Airline Industry in Hong Kong

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I. EXECUTIVE SUMMARY The Airlines Industry was originally initiated in USA as a fastest and luxury mean of travel in the 30s¡¯. With the tremendous development on technological, we have numerous airlines in the world. Yet, just like any industry, there are always winners and losers in the long run. This paper is use to analyze the factors from an economics perspective that drive the industry prospect and their threats in the recent years. In the report, we have analyze, based on the data from industries and also their associates, the impact on the followings, 6¦1 Supply and demand ¨C regional and global 6¦1 Technological advancement leading to economies of supply ¨C reduction in production cost 6¦1 Profit maximization ¨C price…show more content…
For example, the cheapest travel agent¡¯s price from Hong Kong to Jakarta v.v. used to be HKD3,000 six years ago, and we can get the same ticket for HKD1,800 now. This is part of the reason, amongst other reasons, in which air travel is no longer a travel means for the privileged few and Airlines are focusing on volume of revenue generation now. Consumers income and employment rate: The composite household expenditure component of the Hong Kong Consumer Price Index declined from ($4,500-$65,999) in 1999/2000 to ($4,200-60,400) in 2004. The expenditure levels of households change in response to factors such as changes in income level. The unemployment rate for Hong Kong [Appendix 1] has reached a peak of 7.9% in 2003 and begins to decrease to 5.4% currently - still almost triple that of 1996-1997 [2.1%). The GDP indicates a slack in economy as a whole in 1997 - 1999 [Appendix 2]. As a result, Hong Kong Airlines industry reacted, Many unprofitable routes were either suspended or reduced in frequency. In turn this has resulted in excess demand on market segment which are inelastic. But for consumers, particularly in Airline industry, brand loyalty is an important aspect of their selection. Some consumers may switch brand as a result, thus firms may suffer a longer term consequences even though the local economy is picking up now. In the market segment, which is elastic, quantity demanded was down in view of consumers'
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