Global financial crises (2008) impact on Airlines

Chapter 1: Introduction
1.1 Business significance
In this section, we going to find out procedure how researcher would be carrying out research
and analyse the impact of global financial crises in 2008 on Airline Industry. Air transport
industry always plays a significant role in any country economy. Thats why global financial
crisis should also not have ignored, because it has caused drastic result to Airlines as well.
In recent years, many countries economies are intensely influenced by the crises. It results
the negative effect on the majority of the worldwide organizations. In 2007/08, world stock
markets have fallen, many financial institutions fallen and even in the developed countries
government present recovery plan to cope with this situation.So, just like any other industry
aviation also throughout the globe faces the tremendous losses in their income because of the
rapidly shooting oil prices and the global financial crisis. This results in bankruptcy of many
small low cost carriers as well as large airlines.
Airline industry always plays a vital role in carrying many business activities which helps
countries to exchange their markets and culture too. This research would surely help out;
what kind of measures we should have taken to cope with these crises in future.
1.2 Background of the research
In 2008, world economy caught under tremendous problems due to global financial crisis
which resultssevereeffects on the world economy, especially the developing industries like
airline industry. The crisis first begins inAmerica and Europe due to the failures of the big
importantmonetaryorganizations. This catastropheof monetary organizations leads to the
catastrophiceconomic crisis after the great depression. The important factor behind the failure
of these financial institutions was artificial increase in housing property due to monopoly of
real estatescompanies in United States.This artificial increase ends up in year 2007/08 which
caused standard of securities which were only limited to real estates agents, massive
failure.This collapse results in imbalance of monetary organizations of United States, because
they gave 50% advances on real estate housing area.In short, the fall of real estate housing
sector also results in fall of these main financial organizations. So, consequently these
monetary organizations suffered massive losses of around $2.3 trillion. So, the reason to go
bankruptcy of these financial institutes is suffering of big unbearable losses.
As it is already mentioned in business significance above, airlines being important pillar of
any country economy also got affected due these crises.Airlines provide main and quick
source of transportation throughout the globe. These crises caused lots of problems due to
which this sector experienced the negative growth. The impact of these global financial crisis
was too much which results in bankruptcy of many giants in airline industry. Even the
companies who escaped from these crises also suffered many big losses indirectly.
1.3 Research Question
The reasons behind selecting this topic are too many, but the most important is to keep myself
up to date with ups and down of airline industry. I have done my undergraduate degree in
aviation management, so I really want to analyse the factors of global financial crises which
affect the one the most developing sector of any country economy which is airline industry.
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Thats why my basic Research Question is

"How the global financial crisis has cause impact on Airlines?"
In my questionnaire, I will also analyze the following financial metrics.

Total income associated with scheduled passenger traffic

Operating costs, excluding interest expenses, taxes, extraordinary items and other
non-operating expenses
Operating profit
total and functional margin percentage.

1.4 Research data analysis

There are many ways to analyse the data of this research and also many medium of data

collection. My primary source of data would be internet, which includes online survey,
interview and quantitative figures of main companies. In this research, we will be going to
use Regression analysis for every variable.We will also use graphs and tables as secondary
data.
I would use following software in my research:

MS Project
SPSS MS Excel
MS Word
Minitab
Statgraphics
EViews

1.5 Research methodology

Philosophy-My research topic is "Global financial crises impact on Airlines". The

methodology will tell us as to what models to apply and on the basis of that, results will be
articulated and deduced. Thus, in the most affecting variable will be proved.
Type- That is obvious, we going to use quantitative figures so nature of this research would
be quantitative. There is not any need of qualitative data. Because, this research involves
statistical models which comprises of too many quantitative data.
Techniques-In this research, we will carry out regression analysis. Regression Analysis helps
in finding out relationship between dependent and independent variables. We will also use the
SPSS to show the numerical analysis on our hypothesis.
Duration of ResearchThe duration of my research would be approximately five years, which would be from 2005
to 2009.
Databases-

The main focus we have in this research is to get the actual figures from verified databases.
Sources like IATA, ICAO, ACTS (Air Carrier Traffic Statistics), ILO and WDI. For
collection of oil prices data, we will use OPEC website. data of oil prices will be taken from
OPEC web site. We also try to gather information on unemployment, traveling demand, rises
of Low cost carriers and fall in profitability of airlines.
HypothesisH0: There isnt any impact on airline industry due to global financial crises of 2008.
HA: There were significant impact on airline industry due to global financial crises of 2008.
H0: Fluctuation of oil prices not cause significant impact on airlines.
HA: Fluctuation of oil prices cause many impact to airlines.
H0: GDP growth has not significant effect on airlines.
HA: GDP growth has any significant effect on airlines.
H0: Inflation rate has not significant effect on airlines.
HA: Inflation rate have any significant effect on airlines.
H0: Unemployment rate has not significant effect on airlines.
HA: Unemployment rate have any significant effect on airlines.
1.5 Research process
This research involves many steps, which includes identification, assessment and the
evaluation of the topic. We also use different planning method, which helps us in deducing
that whether it would be completed on time, or not. That is why SMART analysis is always
very helpful in deciding whether the research would have completed on time (Jaworski, 2010,
p.53). Next step involves gathering of data from internet and journals. If we implement the
data after analysing it will deliver realistic results without any errors (Tim, 2013).
1.6 Research outline
The global financial crises, which occurred in 2008, leave tremendous effects on many
developing industries including airline industry. The famous bankrupt institutions include
banks like Lehman Brothers, Bear Steams etc. Mostly, Americans institutions were involving
behind these crises. In addition, the consumer faced billions of $ loss due to these crises. That
is why after Great Depression of 20 th century, economists considered this as worst economic
crises for trade industry.
The research project on global financial crises impact on airlines comprises of the analysis of
the factors, which contributes in failures of airline industry. There are certain research
questions, which we can use. However, due to our limitations to gathering of data and
parameters, we only consider quantitative analysis.
In our next chapter, we described literature review that familiarizedwith whole study includes
hypothesis and questions. We also going to observe the financial activity of airlines and their
performance metrics. The impact of global economic crises on relevant industry would also
be considered.
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The third chapter of the research is about the data collection, techniques and their analysis.
On the basis of this we will going to give recommendations and outcomes.
The final chapter would deal with the scope of study. How this can helpful in future to cope
with these crises.
1.6 Project Plan

Critical path of the project

(Source: As created by author)