HEY! it is the holidays and i saw an article on the front-page of the World, The Straits Times
the picture showing a scissors cutting "BUDGET FLIGHTS" into half caught my attention

Rising fuel prices has been one of the most common headline in recent months. Again, the price of oil has hit a record high for the third day running( of more than US$135(S$180) a barrel this week). As fuel/oil is an essential raw material in production of products, operation of industry, cooking e.t.c., the rise in fuel prices to unprecedented high levels will inevitably affect many in the world.

From recent issues, such as countries trying to keep the prices of food as low as possible by giving up part of their producer surplus so as to ensure that their people is not denied of a balanced diet and and Singapore NTUC Fairprice coming up with food vouchers, we can see that many parts of the world are struggling with the economic instability faced.

Today's article on the budget flight is yet another impact of the economic instability:(
"The soaring cost of oil along with global economic uncertainty would force airlines to raise fares in a scramble for survival that will see many of them go bust." - British Airways cheif executive. Willie Walsh.

To prevent this from happening, firms have taken some steps.
1)huge cuts in routes and jobs ----- there will be retrenchment :(
2)passengers are charged for their first checked-in bag ----- passengers will have to pay more, firms total revenue will increase.
3)increase fares ------passengers' consumers' surpluses decrease :(
4) use "variable speed" as a fuel conservation initiative ------to decrease fuel consumption, to decrease total cost of flight
all these are aimed to mazimise profit/prevent the occurrence of economic losses which may result in the firms shutting down in the worst case scenario.



This is a list of the airlines that have done something to beat rising costs in fuel:
American Airlines
British Airways
Ryanair and EasyJet
Qantas
JetBlue Airways
Us Airways
Northwest
United Airlines




However the extent to which the steps will be carried out is variable.
this is because they have only factored in the oil price and have not factored in consumer slowdown. Price elasticity of demand which measures the consumer's sensitivity (change in quantity demanded) to prices changes needs to be further analyzed before the firms can be sure if higher airfares is feasible as a solution to curb their problem.






kelly
Output time: 9:09 AM