Airline Industry in Hong Kong Essay

8395 Words May 25th, 2007 34 Pages
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
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Moreover, the pressure from the US Government for liberalization such as ¡®open skies¡¯, will leave the Hong Kong Airline Industry with potential growth and higher competition at the same time. It is critical that under such conflicting circumstances local airlines manage with a view to the future.

This paper will look into the determinant of changes in Demand and Supply, the impact of Technological change and Economies of scale, the evolution of Pricing Strategies of the Airline Industry, the interaction between firms and the nature, extent and impact of the Government Policies on the Industry.

Our objective is to understand the challenges and opportunity of Airline Industry in Hong Kong, the trend in which firms behave and the future implications as a result of it. We will give our recommendations as to how Airlines in Hong Kong will remain competitive in the circumstances.

III. The determinant of changes in Demand
Market Price:
We are going to elaborate more about market price, in particular passengers¡¯ ticket price, in Section VI and to a small extent in Section IV. In general, prices, both in terms of passenger tickets and cargo rates are trending down. This is largely due to a combination of the legislation trend whereby liberalization and competitiveness amongst firms are encouraged, the increase of capacity in the industry resulting in economies of scale, price war amongst firms and price differentiation strategies adopted by

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