United Airlines Essay Example | Topics and Well Written Essays - 1250 words

United Airlines - Essay Example In the United States, the term 900 pounds gorilla is usually utilized to refer to the most dominant player in the industry in terms of shares or market capitalization. UA have undoubtedly referred to as the 900 pounds gorilla because of its high level of market capitalization. Being formed out of many mergers and the Air Mail Act of 1934, this air carrier had already started big. The company is further strengthened because its operation embraces air mail carriers and air craft manufacturers aside from its air passenger services.Its flock includes Boeing Air Transport, Pacific Air Transport, and the Pratt and Whitney Engine Company, Ford Motor Company, Stout Air Services, and Varney Air Lines. It should also be noted that among the Big Four or the four largest air lines in the United States, United Airlines became recognized as the most dominant. The terms capital, labor, and consumer can be regarded as the most important variables that airlines should consider in order to ensure the success of their business operations. In the explanation of Adam Smith, these three are like the legs of the three legged stool. In this simple connotation, it can be seen that if any of the legs is shortened, lengthened, or modified, the whole stool collapses. Thus, the operation of an airline should be strongly favorable to these market forces. However, it is also recognized that the current market is not as efficient as it should be because of the imbalance in labor, capital, and consumer. In the simplest sense, capital can be referred to as the human made machines or equipment which business organizations use in their operations. For an airline, the aircrafts undoubtedly represents the highest investment in capital. Nowadays, technological advancements like online ticketing and booking are also considered capital. The ownership of capital gives power to business organizations especially if these resources are not readily available for individual customers. As airlines are generally profit maximizing, they view capital as a way to raise income often at the expense of their employees or the customer. Attributing high value to capital, airlines can undervalue labor and pass on a high price to consumers. Labor is contribution of the human resource to production. In the airline industry, labor represents the services of the flight attendant, pilot, and mechanics. At the extreme, it is advocated that labor should be on top of the production system. However, putting much on labor can be detrimental to the business organization and consumers. Consumers are the market that business organizations serve. Nowadays, the profitability of an airline is strongly linked with its ability to satisfy its consumers through the goods and services it provides. As we can see, airlines should strike a balance between these market forces. They should invest in capital in order to improve their products, value their employees and compensate them according to their worth, and deliver value to customers. 3. What is the effect of economic regulation and the effects on industry "market rationalization" Economic regulation is the participation of the government in order to correct the failures in the market. In the airline industry, government intervention is warranted to bring about economic efficiency, ensure safety, protect the environment, and regulate interstate and foreign commerce. Economically speaking, regulations are used in order to balance market forces. It should be noted that as businessmen do not see things the way consumer does, this necessitates the intervention of the state in order to protect the interest of the consumers. Through this way, market rationalization or the efficiency of market forces are ensured. The Airline Deregulation Act is an example of how the government intervenes in order to bring about efficiency in the airline indu