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Analyze and asses the economic effects of regulation on passenger vs. freight transportation - Essay Example

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Many governments all over the world are tasked with the responsibility of drafting and enforcing airline transport regulations and…
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Analyze and asses the economic effects of regulation on passenger vs. freight transportation
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Passenger Vs Freight Transportation Passenger Vs Freight Transportation Passenger and freight regulation is as a result of an initiative to ensure that the industry is governed by certain principles and conditions. Many governments all over the world are tasked with the responsibility of drafting and enforcing airline transport regulations and legislation. What is clear is that, without the freedom to operate as they choose, there are certain economic effects that the airline transport system experiences. It is clear in very many circles that there is no coordination when dealing with the regulatory frameworks that have been set up. This is when aspects of comparison are enforced in the market and the targeted performance by the airline companies. This paper analyzes and assesses the economic effects of regulation on passenger versus freight transportation.
In the field of economics, once supply is reduced the tendency for price increase to be introduced is always very high. Regulations that inhibit airlines from taking a certain route within a timeline result in choked supply of the goods that are required. This means that there are people that want to travel and transport their goods from one area to the next. They are not able to do so because government regulations restrict them. The people and the goods have to be transported within set timelines. This results in so many people wanting to travel. In other cases, the flow of goods is hampered especially if the goods are perishable in nature. At this point, it is the mandate of the airline company to increase the air fares thus reducing the demand for the service. This means that if governments allowed airline companies to travel to regions as many times as they would want to, the demand would be evenly spread. This will also translate to cheaper airfares for anyone using the service (Abramowitz & Brown, 1993).
In many instances, regulation has been viewed as a form of any government’s effort to reduce the number of people and goods using air transport. This is because many of them do not have the structural capacity to deal with the ever emerging need for transportation. Economically, this results in over congestion of other forms of transport and reduced revenue generation from the air companies. The aspect of coordination and relationships is greatly affected by the fact that regulations have been perceived as a form of dictatorial governance. This is a headache for very many governments and their transport systems. It is necessary to note that regulations affect economic relations between nations by stipulating the terms and conditions of route schedules and prices and general access to runways and allocated gateways (Eckel, Eckel & Singhal, 1997).
Each and every company, organization or institution aims to make a profit in the business that it conducts. Regulation affects the level of competition that should be felt in the service industry. This means that the boarding facilities and gates are scarce resources. As a result, many companies rely heavily on non-market mechanisms to access the facilities that they do not have. If this is regulated, they are felt out of the market which demands for the services that they can offer. There are very many governments that have stipulated regulations that have affected the use of their airspace. By rejecting such pledges and common alliances, the aspect of competition is reduced for both governments in relation to passenger and freight transport (Small & Verhoef, 2007).
In conclusion, regulations are important in each and every sector of the economy. This means that regulations pave the way for safety in transport, effectiveness and reliability in the airline industry. This is in relation to the transportation of people and goods from one area to the other. Regulation should be carefully thought through for purposes of reducing the effect of the regulations in the economy of the countries in question. The positive side of regulation will be held and felt by stakeholders if the policies are all inclusive.
References
Abramowitz, A. D. & Brown, S. M. (1993). Market share and price determination in the contemporary airline industry. Review of Industrial Organization, 8, 419-433.
Eckel, C., Eckel, D., & Singhal, V. (1997). Privatization and efficiency: Industry effects of the sale of British Airways. Journal of Financial Economics, 43, 275-298.
Small, K. A. & Verhoef, E. T. (2007). The Economics of Urban Transportation. Routledge, England. Read More
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