Posts tagged Airline

Iceland Volcano Ash Disruption

BBC News: News Article 1, News Article 2

According to BBC News, shares in major European airlines have fallen as most UK flights remain grounded for a second day because of the volcanic ash in the atmosphere.

British Airways shares dropped down by 1.1% with many investors concerned about the loss from the stoppage. Meanwhile Germany’s Airline Lufthansa was down by 2.1% and Air France-KLM shares fell by 1.7%.

“For a large network carrier like BA or Lufthansa your talking about £10m a day – but that’s of limited commercial significance” said Douglas McNeill, transport analyst, Charles Stanley Securities.

While most of the airline industries are affected by this natural disaster, other industry such as pharmacy is suffering from the disaster also. Most of the drug exports/imports are heavily reliant on air freights. If this cancellation prolongs for over a week, it will definitely affect both airline and pharmacy industries severely.

Iceland volcano eruption stirred some health concerns, especially respiratory problems. World Health Organization said that it is not sure if this will cause serious health problems, however, it has advised people to stay indoors to avoid respiratory problems. It is also reported that there are some level of sulphur dioxide in the ash.

In sum, this volcanic eruption has caused several economic problem to health problems. If this prolong for over a week, European economies, including UK, will have difficulty due to canceled air flights.

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Advice for JAL

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Just like British Airline, Japan Airline is in a big mess of deficit. Due to global economic recession, the demand for high service, high price seats went down as well as Japan Airline’s profit went down. Here are some of my advice for JAL:

  1. They should cut off high price seats such as business class and 1st class seats. Due to global economic recession, the demand for those seats have went down. Conversely, the demand for lower price seats such as economic seats went up.
  2. They should lower the price as much as possible. As the demand for high price seats went down, Japan Airline must make the seats available for a low price in order to ‘survive.’
  3. They should lower the labor cost. This might lower the quality of airline service, however, it is inevitable during the recession.
  4. They should get rid of unprofitable air-routes. By getting of those unprofitable, money-eating routes, it will significantly help Japan Airline financially. Instead, they should look for cheaper, but effective routes.

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Data Response: “Cheap Flights – Europe”

ryanair-Irish-budget-airline

a) In the article, it suggested that European air travel’s price are getting elastic due to the global economic recession. It has introduced British Airway, which aimed for high price and inelastic part of the service to gain profit. However, as the demand for high price seats went down, they tried switching their plans to aim for low price and elastic part of the service. So this suggests that European air travel price are getting elastic.

b) Ryanair used to aim for low price seats in order to gain a lot of travelers in their aircraft. The low price seats are usually very elastic. Therefore, if Ryanair lowers the price by just a little, there are tremendous increase in amount of demand. As the global economy went through recession, lots of travelers wanted low price seats for airlines. So the Ryanair has become the most profitable airline by the tremendous increase in demand for low price seats.

c) Ryanair was able to offer seats on some flights for under 10 pounds because of their unique plan. Ryanair had an unique plan in minimizing costs included in a flight service. The airline provider has only one kind of aircraft, the Boeing 737, that minimizes the service costs. It only landed on minor cities, where it cost less than in major cities. Also, they can fly two times than the ordinary airline because their airline gets their aircrafts back into the sky only 20-25 minutes after it has landed. Also, as they covered the cost for the flight, they lower the price for an empty seat right before take off. This has really helped lower the price for seats.

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