The USA Airline and the Regulations from the American Government

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Legal and Political Environments. The USA Airlines Group handles several important legal and political environmental factors both domestically and internationally. As such, the USA airline is affected by the political activities and legal systems that define the company’s actions and its interactions with the clients, not limited to the public members (Bissessur, & Alamdari, 1998). Domestic authorities and governments of other nations carry out activities parallel to the market set to put pressure on the policymakers and urge them not to intervene to change the industry. These actions include lobbying, severe and damaging border regulations, commenting on the suggested regulations and policies as well as the strategic litigations.

Domestic and Global Political-Legal Barriers to the U.S.A Airlines

Domestically, political barriers massively deter the U.S.A from carrying out smooth operations among its major airlines. Notable is the fact that the government is the largest shareholder within the United States airline industry hence it controls many decision-making agencies thereby influencing the decisions that are made. The government further plays the role influencing the investors into being involved into the airline activities as well as contributing to the building of the domestic airline infrastructure.

Globally, the major barrier that the U.S. airline group faces is the low entry barriers, which has seen the airline industry, in general, to be flooded. For example, due to globalization and advancement in technology, the industry is undoubtedly competitive as well as being capital intensive. According to Papatheodorou (2006), the U.S.A airline has to deal with the high capital intensity nature of the business. Thus, there are fixed costs of travel as exemplified on the purchased tickets which sometimes and inconsiderate of the prevailing market conditions. The U.S.A airline cannot control such fixed costs, thus, sometimes incur huge losses that are not healthy for the business.

The liberalization of market access globally grants unlimited access into the industry by the new airlines. The International Air Transport Association (2013) elaborated the effect of market liberalization quoting that at approximately 1,300 new airlines have been admitted into the international airline industry. The implication is that the U.S.A airline has to improve the quality of air services that it offers, lower the prices below the fixed respective fixed prices to remain competitive. Additionally, market liberalization leads to some international airlines such as the Emirates and Etihad airlines expanding their airlines to access newer international markets, thus, competition is getting stiffer.

Political control of the Grid is a global political and legal issue that greatly impacts the U.S airline. Plausible to note is the fact that an operational network only becomes effective and efficient for the purpose it is meant for when there are smooth interaction and flow of communication. However, the airline in question is disadvantaged due to the wider expansion of the air operations without necessary expansion of the corresponding and related factors such as the physical and technological infrastructure not to mention that a grid that ought to be sophisticated and technologically advanced. This mismatched expansion affects the U.S airline through friction and interruption of ineffective communication. A perfect example of such effects includes consistent flight delays as witnessed by the passengers as well as flight cancellations. According to the Air Transport Association (2013), the U.S airlines flight losses constitutes the more than five billion dollars lost due to delays, increased costs of operating the planes, maintaining the ground workforce not to mention inconveniencing passengers.

The U.S airline faces taxation policies both nationally internationally. For example, inadequate representations in teams that lobby the industry against taxation measures that when imposed tends to be unjust and are specific to target the industry. Domestically, such legal acts can be controlled whereas the scenario presents a bigger problem when the airlines have into territories that are politically unstable. Going past such boundaries presents the airline the need to pay more taxed which are detrimental to the growth and sustainability of the industry. On the contrary, the U.S has no control over international taxation policies, thus, the ever changing taxation requirements and legal matters are beyond its control. For example, there can be instances of double taxation either direct or indirect, which if not properly followed and corrected can lead to massive losses in terms of capital (Shah, & Swaminathan, 2008). Nonetheless, improper redress of changes in taxation when applied to the airline often affects the airline when the prevailing economic situations and social ramifications are not taken care of.

Deregulation policies are barriers to the U.S airline operations. Such legal changes as witnessed during 1978 led to the restructure and reorganization of the entire U.S.A airline industry (Shah, & Swaminathan, 2008). For example, change in legal policies as depicted in deregulation led to reductions in the travel cost as well as increased volatility of the profits made out of the business. Allowing airlines to merge present the opportunity of the operational airlines to be on the verge of being declared bankrupt in the event that the low and fixed costs can no longer sustain the business and its daily operations.

References

Bissessur, A., & Alamdari, F. (1998). Factors affecting the operational success of strategic airline alliances. Transportation, 25(4), 331-355.

International Air Transport Association. (2013). Profitability and the air transport value chain. Economics briefing, 10.

Papatheodorou, A. (2006). Corporate rivalry and market power: Competition issues in the tourism industry. London [u.a.: Tauris.

Shah, R. H., & Swaminathan, V. (2008). Factors influencing partner selection in strategic alliances: The moderating role of alliance context. Strategic Management Journal, 29(5), 471-494.

October 12, 2022
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Federal Government

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