Drop in shares

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A drop in share price and maintaining cash flow sustainability

A drop in share price is a normal financial difficulty that most firms confront, especially when there are incidents like the one experienced by United Airlines. Although the problem may have an impact on a company's financial stability, management can use a variety of ways to maintain cash flow sustainability. Management will always develop methods that are consistent with operational processes.

Increasing the number of shareholders

Reducing share prices while increasing the number of shareholders is one way United Airline can adopt in order to provide a solution to its financial challenges. The increase of shares will ensure the availability of the working capital, a situation that will ensure the smooth operation of airline despite the reduction in the number of customers. On the other hand, it is necessary to consider the interest of the short term shareholders at the time of financial problems. The United Airline should give opportunities to the short-term shareholders; this will increase the working capital for a given period of time, a situation that may save the business in the verge of collapse. The short-term shareholders are always available and they usually target the drop in the prices of shares in every business.

Advertising the company's values and addressing incidents

Advertising the company's values and the possible cause of the incidence mentioned above can enable the United Airline to regain its customers, a scenario that can ensure the attainment of normalcy in the business operation. In most cases, customers will always become scared of the incidences that they are not aware of their root cause and explaining to them actual cause of the scenarios as the one experienced in the airline will make them regain confidence in their preferred airline. With the return of the customers, the United Airline is able to ensure the financial flow in its operation. Ensuring the customers that such incidence might not occur again will win their trust and confidence in the company.

Eliminating non-value added operations

Eliminating operations that do not add value to the United Airline Company is another factor that can reduce financial problems. The above operations may include additional services offered to customers at no or low costs. In most cases, companies usually provide extra services to attract more customers or to increase comfort to the clients during, after, and before the flight. For instance, cutting off the car services for some of the members will enable the United Airline to reduce the cost of operation and focus on the important services that are valued by all or most customers. According to the airline policies, the customers who purchase the expensive tickets are usually allowed to fly with their luggage at no cost (Fu et al. 32). Therefore, charging extra cost on luggage is another method of eliminating extra cost incurred by the United Airline business; this will increase the financial income of the company, a situation that can help in reducing the financial problems.

Reducing flight destinations

Reducing the flight destinations is another approach that will enable the United Airline to reduce the cost of operation thereby reducing the financial problems. When the airline market shakes as in the above case, there will be the reduction in the number of customers for certain destinations, therefore reducing the number of planes operating on such routes will reduce the operational costs, a scenario that will save the financial problems of the business.

Work Cited

Fu, Xiaowen, Tae Hoon Oum, and Anming Zhang. "Air transport liberalization and its impacts on airline competition and air passenger traffic." Transportation Journal (2010): 24-41.

June 12, 2023

Business Economics

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