http://www.cbc.ca/money/story/2011/01/11/consumer-air-fares-rise-canada.html#socialcomments
Summary:
In the first 2-3 weeks of 2011, some U.S airlines have already increased their prices three times. An analyst, Chris Murray, says Canadian airlines are expected to increase prices soon as well, but will not predict an amount of the increase. These price hikes are possibly going to stay since some major U.S airlines all increased and matched prices on the market. This was predicted by Rick Seaney, the CEO of FareCompare.com. In 2008 and 2009, U.S airlines had lost billions but turned around in 2010, and are expected to earn more this year. They increased prices for peak travel days, and collected more fees. These increases can be caused by the rising fuel costs, and the limited supply of airline seats. The world’s airlines are expected by the International Air Transportation Association to make $9 billion Cdn this year.
Connection:
The connection to chapter three would be the gross margin and the income from operations. In this article, many airlines are increasing prices because of the rising expenses they must cover. On a multi-step income statement that is thoroughly discussed in chapter 3, covering expenses with sale or service revenues will provide a gross profit or gross margin amount, which appears at the start of the statement. A gross margin percentage can then be calculated (gross margin divided by sales). This is an important percentage because can reflect the performance of your company over time by seeing if it is increase, decreasing, or remains the same. Also, in a multi-step income statement, income and expenses are divided into specific sections. In this case, the revenue gained from increased prices of fares, it will be recorded under income from operations instead of others like income from non-operating sources. This is because the revenue will be obtained by their normal operating services, and are expected to continue in the future.
Reflection:
Even though airlines are increasing their prices, I agree that the airlines will still be earning this year. During the year, people need this extremely important transportation for many reasons. For example, business trips, vacations, world events like the 2011 FIFA Womens World Cup, family issues, and many more. People will need the airlines no matter what, and when all the airlines increase their prices, people will not have many choices. Also, the economy is slightly better and people will be more willing to go on vacations. I think that the airlines will earn even more during high seasons with their increased prices like the usual, because as a student, or families with students will only have a certain period of time to travel, so therefore they cannot escape the expensive fares.
Reflection:
Even though airlines are increasing their prices, I agree that the airlines will still be earning this year. During the year, people need this extremely important transportation for many reasons. For example, business trips, vacations, world events like the 2011 FIFA Womens World Cup, family issues, and many more. People will need the airlines no matter what, and when all the airlines increase their prices, people will not have many choices. Also, the economy is slightly better and people will be more willing to go on vacations. I think that the airlines will earn even more during high seasons with their increased prices like the usual, because as a student, or families with students will only have a certain period of time to travel, so therefore they cannot escape the expensive fares.
