•Operation Decisions: Reviewing the Beige Book dated April 17, 2013 for the San Francisco area it is stated in the manufacturing section that the manufacturing of the airplane industry is up. To elaborate on the meaning of this, it means the airline industry is also increasing in business and so it is responding by is purchasing airplanes so they can expand their services to more destinations throughout the world. United Airlines has been growing the last few years despite the slump in the market. United has purchased and merged with Continental Airlines starting in 2009, and as the business cycle is in mid-expansion it is a good time for United to be growing.
The U.S. business cycle according to Hofschire at Fidelity.com is in mid cycle of expansion.
Based on these few items it is a good time to invest in this airline business. ("Beige book," 2013) (Hofschire, 2013)•Projected Credit Markets: According to FOMC found on the Board of Governors of the Federal Reserve System, under the Monetary Policy tab, the Federal Fund Rate (FFR) would be 1% lower in 2014 than 2013. This would support the progress in achieving the Federal Reserve’s mandate for promoting growth in employment and creating stable prices. In the long run the FFR would range between 3 ¾ to 4 ½ percent.
The projected credit market looks to remain close to the current rates in the near future. Because of these projections and information United Airlines should continue to buy airplanes and expand their business. (minutes from January 24-25, 2012) (Monetary Policy,2013)•Current Credit Markets: Interest rates for business loans and interest rates for consumers are lower than they have been in years. U.S. government credit exchange like Prime, FFR and discount rate are also low.
For instance Prime rate is a 3.25% and banks are giving credit to about 10% more consumers loans that what they were giving in 2010. Business loans are still restricted or not given as freely as they were in the past. But even though they are low there are highs in the market.
Like the automotive loans for new cars are up. And the housing market is starting to move as well. ("Beige book," 2013) All these indicators show the market is starting to move and consumers are starting to buy and be comfortable with the current economy. United Airlines can capitalize on this uptick in the market by marketing to the flying public to get more passengers buying passage to vacation spots and to visit family and friends.•International Economic Condition: Nearly 8 million people in the United States are employed in travel and tourism industries, or in industries that support the travel and tourism industries. In 2011, 62.
7 million international visitors traveled to the U.S., generating $153 billion in receipts and a $43 billion trade surplus. International Trade Administration at the U.
S. Department of Commerce, the United States can expect 3.6 to 4.3 percent average annual growth in travel and tourism over the next five years. (Lee, 2012) U.S.
exports of goods and services increased by 0.8 percent in February 2013 to $186.0 billion since January 2013, while imports remained flat, increasing by only $61 million to $228.9 billion during the same period.
•Comparative Advantage: In the airline industry comparative advantage is convoluted by the large amount of support that happens throughout the industry. The best example of comparative advantage is the current interest of foreign countries investing into their airports infrastructure. They are expanding as quickly as they can to entice travelers into their countries. The United States is exporting technologies to these countries to help build these airports, like L3 communications exports security technologies and IBM is exporting computing equipment. We receive thousands of different types of low tech items in trade from these developing countries.•International Economy: For United Airlines the international trade and forecasts is very encouraging.
It is not all roses but the economy of most of the world is recovering from this down turn, some faster than others but they are somewhere in the expansion leg of the business cycle. This is good news for United Airlines because they are an international company. They are a domestic company but do business throughout the world. As the economic markets improve and as countries struggle to get money flowing in their countries they put money in international trade which means business in one form or another for United Airlines.
•Further Recommendations: United Airlines is poised to continue to grow as the economy in the United States and the world improve. United Airlines should work feverishly to streamline their several travel systems they currently have after acquiring Continental airlines, so the booking will be seamless. They also need to resolve the union issues between United Airlines and Continental. These two items will create sovereignty and bring the two companies together. From this they will be able to streamline their process and improve their bottom line.
