This is a discusion type assessment for economics in aviation. Essay Example

Lecturer’s Name:

Economics

An airline that operates on a monopoly route has the advantage of deriving high profit returns because customers rely on air travel as the fastest and most efficient means of transportation. Setting price policy depends on the customers’ base and the different routes. Operating on a monopoly route means that an airline can adjust its airfare to improve the expected profit margins set by the organization. This price adjustment should suit the budget of customers in the sense that, they can be able to pay for airfare and also have enough money saved for other expenses. Customers will be loyal for a long period of time because they are assured of a fair price to and from their destinations.

Value-added services in an airbus or airplane contribute to increased profits. The products and services provided by an airline can be of high quality and hence increasing organizational profits. Many airline companies get a lot of profits when they have low cost of production in terms of raw materials while making a lot of profits from the sale of products and services in the airline.

There are a few limitations to high pricing of products and services because of operating on a monopoly route. Customers who cannot afford to pay for the high price of goods and services will consider cheaper means of transport such as through railway or highways. Small and medium-sized enterprises will also emerge in the intention of serving the customers’ needs by reducing prices and being competitors in the route that was previously monopolized. High prices from airlines enterprises can lead to increase in oil price and change of steel price. This also causes an increase in social prices. Low pricing has its own ramifications in the airline industry: low earnings leading to enterprise bankruptcy or vicious competition that can make weak airline competitors fold.

Running successful monopoly routes need a fair pricing policy to different routes and an increase in value-added services so as to attract more customers and still maintain loyal customers. Some regional airlines can use the monopoly routes to raise the prices because they are the only airlines operating in these routes and customers do not have a choice. Operating on a monopoly route will guarantee high profit returns in an organization. Other ways of generating profit is launching flyer services for different businesses and making hotel reservations for customers so as to retain and attract more customers. Customers who get quick and convenient services from an airline will recommend other potential customers and the airline will have a wider client-base. The best way to set new pricing policy in the airline is through thorough research and investigations whereby, employees, shareholders and customers are included in decision making to find a pricing policy that will suit all the important parties in the airline industry. Price moderation and providing value-added services facilitates profits increment and competitive advantage.