Question

how will competition in the airline market affect customers . please illustrate the answer . 4 reasons will do . please also answer in essay form and do give a conclusion . Thank you

Answer 1

The airline industry is highly competitive capital intensive industry. Competition airline market arises due to low barriers to entry because of liberalisation of market access as a result of globalization. Demand for air travel and capacity has seen tremendous growth in the airline industry ,but profitability is comparatively low even though unit cost has fallen. Most of the efficiency gains from lower costs were passed on to customers in the form lower airfares. Due to the higher competition among airline industries passengers satisfaction up fares are at low Competition among airline industry affect customers are due to following reasons 1. Competition among airline industry drives them to innovate and provide new and expanded services and options, It result is higher benefit to customers by providing combination of services, low costs , access and affordability 2. Due to greater competition , airlines have a vested interest in providing the best possible service to passengers. Most of the efficiency gains from lower costs of industry due to fallen its units cost were passed on to customers in the form lower airfares. 3. Higher competition makes airlines highly price elastic. So if they try to rise their prices , demand will decline drastically and if they reduce the prices ,demand will increase at higher amount. 4. Operating of airline industry in a competitive space is good for customers. It fosters airline investment in everything from new aircraft to new technology that provides better services and safe journey to customers Low entry barriers intensify a tough competition among airline industry. Liberalisation and deregulation of airline sector have facilitated the competition. So it results decline the price of airline tickets.The emergence of low cost flights in recent years pushed the airline industry towards an oligopolistic competition. But it has been providing higher benefit to customers