Select a sector of the UKs tourism or hospitality industry and discuss how the current economic environment is likely to affect its future growth. The sector which will be discussed is the UKs airline industry,

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Select a sector of the UK’s tourism or hospitality industry and discuss how the current economic environment is likely to affect its future growth.

Assessment two: Individual Essay

Module Code: TH4004E

The Business Environment

Student Number: 21059246

Student Name: Douglas McKay

Tutor: Suzanne Weekes

Date of submission: W/Com 30/11/2009

Select a sector of the UK’s tourism or hospitality industry and discuss how the current economic environment is likely to affect its future growth.

The sector which will be discussed is the UK’s airline industry, and how the current economic environment is likely to affect its future growth. The economic environment, as described by Kew et al (2008) is anything outside the organisation that may affect an organisation’s present or future activities. Business Dictionary (2009) illustrates this further by stating that it is the totality of economic factors, such as employment, income, inflation, interest rates, productivity, and wealth that influence the buying behaviour of consumers and firms. A brief outline to what exactly is the UK airline industry comprises of and a historical overview will be outlined. The size, structure and characteristics of the industry will be identified and what key economic factors influence changes to the growth of the airline industry, such as the current economic global slowdown. Political factors will be addressed and how they influence the industry. Economic factors such as interest and inflation rates will be investigated and how does it impact on the industry. Also employment levels in the UK airline sector will be discussed and how does that have an impact on the industry, furthermore, how the effects of exchange rates and relative value of the pound in relation to other significant will be demonstrated. What currently happens now, in terms of economic changes, will affect the future and this is what will be discussed.

According to facts from Century-of-flight (2009), the Farman F-60 Goliath was the first airliner to fly scheduled services for European airlines in the 1920’s form London to Paris.  The term “airline”, is located at (http://www.answers.com/airline) states that an airline is a business providing a system for scheduled air transport of passengers and freight. Since then, as aircraft developed, airlines developed. This industry grew rapidly since the 1920’s as it was very profitable – as only the rich and famous flew. However, as WWII broke out, the commercial airline industry came to a halt. Airline History (2009) showed that nearly all resources used by the commercial airline industry were being used by military operations. This included aircraft, airfields and many more resources used for the airline industry. Partly was because it was unsafe to continue commercial air transport operations as enemy aircraft pose serious threats and that the government was using the majority of their funds to support the war. Also, aircraft were valuable resources during the war, the Royal Air Force (RAF) took advantage and used commercial aircraft for the transportation of troops and equipment and for converting them into bombers. By 1952, stated by Edmunds (2009, p.20), the first jet powered aircraft entered service, which was the de Havilland Comet with British Overseas Airways Corporation. Since then scheduled airlines tried to gain a competitive edge by “buying” all these jets, which subsequently in turn left a surplus amount of turbo-prop aircraft. Marglin, s (1992) said that “The period after World War Two, with its sustained growth and high employment rate, has been referred to as the ‘golden age’ of capitalism”. This post war economic boom led to mass consumption as unemployment levels were at record lows, because of this it resulted in continued supply/demand and growth. This was good for the airline industry as many people could afford to fly, resulting in high operating incomes which in turn allowed airlines of that era to expand.

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Air Transport Association (2005) informed that deregulation has considerably impacted areas of the airline industry. Since deregulation in 1979, the airline industry experienced substantial growth. With the emergence of new competition in the industry this created numerous amounts of jobs, drove ticket prices down, and expanded the available market for various air carriers. It triggered massive growth levels and contributed to the economy as a result.

Today, we are currently in an economic slowdown or recession. Economists such as Armentano (2008) argued that the reason for this global slowdown was a result of the housing boom in the USA. A ...

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