Aviation Industry: Aviation Industry

Aviation Industry Name Institution Date Aviation Industry The airline industry is not without its challenges. These times, the aviation industry is becoming more profitable, safer, and most effective with smart management teams. However, the challenges that face the air industry are familiar and have not gone away. The comprehensive nature of the industry makes it peculiarly insecure to many factors spanning from poor infrastructure, expenses, environment, technology, and misgiving of fuel prices. As the airline industry grows, it becomes more and more vulnerable because the same things that make the industry alluring and interesting are just the same things that endanger its prosperity. Labor and fuel costs are the major expenses facing today’s air industry. Labor Cost Labor is often the biggest cost of running a business in any company, and it includes employee salary, benefits or other related dues. In the airline industry, labor costs account for nearly 35% of the sum of airline’s operating costs which itself accounts for over 75% (Morrell, 2013). In 2016, labor costs exceeded the fuel costs by 1% as global airlines largest sole expense, and in 2019 the trend of labor cost is expected to rise (Morrell, 2013). Labor cost in Europe and America are typically higher compared to some regions like Asia where fuel is still the biggest cost. The essence of this issue is that there is a global shortage of employees generally. In some areas, there is an increasing shortage of pilots (NTAS, 2019). This shortage of pilots is due to changes in the industry. Unlike the high demand of pilots in the 80s, the case has changed because deregulation has done away with the low-cost carrier. Many airlines in the US especially have been declared bankrupt amid to poor financial state (Gong, 2007). Another reason for this shortage is that training pilots have become an issue because it is much expensive (O'Leary, Weathington, Cunningham, & Bidderman, 2015). Hence, labor cost is the biggest issue facing today’s airline industry. Fuel Cost Jet fuel costs have long motivated the airline profitability margin and the airline industry as a whole. As history shows, a considerable movement in fuel cost is an essential driver in the decisions of aircraft acquisition and retirement, provided that the relative operating finances of used versus new aircraft dramatically change (Morell, 2013). The reason why airline purchase has been reactive to oil price is that when the oil price is extremely high, airlines order new planes to attain operating cost benefit and lower fuel consumption (Hideki, 2017). Hence, fuel price is the biggest driver of profit and the whole airline industry. Accordin...