Leveling the global aviation playing field
Leveling the Global Aviation Playing Field
Industry has changed how people travel and
interact with each other and do business. The global airline industry continues
to face challenges from the deepening of the European debt crisis that is
wiping out the positive impacts of lower fuel prices, increasing air traffic
and improved freight market. The scenario is unlikely to change for the
remainder of the year.
The U.S. airline industry finds itself
increasingly burdened with higher taxes and fees. Today, the aviation industry
leads all others in America with 17 unique taxes and fees from the federal
government. Airlines for America (“A4A,” formerly the Air Transport Association
of America) estimates a $300 ticket for a typical, domestic round-trip, is
taxed about 20 % of the total ticket price. The federal tax rates paid by airlines
are higher than federal “sin” taxes paid on alcohol, tobacco, and firearms.
Federal aviation tax policy discourages the use of commercial air
transportation and impedes the industry’s ability to grow and expand the U.S.
economy. As taxes increase, airlines must either pass them along to consumers
in the form of higher fares or expect to see their revenue decrease
Oil
prices impact the profitability of airlines as they are one of the largest
costs in the industry. Also, airlines often move closely with growth in global
GDP. According to the IMF, global GDP is expected to grow by 2%, which means
that a rise in airline stocks is expected. This is because countries rely on
one another for different products and services, and therefore a rise in global
GDP means a rise in international trade, and a rise in the frequency of people
moving across borders (2012).The Political issues in middle east is play a big
role of the heightens of the oil price, although the price for oil has
increased substantially over the years and brought stress on an already
beleaguered industry, so if we want to level the playing field the organization
has to find a way curb oil speculation.
Airlines
also are labor intensive. Each major airline employs a virtual army of pilots,
flight attendants, mechanics, baggage handlers, reservation agents, gate
agents, security personnel, cooks, cleaners, managers, accountants, lawyers,
etc. Computers have enabled airlines to automate many tasks, but there is no
changing the fact that they are a service business, where customers require
personal attention. More than one-third of the revenue generated each day by
the airlines goes to pay its workforce. Labor costs per employee are among the
highest of any industry.
Qineqt.
(2012, September 17). Retrieved from http://seekingalpha.com/article/872061-drivers-of-the-u-s-airline-industry.
http://www.alpa.org/publications/ALPA_White_Paper_Leveling_the_Playing_Field_June_2012/ALPA_White_Paper_Leveling_the_Playing_Field_June_2012.html#section1-1.
The airlines have always been labor intensive. There is only so much that can be automated in the business. Much of airline business involves rendering services to customers; whose happiness is of utmost priority. If a third of revenues goes into paying employees that leaves two-thirds for fuel, taxes, levies, fees, maintenance, operations etc. Essentially, there will be marginal gains if any. Unfortunately, labor is constant that cannot be changed so expense lost much be gained elsewhere to balance out.
ReplyDeleteI believe there might be ways to decrease labor costs throughout the industry. It may be possible to automate more systems in the service side of the airlines or even out source items that are costing the airlines the most money. I am aware of some companies that use health packages that are competitive and customized to the employee in order to decrease cost. This may be an option for the airlines to pursue.
ReplyDeleteI believe that the taxes on airlines in the United States has the potential to hurt many companies. There are some taxes that are necessary, but most of the general public does not understand that the cost of their airline ticket is partially because of what the government taxes does to the price. More people would fly or maybe not fly if they knew how much of the ticket price goes to the government.
ReplyDeleteThe taxes imposed on the aviation industry, like you said, are really stunting the growth of the industry. The high ticket prices deter many people away from flying and instead choose to either stay home, or drive when traveling. Knowing that 20% of the money I pay for a ticket goes to taxes is almost disturbing. I feel like these taxes could be lowered, even a 5% decrease could seriously help the growth of the industry. Another way to help this would be to raise sin taxes to cover the losses by decrease in aviation taxes.
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