Effect of monetary and fiscal policies Taxes within any country have a direct bearing on the performance of domestic

or foreign carriers. This is because whenever the government chooses to impose higher taxes on the industry, then these additional costs are carried forward to the consumer in terms of ticket prices. On the other hand, airline operators may choose to minimize their labor costs by reducing the number of employees that operate under their wing. (Doganis, 2002)
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In the United Kingdom, the aviation industry fell victim to overall fiscal policies after government realization that the aviation industry was not taxed as duly as it should be. After institution of more stringent taxation laws within the aviation industry, it was found that the number of cargo operators went down. Similarly, UK passenger outputs drastically reduced. The airline industry is also particularly vulnerable to charges made by government bodies. These include issues such as air traffic control charges and track access charges. Most of the costs incurred with regard to the type of scheme under consideration have affected the aviation industry negatively since these contribute to higher production costs. Countries in which airline companies are operated by the government tend to under-perform. These carriers are not susceptible to market forces and passengers have very little say in the sector. However, when governments decide to liberalize their aviation industries, then this creates a very positive impact upon airline operators. It encourages privately owned airlines who compete on the basis of their quality of service rather than on monopolistic forces. A perfect example of such a fiscal policy was in the Asian continent in India specifically. India made the choice to liberalize their aviation industry and hence witnessed tremendous growth within the sector. The country now boasts of seventy-five percent share attributed to private carriers. It has also grown by a whooping twenty percent this year. (Doganis, 2002) The amount of infrastructural investment within the aviation sector has a substantial effect on the performance of the industry. For instance, if the government makes large investments in infrastructural facilities that support airlines such as building more airports or improving the ones that exist, then chances are that such an industry will perform well. It should be noted that monetary policies are determined by governments and directly affect allocation of resources. This is the reason why infrastructural development is usually likened to government policy. Besides this, the government should also goes out of its way to ascertain that most of the infrastructure necessary to make the aviation industry successful is available for instance, building access roads to airports. Wage inequality and the aviation industry The airline industry has some characteristic wage inequality issues currently. Experts indicate that due to this wage inequality, the aviation industry has been recording negative performance in terms of employee turnover. Most of the employees affected by these inequalities tend to look for other alternatives outside of the aviation industry. Generally, workers are not happy with what they are making in the aviation sector and the situation is particularly evident in the United

States. Within the US, almost eighty percent of the employees in San Francisco's airline industry get less than ten dollars per hour. These wage inequalities have caused the federal state to intervene in this situation. They have decided to pass legislations that would require air carriers to increase their minimum wage by a whooping thirty percent. (Doganis, 2002) However, it should be noted that airline wage costs were deregulated by most western states. Consequently, wage payments have been left in the hands of airline operators themselves. Some of the problems faced by workers in the airline industry today were largely determined by deregulation of these labor costs. Research studies on employee earnings in the nineties (after wages were deregulated) indicated that employees began earning less. This was true in almost all sectors, more especially in aviation. For instance, it was found that secretaries, managers, pilots and flight attendants all registered lower earnings at that time. Wage inequality between firms was largely evident in certain professions. For instance what pilots earn in one particular company differs tremendously from what they will earn in another company. This trend is especially highlighted when one analyzes some of the union data available within the country. Employees within the aviation industry are just as susceptible to job losses as other workers in the country. In the nineteen nineties, the US underwent rapid retrenchment in almost all sectors of the economy. The aviation sector was not left behind. Most of the personnel had to deal with the same issues that their respective counterparts were undergoing. Those that lost jobs lost them as result of the overall employment climate within the country. Overall summary of how the economy affects airline industry / Conclusion The aviation industry causes positive externalities such as; encouraging tourism, heightening employment and boosting investment within any one country. This could bring about an overall increase in the GDP. However, some of the negative externalities associated with the industry include emission of noise, excessive emission of harmful gasses into the atmosphere thus causing pollution. (Keller & Buttler, 2000) The aviation industry is affected by monetary and fiscal policies in that government decisions to tax airlines eats into their operating costs. Also investments in infrastructure have a large role to play. It can also be asserted that the decision to liberalize the aviation industry can bring about many positive effects into the industry. Closely linked to fiscal and monetary policy is the issue of wage inequality. Companies that operate in countries with job losses are likely to witness the same within aviation. However, statistics show that inter-firm disparities in wages are quite high especially with regard to pilots. Lastly, the aviation industry is affected by elasticity in supply and demand depending on the size of the industry and how long it has been in operation.