Importance of the USA to Qatar Airways Future Prospects - Essay Example

Importance of USA to Qatar Airways Future Prospects Executive Summary This paper aims to present the analysis of importance of USA particularly for Qatar Airways in terms of being a trade partner. Discussion is built on the basis of macroeconomic variables including inflation, unemployment, exchange rates, growth, interest rates, macroeconomic policies etc. All of these variables are discussed considering short-term future while also analyzing their impact on airline’s operations. Moreover, the structure of both economies i.e. USA and Qatar is compared and important issues and macroeconomic variables are highlighted. Importance of USA to Qatar Airways Future Prospects Introduction It has been observed that Gulf Airlines especially Qatar Airways is increasing its business operations in USA. This can be signified by the airline’s 2014 business strategy in which it plans to launch its services in Fort Worth, Dallas. Experts suggest that once this service will be initiated then the competition of Gulf Airlines in USA will significantly increase. Here, it should be noted that Qatar Airlines already operate in Washington Dulles and New York JFK from its capital city Doha. However, its services in Dallas will start a new round of competition between three major airlines including Etihad Airways, Emirates and Qatar Airways (Emirates, Etihad and Qatar Airways: Dallas becomes the hub crossroad for all three Gulf airlines, 2013). New flight will also serve as the basis for new relationship between two countries. Furthermore, it will increase feed benefits from the Gulf countries to the United States markets and domestic network particularly located at central and Latin America. These will subsequently increase connecting opportunities for Qatar in US while also increasing its revenue. In this perspective, Dallas will play a significant role as the state is located near the Exxon Mobil, the oil giant in Texas. Exxon Mobil is actually a significant source of providing oil for local traffic airlines specifically associated with Dallas. Based on these factors it can be safely said that US economy and its resources are highly significant for Qatar Airways (Emirates, Etihad and Qatar Airways: Dallas becomes the hub crossroad for all three Gulf airlines, 2013). Discussion Importance of USA to Qatar Airways American Airlines are associated with a U.S. anchor which further forms One World Frequent – Flier Alliance. This alliance invited Qatar Airways to become its part and the company accepted this offer in 2012 (Mutzabaugh, 2012). The CEO of Qatar Airways substantiated this attempt by the airline by mentioned that alliances play a major role in the modern airline industry which is expected to continue in the near future as well. However, in order to become equal members with other American Airlines the company will have to critically analyze its strategic features and other alternatives. Subsequently it was concluded that joining One World will give a significant competitive advantage to the organization while the airline would be able to offer distinctive facilities to its customer in America. This was further explained as company’s strategy to providing different options to the customers so that they can only look up to Qatar Airways when it comes to America (Mutzabaugh, 2012). One the other hand, Qatar Airways will give significant opportunities to USA in order to improve the connectivity between different destinations which are particularly important for customers. Hence this will lead to the state where more value could be given to American citizens. The nature of importance can be summarized as the trade partnership as both the countries aim to work for mutual benefits, for instance, America aims to increase its connectivity between different states through Qatar Airways while on the other hand Qatar aims to benefit from oil reserves in Texas (Mutzabaugh, 2012). Macroeconomic Variables In order to further explain the importance of USA to Qatar Airways it is crucial to discuss different macroeconomic variables concerning the country. Since America has achieved a significant economic development while also having great influence over the world therefore experts believe that to maintain this economic growth the country will have to focus on innovativeness. Moreover, USA is required to reinvent and recreate its own business strategies for a sustainable future (What is the U.S. economic outlook for 2014? Not good, 2014). On the other hand it should also be noticed that America has significant resources, for instance, oil, technology, workforce etc. which also need to be utilized in an effective and efficient manner. This is important to consider because in the short term future America is expected to meet growth challenges while also facing significant threats from different parts of the world. Hence inflation, unemployment and interest rates will drastically increase. In order to reduce the impact of these economic variables USA need the support of major world organizations and therefore it invited Qatar Airways to join its alliance. This, on the other side will increase significant business opportunities for Qatar Airways as it got to serve the most advanced nation of the world in a better way. Moreover, the organization will extensively benefit from USA fast growing environment, evolving customer demands and increasing competition between different Gulf Airlines (What is the U.S. economic outlook for 2014? Not good, 2014). Economic Structure Qatar and USA have a distinctive relationship which can be understood through exploring their Economic structures. USA enjoys the status of being the third largest economy of the world both in terms of population and area. It also has the major economic and financial institutions of the world including the largest stock exchange, gold reserves and deposits. Moreover, the country has the headquarters of world’s largest multinational organizations. All of these aspects give significant strength to the US economy (US Economic Structure, 2013). In contrast to this Qatar has a distinctive economic position, for instance, the country has greater oil reserves, seaports and oil refinery which actually support its major urban and industrial developments (Qatar Economic Structure, 2011). As far as labor force and unemployment is concerned then America got severely hurt by the financial crisis of 2008 which drastically increased its unemployment rate from 5.8% to 9.2%. This was further increased in the subsequent years until 2011. However, if economic situation remains favorable then US unemployment rate is expected to decrease in future. On the other hand people in the work force are mostly working on managerial positions, technical and professional areas. Around 24.2 % of the labor force has office and sales jobs while others are in to manufacturing, transportation, extraction, crafts, fishing, farming, forestry and services (US Economic Structure, 2013). Due to its economic stability Qatar has majority workforce from foreign lands. However, in the post 2000 era the government decided to assign top positions to only Qatar citizens in order to attract a large majority of educated Qataris back to their homeland. But this also caused economic tension in the country as foreign employees were forced towards unemployment and they were also required to return to their countries (Qatar Economic Structure, 2011). Both USA and Qatar have extensive natural resources with an addition of labor force, technological advancement and substantial finances. Thus both of them can benefit one another through the initiation of Qatar Airways in different parts of USA. Moreover, the problem of unemployment in USA and Qatar can be tackled through making joint ventures while providing maximum job opportunities to people. The membership of Qatar Airways in One World Frequent - Flier Alliance will further facilitate in this regard. Future prospects and Future developments in macroeconomic policy of USA In the near future America is expected to have an increased rate of unemployment due to political deadlock, economic instability and lower margins (What is the U.S. economic outlook for 2014? Not good, 2014). In this scenario Qatar Airways will have significant opportunities to hire the American workforce while benefitting from their exceptional intelligence and expertise. Moreover, the exchange rates for American dollar are expected to decline in the short term future which will subsequently help the organization in purchasing airline fuel from Texas reserves in minimum rates. Unemployment and reduction in dollar prices will also cause inflation while increasing the interest rates. Hence Qatar Airways will be able to increase its profit margins while charging more to the customers. Future development of USA macroeconomic policy is expected to depend upon significant financial, economic, monetary and political challenges. These will actually harm the competitiveness of the country. Hence it is important to critically analyze the national macroeconomic goals for the near future while also assisting the economic activities of competitors such as India and China (Vietor, 2012). Following is a brief description about the future macroeconomic policy developments in USA (U.S. Macroeconomic Outlook Alternative Scenarios, 2013): Monetary Policy: Interest rates play an important role when it comes to the monetary policy of a country. Therefore, the Federal Reserve has attempted to normalize interest rates in order to prepare the financial markets to eliminate the quantitative reduction policy. The threshold rate of unemployment in the third quarter of 2013 was 7% whereas the interest rates were 6.5%. The Federal Reserve aims to reduce unemployment and interest rates by the end of summer 2014. However, interest rates are expected to rise in summer 2015. Fiscal Policy: It has been observed that the deficit of federal budget is reducing with an alarming rate. On the other hand tax revenues are significantly increasing. This actually represents reduced government spending. Exchange Rates: US Dollar is expected to maintain its firm position as in the past after the Great Depression. This is primarily due to the fact that no other currency was able to occupy its status. Hence investors are ready to conduct their business dealing in dollar amounts in the near future as well. Moreover, experts’ opinion suggests that US Dollar will maintain its strength against Euro and British Pound in the upcoming years. Energy Prices: Due to safe political conditions oil prices remained somewhere around $100 whereas oil production was expected to increase up to a significant level until the last year. However, in future gasoline and oil prices are anticipated to increase even above the inflation rate. Conclusion America’s future macroeconomic policy will be based upon above discussed variables, for instance, the country will have to make strategies for maintaining exchange rates while regulating energy prices whereas unemployment, budget deficit and interest rates will be managed by Federal Reserve. In this situation Qatar Airways can perform its role through providing significant job opportunities which will help in reducing unemployment rate. Moreover, the organization can extensively benefit from Texas oil reserves. This will subsequently help the organization in maintaining good progress in times of inflation and increased oil prices. Hence it can be concluded that USA has high significance for Qatar Airways. References Emirates, Etihad and Qatar Airways: Dallas becomes the hub crossroad for all three Gulf airlines. (2013). Retrieved May 27, 2014, from CAPA Centre for Aviation. Mutzabaugh, B. (2012). Its official: Qatar Airways joins oneworld frequent-flier alliance. Retrieved May 27, 2014, from USA Today. Qatar Economic Structure. (2011). Retrieved May 27, 2014, from Economy Watch. U.S. Macroeconomic Outlook Alternative Scenarios. (2013). Moody’s Analytics . US Economic Structure. (2013). Retrieved May 27, 2014, from Economy Watch. Vietor, R. &. (2012). Macroeconomic Policy and U.S. Competitiveness. Harvard Business School , 1-21. What is the U.S. economic outlook for 2014? Not good. (2014). Retrieved May 27, 2014, from US Economic Outlook. Read More