SWS Sample Paper: The Aerospace Industry
July 31, 2020
The Aerospace Industry
The aerospace industry plays a critical role in the economy as it is a major mode of
transportation for professional and personal travel. There are many airline companies, and the
seven largest U.S. airlines, according to Business Insider, include Delta, Southwest,
American, United, Alaska, JetBlue, and Spirit (1). Although airline travel is an efficient way
for individuals to connect, with advances in technology there is some decline in travel for
business purposes. This paper will discuss the airline industry and specifically discuss their
goods and services, a few economic factors that relate to this industry, and highlight a trend
related to the future of this industry.
Goods and Services
The airline industry provides a service in that it enables passengers to travel using
different types of planes and routes, based on different airlines. More airlines are also starting
to sell additional goods and services such as credit cards with airline miles, with the goal that
this will create loyalty to travel with a specific airline company. With respect to the service
provided by airlines, individuals will also see differences in price values based on their travel
preferences, such as the time of day, location of travel, type of aircraft, seating preferences
(first class versus economy), number of stops, and how early or late the flight was booked.
There are also additional factors that would impact the goods and services provided within this
industry because travel can be either domestic or international, and longer flights often provide
more services and amenities.
There are many economic concepts that relate to the airline industry, but this brief will
focus on the Law of Supply and Law of Demand. The Law of Supply would imply that
airlines have the goal of maximizing their profit by having more flights running and charging
a more expensive price. Also, these airline companies would not want to send empty flights,
so they would also try to find flight times that might maximize their number of passengers per
flight. The Law of Demand would imply that customers will travel more if prices decline and
are more affordable.
There are often last-minute sales from the airline companies that are posted online with
the goal of encouraging more individuals to travel, since the price was reduced. Although
airlines will not receive full price on this individual’s ticket purchase, it will still help them to
reach their flight capacity. Another important economic concept that stems from these ideas of
supply and demand is competition. As prices and travel options fluctuate, individuals may look
at different travel alternatives or different airlines to reduce costs, leading airline companies to
evaluate their prices daily in comparison with competitor’s rates.
Currently, there are over “42,000 flights and 2.5 million passengers” (Federal
Aviation Administration, 2). However, one notable trend over the past decade is an overall
decrease in business travel, as seen in the visual below from Snyder (3):
In conclusion, as technology continues to advance, it will be interesting to see
what happens in the future, especially as both first (or business) and economy class
travel are on the decline.
1. Business Insider. 2016. These Are the 7 Biggest US Airlines.
2. Federal Aviation Administration. 2017. Air Traffic by the Numbers.
3. Brett Snyder. 2009. December Premium Air Traffic Down More Than 13 Percent.
- Goods and Services
- Economic Trend