Economics Commentary Essay
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The article I have chosen to base my commentary on is “SpiceJet buys 30 Q400” aircraft from the times of India (website) and the article was published on 30th of august, 2011. As the title suggests the article discusses about the recent acquisition made by SpiceJet of 30 Q400 aircrafts from Bombardier in order to reach out to more of the tier 2 and tier 3 cities in India, where there is a potential demand which has not been yet met entirely. These cities include Aurangabad, Bhopal, Indore, Mangalore, Rajahmundry, Tirupati and Vijayawada also SpiceJet will start operating direct flights to cities that is not easily available such as; from Hyderabad to Goa and Madurai, Nagpur to Pune and Bangalore to Vizag.
This plan to improve air connectivity by SpiceJet has given a lot of satisfaction to many people as their travel has been made much more easier for many citizens of India. Also this the first time that any airline in India has bought these new changes and it allows the company to have monopoly, when concerning these particular routes.
Through these changes SpiceJet will be able to increase their customer base and reach out to a more niche market that had been previously neglected by them. This improvement in their route and by providing more aircrafts SpiceJet will enable them to increase their supply thus resulting in their prices to decrease (as can be seen on diagram 1).
Moreover the Q400 aircrafts are comparatively much more fuel efficient which not only decreases their cost and hence allows them to offer “affordable journey to the common people” but also improves their public image because it promotes them as being environmental friendly and hence increase their demand thus bringing about an increase in the equilibrium quantity and price as well (as can be seen on diagram 2). Additionally it makes sure that SpiceJet would be less prone to criticism from NGOs or other pressure groups.
Q400 is considered to be the “best short-haul plane” and comparatively is more comfortable than other planes like it. This will increase the demand of this series of aircraft and most probably more of airlines companies would like to buy flights from bombardier these and hence the price would be increased (as can be seen by figure 3). In addition to this The Q400 aircraft due to its comfort would also benefit SpiceJet as more passengers would like to travel through it compared to other airlines thus causing the demand curve to shift upwards and thus allowing the prices to increase even further (as can be seen by figure 4).
The Q400 aircraft are not only going to benefit SpiceJet but also millions of people and India as a whole since this would cause a drastic improvement in communications. Also it will set a trend for other airlines to also offer more routes and hence force the prices to go even lower as the competition will increase and the demand would become comparatively elastic (as can be seen by diagram 5).