Why are airline prices so high? Supply and Demand

In the news of late has been the outcry from consumers of the increase in the price of domestic airline fares, in some case 300% higher than they were pre-pandmeic. So why have they gone up so much? It’s a simple matter of supply and demand.

Below is an interview with Air New Zealand CEO Greg Foran talking about what is driving up airfare prices. Pick the supply and demand causes.

The topic supply and demand on elearneconomics has fully integrated flash (cue) cards linked back to the key notes that assist students to understand economic vocabulary, improve their skills, develop knowledge and build their confidence.

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Aircraft Manufacturing Duopolies – Long-Haul and Regional

On my way up to the 10th Anniversary Tutor2u conference in London this week and I have plenty of time to catch-up on reading and some blog posts. Flying on an Air New Zealand Boeing 777 200ER from Auckland to London (via Hong Kong) – flight time 24 hours 35 minutes. Free Internet access at HK meant a few blog post were able to be published.

However flying up on Boeing one thought of the duopoly market that pervades the aircraft industry. In the long haul market we all know about Boeing and Airbus but in the regional markets there are two competitors that are starting to make their presence felt with the established duopoly. At the moment the regional jet market is dominated by:

Brazil’s “Embraer”
Canada’s “Bombardier”

However two other manufacturers are starting to break into the short-haul market and they are:

Russia’s “Superjet”
China’s “ARJ21”

Even for the airlines with long haul flights, which has been dominated by Boeing and Airbus planes, Russia’s MC-21 and China’s C919 are being developed and are potential threats to the Boeing 737 and the Airbus 320. Although both Boeing and Airbus have successfully launched modified versions of the above which should maintain their competitive edge. However according to The Economist the money is the Chinese to come out with the best plane in the end.