April 25, 2020
The decision to invest on any sector of economy is heavily dependent on the feasibility of the business and its ability to withstand inherent risks in that particular business. It is no doubt that investment in aviation industry is one of the most lucrative ventures available for entrepreneurs whose focus traverses a number of years. Huge initial investment in the airline industry business is justified by its related risks in which at the event of their occurrences the investors are going to incur a catastrophic loss of their capital (Agur 33). This research paper attempts to point out the areas of importance dictating the decision by the prospective investors. A risk conscious investor may not necessarily abandon the entire project but rather he or she must be able to put in place means of mitigating disastrous effects of risk occurrences.
One major challenge facing investors in the airline industry is the continued pilferage of customers’ baggage. A good number of cases have been reported in line with this vise. Luggage is declared as lost if it fails to arrive at passengers’ destination. In the United States for example, at least one passenger out of every one hundred and fifty have their luggage arriving at wrong destinations or not being transported at all. Lost luggage cases are mostly associated with more detailed flight plans. A passenger taking one flight to get to his destination stands lesser chances of loosing his belongings than the one need to connect several flights before arriving at his destiny. At the event that this unfortunate event occurs, every airline has laid down procedures aimed at remedying the uncalled for act. Upon filling of relevant forms the airline arranges means of tracing the luggage and sending by airline to the correct destination. The negative effect this move is the addition of an extra cost. If a bag cannot be retraced it would mean that it has been stolen or mistakenly picked by other individuals. Passenger does not care much about the reasons why he is unable to arrive at his destination with luggage. All that concerns him is the fact that he has a right of getting back his bag and taking legal actions against the airline company. Whether the missing bag is as a result of human error or masterminded malice it is true that the risk of lost luggage is eating up to the deep pockets of airline investors. Such outflow of cash scares away investors and it will play a major role in shaping the investment decision making process (Aaron 1).
Time management is one of the key elements in aviation industry. Customers are very much willing to contend with an airline which is strict with time utilization. A company which sticks to its timetable whenever possible displays a high level of integrity and stability. Occurrences of late flight cases should be one of the major concerns of a potential investor. The number of times an airline decides to have a delayed take off without substantial explanation should worry its prospective investors. An individual or corporate body desiring to put their money into a profitable use will definitely consider how customer needs have been met in the past. If such needs have been delivered unsatisfactorily, it would mean that the company’s future is at stake. Unreliable future is a sure ingredient of scaring away potential business partners. Therefore, the frequency of late orders will go a long way in determining whether to invest or not. Cancelled flight is another vital parameter of airline stability and reliability (Floris and Lock 99).
An airline company struggling with maintaining its flights schedules must be either bankrupt or poorly managed. Such negative attributes will not at any given point attract financiers in the name of investors. Whether individual or corporate, investors’ decision making must be fully furnished with the potential new partner performance in business. If cancelling flights is one of the operational tactics employed by management, it would call for more critical look at circumstances surrounding these cancellations. Despite the late and cancelled flights being undesirable, it is worth noting that some conditions are totally inevitable. If these adjustments occur as a result of poor weather or threatened security, it should not affect investment decision making process at a larger extent.
Engineering systems reliability remains as an area of focus in the infrastructure evaluation of an aircraft. Mechanically sound aircraft is a desire of many players in the aviation industry. From the owners’ and customers’ points of view, air safety is heavily dependent on faultless machine at the port and in the airplane. An investor who seeks to put in his money to airline related industries must demand for a detailed analysis of infrastructure reliability and their ability to avert foreseeable mechanical problems. Mechanical problems remains one of the major focus in airline industry because of it multiplier effect. A technical hitch is likely to result is undesirable rescheduling of flights or entire cancellation.
It is no doubt that investors are looking for technically reliable facilities which are in a position of not only safeguarding their contributions but also regenerating capital in expected rates of returns. Risk sensitive investors are those who explore companies which employ the most innovative and sustainable techniques. Before making a decision on whether to commit their wealth on an airline, investors solidify their preliminary judgments on how reliable it is in terms of engineering sustainability.
Last but not least, human resource base and capability is another area which will definitely influence investment decision making process. Levels at which pilots and other members of staff are motivated are vital in such decision processes. Employees who are paid well will work hard in improving aboard services which in the long run help in boosting the company image. Chances of strikes and go slows occurring is another matter to reckon before an investment is made.
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