Economic Environment

United Airline’s external economic environment is made of fluctuation in demand for flights, increase in insurance costs, and volatility in exchange rates (SEC, 2018). Based on the previous observation, demand for flights to various destinations varies according to business cycles. Most flights occur during spring and summer. Therefore, the first and fourth quarters of the year do not attract many flights. On the other hand, second and third quarters of the year experience high demands. During a low season, most companies, including United Airline, lack customers to finance their operations. As such, the company may run into losses. Increase in insurance costs is another aspect that constitutes the economic environment of the United Airline. Insurance costs are determined by insurance regulatory bodies, contingent on the outcome of United Airline’s risk assessment. High insurance costs will shrink the company’s profitability. Being an international carrier, United Airline is susceptible to the volatility of exchange rates and exchange controls. Any unfavorable movement of exchange rates will adversely the company’s revenues, hence a reduction in profits.

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