Australian Aviation Sector Economic Analysis
1. This task makes reference to the Four Corners Video titled” Will the Australian air travel ever recover? Australia’s aviation crisis and the future of flying” posted on Jun 29, 2020, available on YouTube. The global pandemic has caused firms to shut down and greatest ever job loss in the aviation sector (4:05). The economic impact of covid19 also affected the other industries that are related to the Airline transport like the hotel and tourism industry. People in these sector also lost their jobs (4:42). The covid19 caused a low demand in the air passenger travels due the grounding of aviation and the travel and restrictions issued by the government as containment measures (0: 39). The resulted to a great revenue loss within the aviation sector. There was a debate on how the government should use pubic resources to support the firms in airline industry to overcome the economic recession (11:33). Some firms were seeking loan from the federal government (11:30) to support their operations during the recession. Other firms advocated for minimal government interference with market forces. The closure of many firms in the industry has caused small number of dominant firms to control majority of the consumers of the Airline products.
2. The firms downsized the workforce as a strategy to cut the operational cost in order to survive the economic recession. While other firms temporarily closed stopped operation since they could not sustain their operational cost. According to economic managerial concept, shutdown is advisable when managers have established that the firm is no longer experiencing profits and the operational cost is too high. According to the neo-classical scholars REFERENCE, a firm should continue with business when it is able to sustain its operations and cover the redistribution costs in the long run. And in the short run the shutdown point is determined at the point where the marginal cost is level with average variable cost (AVC). A firm should seize to operate when the average revenue (AR) is less than average variable cost (AVC) for a profit maximizing firm. This implies that the firm will incur greater loss if it continues to operate compared to when it stops operations. This is the suitable explanation to why the Australian airline firms closed their operations.
The quantity of labor demanded is dependent on the revenues derived from the output of the labor. This indicates that the size of the workforce employed by a firm depends on its current financial returns, in retrospect, the Airline firms retrenched the staff to match their revenue returns. The decrease in the size of demand for the passenger air transport translated to low revenue generated from the business operations. The supply chain in business settings is long, aviation sector directly impact on the hospitality and tourism, equally there business operations stopped to generate profits when demand of their final products drastically dropped. This is because hospitality and tourism rely on the air transport to facilitate the ease and access of movement of clients.
3. The federal government issued a grant of about $ 1.2 billion to help the struggling firms ease that financial problems. All the firms in the industry bound to benefit from this program as long as they met the stipulated conditions. This was the government response to support the aviation sector from the impact of covid19. The government grant is free and helps to ease the financial burden of the firms (Gössling, et al., 2017). This gives the management team sufficient time to focus on how to strategize their operations to recover financial losses and improve the quality of their services. During the economic recession, the future of many businesses is dim and financial institutions are unwilling to issue a loan to the firms. (Hall, 2016)Argues that it is difficult to determine a firm’s ability to repay the loan during recession periods. Thus government grants are a more efficient and fair intervention for supporting the Australian airline industry due to the adverse effects of covid9.
The alternative approaches that can be adopted by the government to support the Australian Industry include tax incentives, friendly trade policy, and loans. Government loans are more effective when there is a need for the government to rescue any of the giant firms within the industry that risk insolvency. The government can gain ownership of part of the shares of the company in case it fails to repay the loan. This ensures the continuity of the firm and the industry as a whole (Kahn, et al., 2020). Both tax incentives and friendly business policies cause a well-distributed effect on the industry. This ensures minimal government interference with the market. Resulting in a free and fair completion and no one firm gains a competitive advantage over the other due to government influence like in the case of Rex Airline.
4. After economic difficulties, the economy undergoes the recovery phase where it is starting to adapt and adjust to the prevailing conditions. The key economic players begin to manage the factors that triggered the economic recession. In the next eighteen months, Australian aviation is more likely to start recovering due to the government grant, and the firms that shut down are more likely to be brought to life by either a merger or requisition by the giant companies. It is expected that the government will issue tax incentives and other fiscal policies to help the airline firms regain their operation. This will help to revive the other related industries like hotel and tourism.
When more dominant firms like Qantas and Virgin buy or merge with the other struggling firms this will may lead to a duopoly. This is a scenario that rises when two companies control all or the majority of the market for a given product. It is the basic type of oligopoly where a small number of firms control the market of a given product. There is a possibility that Qantas and Virgin will collude to control the prices and output of air transport services. This may have the same impact as the monopoly.
Have you reached your limit trying to find dependable assignment help in London, Glasgow, Nottingham, Bristol, and Cardiff? Now, unlock top-quality dissertation help in the UK only on Myassignmenthelp.co.uk.
For over a decade, we have been resolving assignment problems for millions of students wondering, “Who can provide me with quality homework help?” Our priority is to maintain top-notch standards in every assignment we deliver.
As a result, when you look for law assignment help on our website, you can hire professional lawyers for a consultation. So, don't let your academic worries fester. Instead, hire our professional paper writers and increase your chances of securing an A+.
