Effect of Politics on Airlines and Breweries

nub of Politics on credit linelines and BreweriesThe Effect of Political Factors on the Airline Industry and the Brewing Industry, 2005Politics has a huge partake on all businesses, and the range of its influence is broad. Political factors include statutes which may be implemented because of a UK g overnment activityal decision or a decision in Europe, or by the UK cosmos a signatory to an international agreement. Other legislation arises in response to issues such as terrorist threats.Other policy-making influences include trade agreements, restrictions and opportunities arising from foreign governments policies or opposition groups in the form of political parties or crushure groups formed by the saloonlic to address specific issues, who may challenge, delay or obstruct government plans.This essay looks at the impact of recent political factors on the airline and create from raw material industries.The Airline IndustryIn a speech delivered in June 2005, Derek Twigg, the conveying Minister knocked out(p)lined build up on the Aviation White Paper. He recognised issues with capacity, particularly with recent increases in demand for affordable flights (Twigg 2005).A fifth terminal at Heathrow Airport is world constructed, and additional runways are planned at Stansted and Heathrow. However, there is opposition, focused on noise pollution, fuel pollution, the strain on roads and rail relate to airports, and the destruction of countryside to accommodate airport expansion. The governments pursuit of its policies depends, stated Twigg, on the ability to butt against strict environmental standards, and airlines increase expansion depends on successful implementation of these policies.Energy PolicyThe UK government has secured a commitment from airlines to improve fuel efficiency and reduce emissions, but this will require enthronisation from the airlines. The industry must strike a balance, spending on initiatives to become more(prenominal) green in return for an infrastructure development policy from the government.TerrorismThe 9/11 terrorist attack on the US had immediate consequences, with a drop in demand. This has had particular impact in the US, where a spell of airlines gestate survived only because of Chapter 11 of US criminalisekruptcy laws, which allows continued trading with protection from creditors until profitability is achieved.United Airlines has been operating(a) under Chapter 11 for 3 divisions. Delta and Northwest are entering Chapter 11, and will probably follow a similar policy to United, focusing on international flights and disposing of smaller planes used for interior(prenominal) flights (Field 2005). They will indeed continue to compete in the international food commercialize with protection UK airlines would probably be forced out of business if they were to find themselves in a similar position.US anti-terror legislation requires foreign operators to undergo an analyze by the Federal Aviati on Administration, and to have a Part 129 Licence. Demand for transatlantic charters has been difficult to have-to doe with at times, due to more carriers not having the necessary authorisation (Wastnage 2005). Meeting new legislative demands has an frugal effect on businesses due to the additional financial and human resources required.Terrorist attacks in pass resorts are considered by galore(postnominal) to be a response to foreign policy, particularly that of the UK and US. Consumer response is to book a holiday in an area considered safe, rather than to forego the holiday altogether, suggesting that airlines carrying holidaymakers should consider a portfolio of varied destinations.The instability of the market due to international political relation has encouraged round airlines to carry out work through contractors (for example, Air Atlanta), who will provide aircraft and crew without the demand for the level of commitment required with an airlines receive staff and ai rcraft investment.The Influence of EuropeThe UK is required to adhere to European laws which may affect airlines. For example, UK legislation is being broadened to encompass an EC directive on Age Discrimination. From October 2006, one of its effects will be to criminalize forced retirement before age 65 unless it can be justified (www.agepositive.gov.uk). Current devote at British Airways is to retire pilots at 55 as many transfer to other airlines, it would look unjustified. Salaries are much higher for pilots with long service at BA and the effect of having to keep them rather than employing cheaper new pilots could affect profits.Iraq WarThe Iraq war has impacted on oil prices. It has been argued that the agenda behind the US/UK decision to go to war was oil-influenced, with the US increasingly reliant on Gulf oil and hence having a particular interest in control of oilfields in the region (Cable 2003).Airlines are particularly sensitive to changes in oil prices due to their large amount of fuel consumption, and all airlines have recently had to accept between reflecting rising fuel costs in ticket prices or accepting reduced profits. ball-shaped counterchangeThe BRIC nations Brazil, Russia, India and China are set to become more economically influential in feeler decades.China has recently removed the barriers to private airline companies. Domestic flights in China have increased by 20% over a year, which equates to 17,000 extra flights per month (Brown 2005), as planes replace trains as the favorite(a) method of domestic transport. This generates business for aeroplane manufacturers but places additional demands on the world oil supply. It is besides part of a larger trend of China engaging more with the global economy, with the consequence of boosting wealth and consumption among its population.The Brewing IndustryEnvironmental IssuesBrewing, as with airlines, is affected by green issues. In July 2005, the British Beer and Pub Association rep orted a continuing fall in the energy used to evoke a pint of beer to achieve double the industrys target, reducing CO2 emissions by 13.9% (www.beerandpub.com, press release 16/2005). Although reducing emissions requires investment, meeting targets qualifies the industry for a rebate on the Climate Change Levy.Changes in Student FundingThe bookman market is important to the brewing industry. Changes to student finances over the last 15 years have seen a switch from non-repayable grants to repayable loans to support study, with tuition fees added to student costs. This has not reduced student spending as might be expected. The average student spends 7000 per year and 70% of students have part-time jobs (Turner 2005). Debt is accepted as the norm to meet study and living costs, with a wide range of lending sources available. Money for drinking is hence readily available, and Reachstudents, an independent marketing consultancy, claims that 29% of student spending is on entertainment ( www.reachstudents.co.uk), including drinking.Extension of Licensing HoursThe UK Government has proposed extended licensing hours in England and Wales however, legislation is being opposed by the Conservatives and LibDems as well as medical bodies and organisations working to reduce alcohol problems. carrying out in November is threatened which could affect permissions granted for Christmas and New Year and reduce takings during the most paid trading period of the year (Wintour 2005).Smoking BanInitial plans to implement a fume ban only in pubs where food is served have been changed in favour of an outright ban on smoking in all pubs (e.g. Carr-Brown 2005).Spirit is the UKs largest pub chain and owns brands including Chef and Brewer. It suggests a gradual transition to pubs decent non-smoking, anticipating that an immediate implementation could result in 5000 pub closures and 75,000 job losses across all pub companies. The chain JD Wetherspoon has already begun introducing a comp lete ban on smoking in a number of its pubs. However, it has recently reported a 4% drop in profits, with an even higher figure of 7% among its non-smoking pubs (anon 2005).Binge drinkingBinge drinking is somewhat double-edged for the brewing industry. On the surface, the increase in drinking to excess would appear to bode well for brewing industry profits. However, drinking large volumes lots takes place in conjunction with drinks promotions, where lower prices mean a higher quantity must be consumed to give the same profit.JD Wetherspoon, responding to a recent drop in profits, suggested that the proliferation of debauch drinking was keeping many consumers away from town centres and pubs (Anon 2005).Government policy on binge drinking has been criticised for its reluctance to take more extreme measures (e.g Plant 2004) however, there is pressure on the government to take steps to tackle binge drinking and the consequences for the brewing industry are uncertain. Could it open up a more profitable market by creating a more pleasant drinking atmosphere, advance more people to drink clean? Or could the amount drunk in the UK drop significantly, or measures be too little to impact on the current situation?Fuel PricesThe brewing industry is affected by the increase in fuel prices caused in part by the Iraq conflict, discussed previously. Transport and distribution costs have been increased by the rise in fuel costs, and consumer spending is also impacted by increased petrol and diesel engine costs reducing disposable income.While world oil prices affect fuel costs to some extent, a far greater proportion of the cost of a litre of petrol or diesel is the tax both fuel duty and VAT which are set by the Chancellor domestic policy is having more effect than global oil price trends.ConclusionFrom the above, it can be seen that politics both in the UK and around the world impact on the airline and brewing industries in many different ways. While the industries ca n have some impact through lobbying the government, or by encouraging public support for industry-friendly policies, a significant proportion of political influences cannot be impacted by the industry, and capability threats and opportunities must therefore be addressed in each organisations business strategy.BibliographyAnon (2005) Wetherspoon presses on with no-smoking pubs (Press Association) in The Guardian folk 3 2005Brown C (2005) Air travel recovers to blossom forth its wings above 9/11 clouds in The Scotsman 11 April 2005Cable V (2003) Saddams other weapon of mass destruction the potential economic fallout from a war in Iraq (from January 2003 lecture) www.lse.ac.uk/collections/globalDimensions/research/vcable.htmCambridge Marketing College (1999) Marketing Operations (BPP Publishing, UK)Carr-Brown J (2005) Total ban on smoking in pubs and clubs a step nearer in The Sunday Times, 9 October 2005Diageo plc (2005) Press release 1 September 2005 Preliminary results for the ye ar ended 30 June 2005 at www.diageo.co.ukField D (2005) Delta and Northwest shelter from creditors in outflow International 20-26 September 2005 (Reed Businss Information, UK) p10Hall W (2005) British Drinking A Suitable circumstance for Treatment? Editorial in The British Medical Journal2005331527-528(10September)Meikle J (2005) Pub firm changes tack on smoking ban in The Guardian September 5 2005Plant M (2004) The alcohol upon reduction strategy for England in British Medical Journal 328 pp905-6 (17th April 2004)Turner S (2005) Drink in the Atmosphere in The Guardian, July 12 2005Twigg (2005) Speech on UK government aviation policy, 28 June, by Derek Twigg, Transport Minister www.dft.gov.uk/stellent/groups/dft_aviation/documents/page/dft_aviation_038580.hcspWastnage J (2005) Brokers split on effects of tighter US security in Flight International 13-19 September 2005 (Reed Businss Information, UK) p35Wintour P (2005) Minister cites support of police chiefs to head off licensing rebellion in The Guardian October 11 2005WebsitesBrewers continue to lead battle on emissions British Beer and Pub Association 28 July 2005 Download Ref 16/2005 www.beerandpub.com/download.asp?id_Doc=2121www.agepositive.gov.uk (Government website devoted to Age Discrimination Legislation issues).www.reachstudents.co.uk Student statistics and profile