Airline Companies’ Threat and Chance

Summary

Local airline companies deal with high oil price. Korean Airline and Asiana Airlinere are presentative in Korea, and they reduce their routes. Moreover they sirously consider many factors about flights like wind and course. Income also changed last year, first quater Korean Air’s net income was 130 billions won, but this year first quarter the company lost 325.5billion won. Analysts predict it negatively. Jet oil price is aready 50% percent up due to soaring petroleum prices, creating a bigger-than-expected burden on the industry. Experts also pointed out exchange rate. Korean won created more of a cost burden on air carriers this year. Hence, airline companies are considering raising domestic fares as well.

My opinion

Airline companies should be defferentiated. I think they need something new way. Price raising is not a solution. World econmy is in downterm. Especially US are suffered by this recession. US made an effort for this recession but it’s useless. It is similar with Great Depression. During Great Depression, US government does many things, but it made an opposite effect. It is related with oil price and agflation. Agflation is a complex word of agriculture and inflation. Consumption is reducing by these reasons. If airline companies increase their price, their revenue would be reduced. Their new solution should catch two points, the one is no change in consumers, and the other is reducing cost.
We learn about factors of price. Among them, cost is not changeable. It almost fixed by environment like oil price and aircraft price. Addmission fee is changeable, but it’s not easy. Especially their labors fee is very hard to change, because their labors are well educated and not easy to reduce their number.
To conclude, they should improve their market value or brand value. Their pricing strategy is a basic. Most of airline companies in the world are spending difficult time. During this recession, price increasing is reasonable. However, if they find new way to improving their value, it will be a chance.

References;Author: By Ko Kyoung-tae Title: Oil prices hit air carriers The Korea Herald. May 28, 2008

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