airline industry above, there are those that can be handled by the airline companies and those they cannot. The expansion of international trade has ensured a favorable market for many airline companies across the world. However, there is still need for more negotiations to put in place the best measures that can ensure safety of passengers, sustainable operations of airline companies. Besides, many airline companies have still not complied with the international aviation regulations, which are crucial for safe and sustainable air transport.
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References
http://marketrealist.com/2014/09/changes-u-s-airline-industrys-competitive-landscape/
http://marketrealist.com/2014/09/pestel-framework-analyzes-industrys-external-environment/
http://pestleanalysis.com/pest-analysis-for-airline-industry/
http://finance.yahoo.com/news/why-political-legal-factors-impact-185643404.html