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MB 113 Economics Assessment 2: Individual Report Due: Week 11 – At the start of the session (19th May 2020) “Australia’s number-two airline revealed improved earnings and revenue in the first half of the year on Wednesday, as higher domestic airfares more than made up for a growing fuel bill.”

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MB 113 Economics

 

Assessment 2: Individual Report

 

Due: Week 11 – At the start of the session (19th May 2020)

 

“Australia’s number-two airline revealed improved earnings and revenue in the first half of the year on Wednesday, as higher domestic airfares more than made up for a growing fuel bill.”

 

The above quote was taken from an article late last year (before the events of COVID19) indicating domestic airfares have been on the rise. The diagram below details the market share of the domestic airline industry in Australia.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Requirement:

 

Answer the following questions regarding the airline industry. Present you answers as a report of no more than 2000 words. The report should have an executive summary, an introduction, a body, and a conclusion. Ensure that the report is referenced correctly, and all diagrams labelled. Any late assignments will incur a 10% deduction per day. In concluding your report, make a recommendation back to the government in whether they should help certain players in the industry and why.

 

  1. Analyse and evaluate the market structure of the airline industry. In your analysis, determine whether the current market is concentrated or not. In your discussion, use economic tools or models to make this decision. You should also consider who owns Jetstar when making these calculations.

 

  1. With the events of COVID-19, there is a possibility that Virgin Australia may fold. Assuming this market share will be taken up by QANTAS, calculate the new HHI for the industry. What do you think will happen to air ticket prices? Explain and justify with relevant economic concepts

 

  1. A couple of States, including NSW, are expected to help bail out Virgin Australia. Do you think this will be good for the industry? Do you think it will be good for Qantas?

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