Systems Thinking of the Airline Industry
Summary
This paper will discuss the development of the airline industry, as a subdivision of transportation systems, and highlights the “systems characteristics” of the sector. High fuel cost, how and why, and what cause it.The paper starts with an overview of early past events that led up the financial problems of the airline industry, as we know it today. Emphasis on the major airline companies practice that took place in the pass year.The paper will also analyzes some reason why some sub-systems of the industry effects other system dynamics. *Why Are Oil* Prices So High? Supply and Demand Alone Are Not Driving Up Oil Prices: Although these trends are accurate,the price of oil is being affected by more than supply and demand. In fact, the data shows global demand is down and global supply is up. Oil consumption decreased from 86.66 million barrels per day (bpd) in Q4 2007 to 85.73 million bpd as of this quarter. During this same time period, supply has increased from 85.49 to 86.17 million bpd. According to the laws of supply and demand, prices should have decreased.Instead, during this same time period, they have increased almost 25%, from $87.79 to $110.21 per barrel of oil. Commodities Trading Is Driving Up Oil Prices: Why? The EIA pins part of the blame on volatility in Venezuela and Nigeria. It also cites an increased flow of investment money into commodities markets. In other words, money that used to be invested in real estate or the global stock markets is now being invested in oil futures. Today's high oil prices are also partially caused by a decline in the dollar. Oil is priced in dollars, so OPEC needs to raise the price of oil to maintain its profit margins. Furthermore, as investments such as real estate and stocks decline, traders are getting into commodities such as gold and oil futures. This is causing a bidding war, and a potential bubble. What It Means to You: Expect continued high oil...