Supply and Demand in the development of AIRBUS & BOEING forecasts

There is an interdependent relationship between an economy’s GDP and air transportation. However, the relationship varies from one economy to another and in one economy overtime. GDP growth patterns and air passengers for countries in a given region have a relationship. Also, on average air passenger and GDP have been growing in every region despite the variation in growth rates in different countries. From 1970 to 2005, the middle east, south Asia, and East Asia & pacific played a major role in passenger traffic across the world (Baye, 2010). Because their shares recorded a double growth. As the economic changes are recorded as a result of a change in Enabled Flows, change is also recorded in the air transportation demand or Travel and Freight Need, between the Rest of the World the and Economy. This pare focus on the relationship between passenger traffic and GDP and the impact of the Airbus and Boeing 20-years forecast.

The Air Transportation System Supply that is determined by the airlines to operate in a given region is affected when there are changes in potential air demand. Also, the decision on pricing and scheduling and operating in a given rout are associated with different factors. The factors include the assessment of origin-destination market’s passenger and freight demand, the available airline resources, airport capability and navigation infrastructure, and profitability of the route as a part of the overall network. Moreover, the internal relationship between demand and supply of airlines between potential freight and passenger flow between economies lead to passenger and cargo Air Transportation Flows which take place in the rest of the world and the specified economy (Baye, 2010). Transport industries generate about 29 million jobs across the world and its global economic impacts are estimated to be 8% of the world’s GDP.  

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On the other hand, the independent economic, geographic, and social variables drive the model of passenger traffic which comprise of Domestic versus international travel opportunities, Gross Domestic Product (GDP), Distance between the countries, flows of services between a pair of countries, and accounting variables that intervene opportunities based on the perspective of distance between countries, and respective GDPs (Baye, 2010). Also, the dynamics in traffic patterns follow the air services bilateral agreement which is: restricted route definitions, permitted a number of an airline, capacity controls, pricing controls, freedom rights, and airline designations. 

Furthermore, the airline’s operation environment is affected by the changes in the regulatory framework which in turn affect the scope of carrier competition locally and internationally. Liberalization of international services and Deregulation of domestic services are two regulatory mechanisms responsible for changes in air transportation supply (Baye, 2010). On the other hand, environmental and noise restrictions, political and economic restrictions, privatization and ownership restrictions, security restrictions, and safety restrictions are regulatory factors that play a critical role in the success of the airline industry.

Also, Inbound Business Passengers determine the flow of investments, services, knowledge, and labor that affect the economy’s firm strategy, skilled labor, and capital. Elsewhere, outbound business passengers enable the flow of investment services and knowledge that impact firm strategy, skilled labor demand conditions, and capital in the economy. Also, the personal business passengers oversee the flow of knowledge, services, labor, and remittances affecting the demand conditions, skilled labor, capital, and unskilled labor in the economy. Personal Business Passengers’ travel is majorly intended for visiting families, relatives, and friends, travel to seek health interventions, education-related trips, and migration. Elsewhere, leisure passengers affect the demand conditions of an economy by enabling the flow of tourism between economies. Also, the economy’s capital, demand conditions and firm strategies are affected by the flow of cargo between economies (Baye, 2010). Furthermore, air cargo alleviates that deficiency of surface infrastructure through the provision of first and reliable transportation of perishable and high-value products. 

The understanding of the relationship that exists between economic activities and air transportation is achieved in different ways. The first way is through the identification and description of different patterns of growth, between GDP and air passenger transportation using the analysis of trends and levels of a given country. Also, a description of developments in air transportation and the impact of transportation of twenty-two representative nations is critical in unraveling the relationship. Moreover, it is important to identify changes in demand-side and supply-side factors that stimulate or suppress the rate of growth of passenger traffic. Likewise, it is important to understand the role of government intervention in the growth of the airline industry and passenger traffic (Baye, 2010). Therefore, it is important to develop frameworks for describing and enabling the effects of air transportation. Besides, the development of a quantitative model that enables the impacts of tourism in different countries to explore the positive and negative consequences of air transport is important in the determination of the relationship between passenger traffic and GDP.

In conclusion, there is an independent relationship between passenger traffic and GDP. Therefore, the development of the Airbus and Boeing’s 20-year forecast shows that there will be a noticeable increase which will help many countries across the world. As a result, the countries may strive to increase their GDP through the improvement of factors transportation factor of production. As a result, the passenger traffic will increase which will benefit the two airline companies. 

References

Baye, M. R. (2010). Managerial economics and business strategy (7th ed.). New York: McGraw-Hill/Irwin.

https://www.airbus.com/
https://www.boeing.com/

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