Free

Economic indicator in the Airline Indistry - Essay Example

Comments (0) Cite this document
Summary
For this purpose one particular airline company has been chosen for the convenience of discussion. The airline company discussed here is Southwest…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.3% of users find it useful
Economic indicator in the Airline Indistry
Read TextPreview

Extract of sample "Economic indicator in the Airline Indistry"

The aim of this paper is to find out the effect of two important economic indicators on the performance of airline industry. For this purpose one particular airline company has been chosen for the convenience of discussion. The airline company discussed here is Southwest Airlines, one of the most popular airline companies in U.S.
Here, attempts have been made to find out how Producer’s price index and foreign exchange rates influence the performance of Airline industry. To judge the performance of the company, one indicator will be uses. Here, yearly net income of the company has been taken into account. Before moving on discussing the effect of these two variables on the performance of the selected airline company, it is necessary to describe briefly all these three indicators that are taken into account for the present analysis- producer price index (PPI), foreign exchange rate, and net income of the company. (Froyen, 2001; Sodersten and Reed, 1994)
Producer price index is a measure of average change in the level of prices that producers of a nation receive for the outputs they produce. Foreign exchange rate between two currencies of two different nations can be defined as the rate at which a particular currency is exchanged for one unit of another currency. For analytical purposes the yearly average exchange rate is generally taken into account. (Froyen, 2001; Sodersten and Reed, 1994)
Net income of any company, can be defined as the level of earnings that remains after deducting the costs and expenses of the firm from its total value of revenue. For the present study, a period of 2000-2007 has been considered for examining the impact of producer price index and foreign exchange rate on net income of Southwest Airline. Only the unadjusted level of price index for finished products has been considered here. It has been found that during December, 2000, PPI was 139.7. In the next year it dropped to the level of 137.2. However, since 2002, it has started to rise continuously (2002- 139.1, 2003- 144.5, 2004- 150.4, 2005-158.8, 2006-160.5, 2007- 170). PPI can be taken as a proxy of cost of living, although not very accurate as consumer price index. From the value of PPI over the year, it is clear that cost of living has increases which in turn will force consumers to economise on their spending. Therefore, a fall in the demand for air traveling can be expected. Looking at the annual report of Southwest airlines it has been found that during 2000, net income was 603,093 thousand dollar. But it then fell to the 511, 147 thousand dollar in 2001, and then again 240, 969 thousand dollar in 2002. However during 2003 it increased to 442000 thousand dollars, but again fell in 2004.however, since 2005 it has continue to rise. Therefore, PPI has not influenced to a great level the performance of the airline company during the selected period. (Southwest Airlines Annual reports, n.d.; Bureau of Labour statistics 2009)
Again, only a single exchange rate between euro and U.S. dollar has been taken into account. Fall in this exchange (euro/U.S.dollar) is expected to increase international air trafficking towards U.S. as a result net income is expected to rise. Since 2000, this exchange rate has continuously fell down from Euro 1.2118/$ in 2000 to Euro 0.7757/$ in 2007. (Measuring Worth 2009) However, income trend did not show expected rise in income in a continuous way. To summarize during the period 2000-2007, so such significant impact of PPI and foreign exchange rate on airlines performance have been found.

References
1. Bureau of Labor Statistics (2009). Producer Price Index. Available from (accessed on 21st February, 2009)
2. Froyen, R.T. (2001). Macroeconomics Theories and Policies. Singapore: Addison Wesley Longman.
3. Measuring Worth (2009), Purchasing Power of Money in the United States from 1774 to 2008, available at: http://www.measuringworth.com/ppowerus/ (accessed on February 22, 2009)
4. Sodersten, B.O. and Reed, G. (1994). International Economics. London: Macmillan Press
5. Southwest Airlines Annual reports. (n.d.) Available from (accessed on 21st February, 2009) Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Economic indicator in the Airline Indistry Essay”, n.d.)
Economic indicator in the Airline Indistry Essay. Retrieved from https://studentshare.org/miscellaneous/1552145-economic-indicator-in-the-airline-indistry
(Economic Indicator in the Airline Indistry Essay)
Economic Indicator in the Airline Indistry Essay. https://studentshare.org/miscellaneous/1552145-economic-indicator-in-the-airline-indistry.
“Economic Indicator in the Airline Indistry Essay”, n.d. https://studentshare.org/miscellaneous/1552145-economic-indicator-in-the-airline-indistry.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Economic indicator in the Airline Indistry

Economic Indicator Analysis (XBOX 360)

...?Economic Indicator Analysis Section One The product being analysed is the Xbox 360 that is being produced and marketed by Microsoft Corporation. TheXbox 360 is the successor to the original Xbox video game console and hails from the seventh generation of video game consoles. A major feature is Xbox Live that allows players to compete with each other online, to download various arcade games, to download new game demos, to view trailers, to watch television shows as well as music and movies through Windows Media Centre capabilities. Moreover, region specific media access to third party media is also offered through streaming services such as ESPN and Netflix. Currently a slimmer version of the Xbox 360 is...
8 Pages(2000 words)Research Paper

Economic Profile of the US Airline Industry

...? Economic profile of the US airline industry Introduction The airline industry is a cyclical one. The industry witnesses bankruptcy as well as M&A activities every decade. The airline industry of United States is currently standing a space from where the future does not seem to be bright. The estimates of the International Air Transport Association and that of Federal Aviation Administration expect a rise in cargo traffic and passengers along with decline in profits for the airline companies. Things are to be sorted out before the estimation of profits for the year 2012. As the third phase of quantitative easing the Fed announced to inject 40 billion...
5 Pages(1250 words)Research Paper

Foreign Exchange Indicator

...that there is more punch in the first report as the statistics for 2007, 2008 and 2009(Q1) are true. The forecast for 2009 is based on various economic indicators like change in interest rates, effect of government intervention in the banking industry in respective countries, negative to zero growth in the developed markets and its influence on the developing markets. Operational and Planning Issues at Southwest Airlines In view of the economic slowdown, which has hit the US, many companies have made alterations in their operations and planning, to just stay afloat. While Southwest is a very popular airline in the continent, it might also have to...
2 Pages(500 words)Research Paper

Economic of the Airline Industry

...Economic Report of the Airline Industry By: December, 2008 0 Introduction Today, the business environment has increasingly become more turbulent, chaotic and challenging than ever before and to survive, it is vital that a firm understands the strategies underpinning the success of rival firms and try to emulate, or do something better than the rivals. Transaction costs economics and the new institutional economics have provided ways in which traditional economics model (On the assumptions of maximising behaviour by individuals) can be used in understanding the relationship between institutions and the reform process (Craciunesco 2006). Changes in...
8 Pages(2000 words)Essay

Economic Indicator Forecast

...Economic Indicator Forecast: Several economic indicators are essential for any forecast, however only the six below will be discussed here.1. Real Gross Domestic Product (GDP) According to the I.M.F the country's G.D.P will remain steady in the remaining quarter at 3.6% while the Office of economic analysis (State of Oregon) projects that GDP will fall by 2.6% a rate that is not alarming in the short run given the resilience the economy has shown. 2. Unemployment rate: Projections for unemployment (% of the labor force) are that the rate will be 5.2%. This is higher than the 4.7 % given by the Office of economic...
2 Pages(500 words)Essay

Economic Profile for the Airline Industry

...that deregulation, in combination with competition can spur growth in the airline industry. Free market competition has increased the volume of travel and has lowered average prices, which benefits consumers. Additionally, free markets have provided incentives for innovations spread, thereby increase efficiency (Gowrasankaran, 2002). The steep sales and earnings growth in the industry over that time period is also affected by general economic activity. On one hand the booming economy spurred demand and made this transportation mode the preferred choice particularly to high-fare business travelers (Gowrasankaran, 2002). Growing GDP per capita as an indication of the passenger's income has...
8 Pages(2000 words)Essay

Economic Indicator Paper

...Economic Indicators in the Housing Industry: Real GDP: The Gross Domestic Product of a nation is the total value of the goods manufactured and services provided in the nation. The Real Gross Domestic Product differs from the Nominal Gross Domestic Product, in that the former quantifies the total value in relation to the prices of a particular base year while the latter quantifies the total value based on the current market prices. Fig. 1.- Real GDP growth rate in the USA for the period between 1950 and 2004. Comparison of the measured values and those predicted from the single year of age population estimates (9-year-olds): 2000 post-census estimates (http://ikitov.blogspot.com/2007/09/gdp-growth-rate-and-population.html, 2008... ) For...
3 Pages(750 words)Essay

Economic Theory - Airline Industry

...Supervisor Prepare a 2400 word paper in APA format that provides an economic profile of the airline industry. This paper must include at least eight sources. Research and include two sources for each of the following topics. (Sources are to be included in the APA reference page). Shifts and price elasticity of supply and demand Positive and negative externalities Wage inequality Monetary and fiscal policies By: January, 2009 TABLE OF CONTENTS 1.0Introduction 1.1 Overview of the Airline Industry 1.2 Shifts and Price Elasticity of the Airline Industry 1.3 Positive and Negative externalities of the Airline Industry 1.4 The Situation of Wage Inequality at...
10 Pages(2500 words)Essay

Economic Indicator Forecast Paper

...will be in the range of 3.50% to 4.00%. Another forecast indicates that until December 2009, the prime interest rates may hit the figure of 4.00% and will continue to move upwards until 4.75% in December 2010. (http://mortgage-x.com, 2009). This forecast is slightly more generous than the earlier projection however, considering the other fact that financial system has to cope with the increasing losses too therefore it is possible that the interest rates may go up to 4.75% in December 2010. The increase in the prime interest rates may decrease the demand for automobiles because the financing cost of such products would increase and consumers may find it difficult to purchase new cars at high increasing interest rates....
6 Pages(1500 words)Essay

Trucks Load Indicator also known by Electronic load indicator or Axle load Indicator

...Trucks Load Indicator Trucks Load Indicator The truckload indicator, also known as the axle load indicator is an instrumentthat is designed specifically for trucks or trailers. The trucks that have the axle load indicators installed in them are also have airbag suspensions fitted within them. The major purpose that is served by the axle load indicator is that it indicates the weight that is carried by each of the axle groups within the truck. To this effect, we can say that the axle load indicator, whose image appears below, provides a correct and reliable solution to the weight problem that such trucks...
3 Pages(750 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Economic indicator in the Airline Indistry for FREE!

Contact Us